A Better Plan for NYC's Tax Lien Sale

Each year, New York City sells between $70 million and $120 million in unpaid tax debt, water charges, and emergency repair loans to a private trust. These liens—which enable the owner to foreclose on the property—then increase rapidly in value. The trust can charge nine percent interest on 1-3 family houses and 18 percent interest on multifamily housing, compounded daily.

Yes, daily. Total tax debt can triple or even quintuple in a year.

For homeowners who fall behind on their taxes and cannot enter into a payment plan with the City, being put into the tax lien sale means shooting down a steep waterslide into a deep pool of debt. Predatory lenders and equity firms often prey on them as they either try to hang onto their property or sell it for as much equity as they can possibly keep. Sometimes even being on the tax-lien sale list can lead to foreclosure by a lender.

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The City doesn’t have to go back to the bad old days of owning thousands of units of foreclosed housing. It could divert the majority of the more than 4,000 properties a year from the lien sale and make huge strides toward meeting Mayor de Blasio’s goal of preserving or creating 200,000 units of affordable housing.

Through regulatory agreements that subordinate tax debt to permanent affordability requirements, and foreclosure and disposition to nonprofits like community land trusts and mutual housing associations (much like large, low-income cooperatives), the City can put financially shaky housing on new footing by realizing economies of scale in purchasing and management. It can preserve nonprofit assets and the public investment that went into them, and it can even turn vacant lots into affordable housing opportunities. By keeping these properties out of the lien sale, it can keep them from becoming prohibitively expensive to save.

Would it cost money? Of course. But so does passing the buck for New York’s housing crisis to generations to come.

Read the full article at Gotham Gazette

 

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