The city’s annual tax mortgage sale, scheduled for Dec. 17, allows private businesses to buy homeowners ’unpaid property taxes and water bills for about 75 cents on the dollar. Businesses can then set fees and high interest rates as they aggressively seek the full amount from homeowners who may lose their homes if they do not pay.
New York Justice Minister Letitia James has once again called on New York City to postpone its annual tax mortgage sale and adopt structural reforms of practice – a debt collection scheme that threatens to disproportionately displace black and Latino homeowners.
The city’s annual tax mortgage sale, scheduled for Dec. 17, allows private businesses to buy homeowners ’municipal debt – including unpaid property taxes and water bills – for about $ 75 cents from the Treasury Department. Businesses can then set fees and high interest rates as they aggressively seek the full amount from homeowners who may lose their homes if they do not pay.
Following demands from housing lawyers and local elected officials, Mayor Bill de Blasio suspended last year’s sales several times to provide a respite for property owners facing further difficulties during the COVID pandemic and the related financial crisis. The city council also voted in January to set up a task force that would receive public input and propose reforms to the tax lien system.
In a letter Monday, James de Blasio called for at least waiting for the task force’s proposal before moving on with the sale of liens. She cited the persistent impact of the pandemic, saying New York is on the verge of distributing hundreds of millions of dollars in federal funding to prevent foreclosure.
“I find it alarming that this retention sale, which will deprive homeowners of their most valuable asset due to an unpaid water or tax debt, will take place despite the continuation of the COVID-19 pandemic and the extraordinary economic strife that it has created “for so many New Yorkers,” James said.
Nearly half of the 5,300 one-to-three family homes (known as Class 1 properties) on the city’s mortgage sale list last year were located in just 10 boroughs, with predominantly Black and Latino Council District 37 covering East New York. and Bushwick, which accounts for the most at 300. Three Council districts in predominantly Black Southeast Queens were not far behind, each accounting for nearly 300 potential sales of the mortgage.
James called for major reforms of the event that would address the racial differences that have long existed in the program.
“COVID19 may have exacerbated the impact of the lien sale on our vulnerable communities, but it did not create them, and 2021 will not be the only year in which the lien sale causes significant harm to our families and communities,” she said.
The issue has arisen as a wedge between two Brooklyn MPs – James and de Blasio – who both weigh candidates for governor. James has often called for a suspension and overhaul of the tax lien model throughout the pandemic.
Eric Adams, president of Brooklyn Borough and probably the next mayor of New York City, has said he would complete the sale of the tax bill. On Tuesday, 17 council members, led by Robert Cornegy of Brooklyn, also called on de Blasio to postpone the sale.
Councilman Brad Lander, the city’s likely next inspector, and several lawmakers have specifically proposed moving from a mortgage system to a community model where nonprofits own the property and maintain affordable housing.
The tax mortgage program was first introduced in 1996 by then-Mayor Rudolph Giuiliani as a way to enforce property tax collection while getting the city out of foreclosures. But the sale has had serious consequences for many low- and middle-income homeowners, especially black New Yorkers, who are disproportionately affected by the foreclosure crisis of 2008 and other systemic obstacles.
Although sales are typically seen as a threat to small homeowners, tenants may also suffer, the New York Focus reported earlier this month. Property owners at risk of foreclosure often sell their homes to speculators seeking to evict existing tenants and turn the properties over. Larger properties with tax liability are also due, which penalizes tenants further.
The city’s Task Force consists of council members and lawyers who have called on the city to remove Class 1 properties from the sale to protect owners of single-family homes and other small properties, said Katrell Lewis, vice president of government and community partnerships. for Habitat for Humanity. Officials from the de Blasio administration are also part of the task force and have so far resisted the idea, Lewis added.
Lewis has urged the city to allow community land funds to play a role and keep housing permanently affordable, saying de Blasio should not sign on to the sale of tax lien rights at the end of his term.
“If there was a task force for the sale of the tax lien to come up with new reforms, we should allow a new administration and a new council to negotiate what a tax lien sale looks like,” Lewis said. “We should not build New York City on the backs of black and brown New Yorkers.”
A spokesman for City Hall said the sale remains scheduled for December and that the city will increase efforts to inform homeowners about their right to claim COVID or Hurricane Ida issues and their ability to enter into a payment plan with the city to avoid the sale. .
“Over the past year, the city has greatly reformed the lien to help more homeowners while maintaining important city services,” a spokesman for the mayor said. “We are currently working with the Task Force on further reforms.”
The mayor’s office said there are 40 percent fewer homes that are at risk of tax law or the sale of water bills than in previous years. Debts of about 10,000 properties are up for sale in December, including more than 3,300 Class 1 properties, according to city listings on the Treasury Department’s website.
City Hall officials have previously said the sale is important to raise revenue. New York City raised more than $ 74 million by selling tax and water debt to private buyers last year, according to City Comptroller’s annual financial report.
That’s a relatively small amount in New York City’s budget of nearly $ 100 billion – and the kind of deal that leads to homelessness, displacement and related costs, said Queens Councilor Adrienne Adams.
Adams enacted legislation last year to resume tax mortgage sales with some protections for owners affected by the pandemic, with properties valued at less than $ 250,000. In January, the Council adopted another bill extending the sale of liens by just one year, while exempting buildings with 10 or fewer units where one unit is inhabited by the owner and where the owner has been financially affected by the pandemic.
Adams, one of the task force members, said the expansion should allow the city to reform the current system while exploring a different model.
“I do not think it is any secret that the majority of us do not want this tax mortgage sale, but we are trying to accommodate a reasonable reform,” she said.
In the short term, Adams said, the task force has sought to raise awareness of the sale and help vulnerable property owners make payment plans. Over the past year, 105 residents in her district have left the mortgage sale pool after accepting payment plans, while about 350 others remain on the list, she said.
The task force’s long-term goals remain a revision of the tax lien to ensure New York City’s small property owners maintain their homes, she added.
“This is Giuliani-like stuff, and we want to create real reforms,” Adams said of the current system. “New York City does not want people to lose their homes for not paying their water bills.”