New York City finance officials are pursuing legislation to reauthorize the city’s ability to sell tax liens on property debt, a controversial program that lawmakers previously criticized for disproportionately targeting communities of color and hurting low-income homeowners.
The proposal includes “the most significant reforms to the tax lien sale since its inception,” Finance Commissioner Preston Niblack said at a Department of Finance event in October. It will “help ensure that no homeowner need ever face the prospect of eviction” and “preserve affordable housing opportunities in disadvantaged neighborhoods,” he said.
Council Member Justin Brannan (D), chair of the committee on finance, said in an interview this month that a bill will be introduced “soon” and that the goal is a “kinder, gentler, softer lien sale process.” But its exact timeline is yet unclear as lawmakers hammer out the final details.
City leaders will face an uphill battle to bring back a program that has faced backlash from the 51-member City Council, which allowed it to expire in February 2022. The move comes as city lawmakers scrounge for new revenue to fill a $7.1 billion budget gap in fiscal 2025, prompting Mayor Eric Adams (D) to demand a new round of budget cuts across agencies.
“The Council is committed to enacting solutions that protect the economic health of homeowners, who have too often been placed in jeopardy of losing their homes and equity built up over generations, as well as our communities,” a spokesperson for council Speaker Adrienne Adams (D) (no relation to the mayor) said in an email. “The Council is the legislative branch of government responsible for developing and passing legislation. While mayoral agencies can offer their ideas, we will make the decisions about legislation.”
‘Fundamentally Unfair’
Proponents of the tax lien sale program said it’s essential to ensure people pay their property taxes, the city’s largest revenue stream, and warn that property tax delinquencies have increased without it.
“Not only can we simply not afford this, but it is fundamentally unfair to responsible taxpayers who pay what they owe in good faith to let others get away with shirking this core civic responsibility,” Niblack said at the department event. He added the proposal “will give us the necessary authority to enforce against those who can pay but will take advantage of any opening to avoid meeting their obligations, while providing assistance and protections for those who would pay but face genuine difficulties in doing so.”
The department’s proposal will aim to reduce the number of homeowners facing enforcement through intensive outreach, provide vulnerable homeowners an easy exit from the lien sale by giving them more time to resolve issues, and partner with community land trusts and other nonprofits to preserve homes that can’t resolve their debt as affordable housing, a spokesperson said. Community land trusts buy the land properties sit on and issue ground leases, typically for 99 years, with affordability requirements.
The Finance Department in May discussed a framework for the bill with housing advocacy groups, but two groups said in recent interviews they remain opposed to bringing the sale back and are concerned the department’s vision won’t go far enough to protect tenants.
“The devil is all going to be in the detail,” said Paula Segal, senior staff attorney at Takeroot Justice, which provides legal support to community-based groups and is part of the Abolish the NYC Tax Lien Sale Coalition.
Delinquencies Grow
The city created the tax lien sale program in 1996 under then-Mayor Rudy Giuliani. It was meant as an alternative to the foreclosure process, after the city was saddled with thousands of mostly decrepit buildings that were abandoned in the fiscal crisis of the 1970s.
The program gave owners who hadn’t paid property taxes and water and sewer fees a 90-day notice to either pay the debt or enter payment plans with the city before the next scheduled lien sale. If they did neither, the lien—or legal claim placed on a property by the city—was sold at a discount to a trust that bundled the debt as bonds and sold them to investors. Collectors can charge fees and interest rates as high as 18% on the debt, according to a 2014 fiscal brief by the city Independent Budget Office. Any revenue generated beyond what’s needed to pay the debt service and bondholders flows back to the city.
Ana Champeny, vice president for research at the Citizens Budget Commission, said the 90-day notice usually triggers a “flood of revenue” before the lien sale even occurs, and that threat of enforcement pushes people to pay their tax bills. Revenue from the sale of tax liens itself—roughly $70 million annually—is small compared with the city’s $110.5 billion budget.
“The reality is, if other people are not paying, those who do pay, pay more,” she said.
Delinquent property taxes have increased almost every year since before the pandemic, to $708 million in fiscal 2023 from $338 million in fiscal 2018. The lien sale was wasn’t held for much of the pandemic under city and state directives, but one was held in fiscal 2022.
It’s difficult to determine how much the surge in debt owed to the city was caused by the end of the lien sale and how much is attributable to the Covid-19 pandemic, when homeowners and renters faced financial difficulties, Champeny said.
“It is typical for delinquency to bump up during an economic recession or other hits,” she said.
City Council Member Gale Brewer (D), who sits on the finance committee, said the proposal is worth considering because owners of large commercial buildings and deficient landlords shouldn’t get away with skipping out on property taxes.
Opposition Remains
Critics say the lien sale process makes people vulnerable to speculators looking to flip houses, and that gaps in outreach mean people don’t always know they owe money until their debt has ballooned from interest and fees.
“Sometimes that can snowball very quickly and people end up, you know, a year or two out with significantly more debt than they would have owed the city outright,” said Will Spisak, senior program associate at New Economy Project, which is part of the coalition that opposes the tax lien sale.
The program disproportionately affects communities of color. An analysis by the Coalition for Affordable Homes on liens for one-, two-, and three-family homes sold in 2016 found the city is six times more likely to sell a lien in a majority African-American neighborhood than in majority White neighborhoods, and twice as likely to sell a lien in a majority Hispanic neighborhood.
Segal, the Takeroot Justice attorney, said the city shouldn’t give up control of the debt to private interests and should use the opportunity to repurpose properties, including vacant land with tax delinquencies. Both she and Spisak said any proposal must also protect tenants who don’t own the property they’re living in.
“Vacant land, unoccupied buildings, those are opportunities for proactive planning for new affordable housing, for new open space, for new community centers, for any kind of amenities that neighborhoods need—particularly neighborhoods that have experienced redlining and disinvestment, which is where the lien sale is concentrated,” Segal said.
