The City: Pushback Grows as Council and Mayor Hash Out Deal to Revive Property Debt Sell-Off

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By Samantha Maldonado

With Mayor Eric Adams’ administration and the City Council in talks to revive a controversial property tax-collection program that died more than two years ago, some community advocates are pushing to keep the tax lien sales system in the ground.

The city has long relied on the lien sale to collect unpaid property taxes and water bills, placing a payment claim on properties whose owners are delinquent on payments. The city then sells the liens to investors, who attempt to collect the debt.

The last lien sale took place in December 2021 and included over 2,800 properties, netting the city $11.7 million. That sale excluded liens for water and sewer bills.

Since then, following a pandemic pause, the Council has not reauthorized the sale.

For over a year, the Adams administration has been negotiating the tax lien program’s revival with Council members and community advocates concerned about the risk of people losing their homes because of economic hardship. 

Advocacy groups on the front lines of the fight rallied in front of City Hall Thursday against the prospect of the sale’s return, saying the system is predatory and only compounds economic stress embroiling New Yorkers.

“There’s really no compromising on the issue of the lien sale itself. It’s detrimental to communities of color, homeowners and tenants,” said Will Spisak, senior program associate at the New Economy Project, which is a member of the Abolish the Tax Lien Coalition. 

“We need an actual enforcement mechanism to actually hold people accountable.” 

Rental units comprise more than 85% of units in residential properties caught in the lien sale, according to a March report from the East New York Community Land Trust, a group seeking shared ownership of housing. Organizers visited more than 60 Brooklyn and Queens properties that had liens on them and found that absentee landlords owned most.

The Abolish the Tax Lien Coalition has proposed an alternative tax collection system with options for owner-occupied buildings, properties with tenants and vacant properties.

Lien ‘Lobotomy’

In a lien sale, the city sells debts for uncollected property taxes and other municipal charges to a trust of investors at a discount. Mayor Rudy Giuliani created the system in 1996 as a way to address real estate abandonment and to collect unpaid property taxes. At the time, city government was still digging out from responsibility for thousands of private buildings it had previously foreclosed on for failure to pay taxes.

Property owners late on their bills must pay more fees and interest in addition to what they already owe, which can send them further into debt and can end with a foreclosure.

Adams campaigned on a pledge to end the lien sales, but recently has said they are necessary. At a March press conference, he and Department of Environmental Protection Commissioner Rohit Aggarwala announced the start of water shutoffs for unpaid water bills, characterizing the move as the administration’s only recourse without a lien sale.

“Nobody likes lien sales. As a property owner, I don’t want it as well. But you need tools to send a message for frequent violators of property tax, water bills,” Adams said. “We are going to continue to communicate with the Council to see if we could put in place some form of lien sale that is fair because we don’t want to take property from New Yorkers based on taxes or water bills, but you do have to pay the costs of running the city.”

So far, no legislation reauthorizing a version of the lien sale has been introduced in the Council, as details are still being hammered out.

“We’re giving the lien sale a lobotomy. We’re not making tacos,” said a source familiar with negotiations.

The Department of Finance estimates the amount of unpaid taxes will be more than $800 million in the current fiscal year without enforcement.

Ryan Lavis, a spokesperson for the agency, said it is “committed to implementing fairer property tax enforcement that protects vulnerable homeowners and safeguards New Yorkers facing financial challenges, especially those in low-income and communities of color, from losing their homes.”

Councilmember Pierina Sanchez (D-The Bronx), chair of the Council housing and buildings committee, said she doesn’t want the lien sale to come back in any form but instead wants to “reimagine tax enforcement.”

“We’re not against tax collection. We’re not against tax enforcement, but what we’re for is equity. What we’re for is social justice,” she said. “What we’re for is making sure our communities aren’t gutted.”

A recent report by the Coalition for Affordable Homes and the Center for New York City Neighborhoods found more than half of liens sold in 2021 were located in majority non-white Census tracts, and the sale especially affects homeowners who are lower-income and seniors. Previous studies have shown the disproportionate impact of the sale on homeowners of color and smaller property owners.

Councilmember Sandy Nurse (D-Brooklyn) on Thursday introduced two proposed measures aiming to bring further education and protections to property owners who might fall behind on their bills and risk getting liens on their properties.

One bill would require the finance department to send information to property owners about tax abatements and exemptions they might be eligible for. The other bill would require the agency to record tax liens on the public property records database when the debt surpasses $5,000 over at least three years.

“Right now when the lien sale list happens, all of that information is put into the world, so you basically have a blueprint for whose houses to go to, to target for deed fraud, deed theft or complete speculation, preparatory calls and mailers or just doorknocking,” Nurse told THE CITY. “We’re trying to find a way to prevent this from happening.”