Campaign to Replace the Predatory Lien Sale

TakeRoot is a founding member and counsel to the Abolish the NYC Tax Lien Sale Coalition which was initiated in summer 2020 by the East New York CLT .

In June 2024, the City took a first step toward abolishing the lien sale. The fight isn’t over:

The Tax Lien Sale privatizes a core public function by transferring the management and collection of property tax arrears to private investors. As a result, investors and private debt servicers extract massive amounts of wealth from low-income Black and brown communities, push elderly and low-income homeowners and tenants into further distress, and leave neighborhoods littered with tax distressed vacant lots. Through the lien sale, the City also squanders powerful leverage it would otherwise have to develop and preserve tax- distressed properties as permanently affordable housing that New Yorkers urgently need, and for other community needs.

In 2020, we formed The Abolish the Tax Lien Sale Coalition to bring attention to the speculation and displacement fueled by New York City’s tax lien sale. Over the past four years, our coalition has led the call for an abolition of the tax lien sale and the creation of a new, equitable debt collection system that works for all New Yorkers. We conducted outreach to countless homeowners and tenants, produced reports, held rallies and press conferences, and beat the drum about the predatory nature of the lien sale.

After years of our advocacy and organizing, the City Council and Administration has finally recognized that the lien sale exacerbates inequity. At last the City will implement long overdue, commonsense protections for some of those harmed by the lien sale, including implementing pieces of our Coalition’s proposed framework:

Funding for community based organizations (CBOs) to assist property owners. This assistance will help ensure that owners avail themselves of all that they have a right to, including exemptions, payment plans and the other options that will stem displacement of homeowners.
Comprehensive notice that will let owners know the exemptions they may be entitled to, payment plans available to them, and other options they can use to avoid being included in the lien sale.
Providing homeowners a “last resort” option to remain in their homes by voluntarily transferring their home to a community land trust (CLTs) or other organizations in exchange for clearing their tax debt while retaining some equity in their homes. For homeowners who want to remain in their home and community, this provides a pathway to do so while increasing the stock of permanently affordable housing in the City.
Outreaching to tenants living in tax distressed properties and affirmatively addressing conditions in these properties.
Dealing with distressed rental buildings. Landlords repeatedly eligible for the lien sale will have their buildings inspected for HPD violations. This can help address quality of life issues for tenants and could provide a pathway for resident ownership.

We are also relieved that the City Council has launched a new $1 million per year initiative that will include estate planning workshops; assistance drafting wills and other related legal documents; legal assistance and counseling on clearing titles on homes where the legal ownership is not clear due lack of estate planning or other issues (tangled titles); referrals to other services to address liens and other encumbrances on tangled titles; and other related services.

However, this legislation is only a first step towards a more just and equitable municipal debt collection system. We call on the City to:

Fully Abolish the Predatory Tax Lien Sale and implement our proposed replacement system (released Feb. 2023). The newly formed Task Force, which thanks to the advocacy of the Coalition includes community representation, must devise a debt collection system that is accountable to the people of New York.
Pass legislation that meaningfully supports tenants living in tax-distressed properties. NYC City Council should pass a reformed city foreclosure program for distressed properties, a Land Bank, and the NYC Community Land Act package to bolster permanently affordable, community and tenant owned housing across the city.
Work with Albany to implement a fair and equitable property taxation system. As it stands, New York’s property tax system imposes disproportionate burdens on Black and Brown communities. By asking property owners and tenants (who by extension contribute to the tax base through their rental payments) to pay more than their fair share in taxes they experience a disproportionate risk of being impacted by the lien sale.

Testimony

Testimony to the NYC Council Committee on Finance (6/18/2024): I am very encouraged that the reauthorization bill the Committee Chair plans to introduce this week incorporates many new preventative measures to divert indebted low income homeowners from the lien sale, provide new options for them to stay in their homes and will require HPD to inspect some rental buildings that are included in the lien sale process (those with a lien to value ratio of 15% and inclusion in two of four proceeding lien sale notice processes). That being said, TakeRoot hopes that there is still room for improvements before the bill is voted on by the full Council: (1) Incorporate tenants! (2) Limit the authorization term to three years. (3) Reveal who puts the trusts together. (4) Keep public control of debt on problem properties.

Testimony to the NYC Council Committees on Housing and Buildings and on Government Operations (6/6/2023, updated 6/7/2023): Worse, the lien trust system is based on the existence of a “graveyard” trust (established in 1998 and called “1998-2”) which accepts liens on properties that would pose a risk to bond offering. Unlike the trusts created in each sale year, this one does not expire when investors have been paid and bonds satisfied; it continues to this day and currently holds nearly 6,000 liens that have not been redeemed or defected, accumulated during the quarter century of lien sales and assignments from trusts that were closed down after investors were paid.

Testimony to the NYC Council Committee on Finance on FY24 Budget (3/6/2023): I am here to draw attention to the need to adjust the preliminary budget to reflect the fact that the City does not have authority to sell tax liens and to add support for a new collection system for municipal arrears; the preliminary budget’s inclusion of $80 million revenue from the lien sale in the budget is misplaced. On the expenditures side of the budget, the amount allocated to the Department of Housing Preservation and Development for Community Land Trust (CLT) contracts must be increased to reflect the expanding capacity of community land trust organizations and the expanded opportunities for the City to partner with CLTs on crucial preservation and development projects that stabilize housing and other key types of real estate across New York City Neighborhoods.

Testimony to the NYC Council Committee on Finance at Oversight Hearing on Tax Reform (11/15/2022): The tax lien sale is the definition of bad policy that prioritizes private investors over homeowners, tenants and the future of our City. We ask that this committee ensure that the tax lien stays in our past. We urge you not to support ANY legislation that involves selling property tax debt to an unaccountable third-party entity. We also ask that this committee work with us to institute a new system of enforcement with the following goals: 1) re-municipalizing public debt collection, 2) preventing displacement of homeowners and tenants, 3) promoting long term affordability through community land trusts and partnerships with trusted non-profit developers, and 4) creating a pathway for productive use for vacant lots and unoccupied buildings.

Testimony to the NYC Council Committee on Finance on FY23 Budget (3/2/2022): We must make sure that the Department of Finance has the resources to bring debt collection into the ambit of the City in this and coming years. We would like to see a system that both incentivizes timely payments and allows owners who simply cannot pay to resolve their debt in a manner that increases the City’s supply of affordable housing. The City’s growing number of Community Land Trusts (“CLTs”), located in nearly every neighborhood, would be ideal partners for such a system: the City could forgive the debts of owners who voluntarily transfer the land beneath their properties to CLTs. This would allow them and their tenants to stay while preserving some equity.

Testimony to the NYC Council Committee on Finance on Tax Lien Sale Reauthorization (December 9, 2020): TakeRoot called on the City Council to abolish the lien sale and expand the pipeline of properties headed for transformation to social housing and community ownership.

Testimony to the NYC City Council Oversight Hearing: Examining the City’s Deed Theft and Deed Fraud Crisis (October 13, 2020): TakeRoot testified to connect the dots between the deed fraud crisis and the NYC Tax Lien Sale.