New York City will continue to enlist a private, multinational bank to collect debt from thousands of delinquent property owners for at least four more years, following a 10-0 Finance Committee vote on Wednesday.
The controversial tax lien sale—a one-day event in May where the city sells off the right to collect outstanding property, water and sewer fees to a private trust managed by the Bank of New York Mellon—brings hundreds of millions of dollars into city coffers each year. But social justice advocates argue that it is also perpetuating a cycle of property neglect and tenant abuse by landlords, primarily in low-income communities of color.
Once debt belongs to the private trust, interest compounds rapidly. A recent report from Public Advocate Letitia James's office focused on 22 multi-family buildings that have entered the tax lien sale an average of five times since 2010. Many of these buildings, from Crown Heights to the South Bronx, are rent stabilized—part of the city's dwindling stock. They are in severe disrepair, and harbor vacancies.
When the debt on these delinquent properties becomes untenable, advocates say, landlords tend to sell. "The landlord flips the building, and the only people who are going to buy it are speculators who, in order to make their money back, are going to kick long time tenants out," said Cea Weaver, research and policy director for New York Communities For Change, a grassroots organizing group.
Following today's committee vote, the full City Council approved the extension of the tax lien sale by a vote of 45-1. "I am tired of speculators knocking on our doors," said Councilmember Rafael Espinal, who represents East New York, before casting the only 'no' vote.
The sale impacts nonprofit organizations, as well. Students at Fordham University recently mapped 89 nonprofits that ended up in the 2016 tax lien sale, including food pantries, churches, and after school care programs. While nonprofits can be exempt from the sale, organizations are required to reapply for an exemption each year—a process advocates say is too onerous for small organizations to keep up with.
Today's vote codifies a slightly-amended version of the sale, which was instated under former mayor Rudy Giuliani as a way for the city to quickly collect on property tax debts that had ballooned during the 1970s fiscal crisis. Amendments focus on improving communication between the Department of Finance and property owners who owe taxes: more warning phone calls and emails. The city will also instate more flexible debt-payment plans—monthly, as well as quarterly—and access to financial counseling for at-risk property owners.
"The Lien Sale Program is an important tool to ensure the equitable contribution to critical City services, but it must also be transparent, fair, and flexible when necessary to provide help to those property owners who are struggling financially," said Councilwoman Julissa Ferreras-Copeland, who chairs the City Council Finance Committee, on Wednesday. "This legislation represents meaningful steps towards these important goals."
468 West 145th Street in Hamilton Heights, with the boarded up windows, has gone through the tax lien sale for five consecutive years (Google Maps).
Also on Wednesday, the Public Advocate introduced legislation that would create a so-called "preservation trust," which could purchase the debt on some of the buildings in serious disrepair and, unlike the Bank of New York Mellon, work with building owners (or, in a foreclosure situation, nonprofit developers) to preserve affordable apartments.
While the city already has the discretion to pull buildings from the tax lien sale and provide them with Housing Preservation and Development funding for repairs, the public advocate has argued that a preservation trust would ensure that many more buildings are rehabilitated. Her bill would also exempt apartment buildings with at least three hazardous violations per apartment from the sale (the current threshold is five), as well as apartment buildings that have been through the sale at least two times within the last four years.
Advocates had hoped the preservation trust would be included in the renewed tax lien sale legislation voted in today, but were encouraged by the public advocate's bill, which already has the support of Councilwoman Ferreras-Copeland. On Wednesday, Ferreras-Copeland called the preservation trust idea "intriguing."
Still, the bill would allow HPD to decide which buildings, beyond the very most distressed, escape the tax lien sale. "The city is going to need to use the preservation trust," said Weaver, of NYCC. "Pass it, and use it."
Ferreras-Copeland acknowledged advocates' concerns on Wednesday. "There is still a lot of work to be done to safeguard property owners," she said.
While the legislation approved today doesn't include language exempting nonprofits from the sale, Ferreras-Copeland assured that the Department of Finance will work closely with churches, food banks, and other organizations with outstanding debts. "The Department of Finance has clarified that if an organization is working with the agency to resolve their tax exemption status, the property will be pulled from the lien sale in almost all cases," she said.
"Enactment of this bill does not represent the end of the conversation," Ferreras-Copeland added.
Paula Segal, an attorney with the Urban Justice Center and longtime proponent of tax lien sale reform, said Wednesday that while the council member's words are encouraging, they don't change the fact that the city failed to codify more robust reforms into law.
"None of this is enforceable," Segal told Gothamist. "It's good to have this on the record, but this legislation does not actually direct the Department of Finance to do any of the things [we asked for]."
