Research Brief:
The Impact of the
Tax Lien Sale on
Rental Properties, 2017-2021
March 2024
Summary
The City of New York’s approach to most property debt from 1996 through 2021 relied on annual bulk sales of all municipal liens to a private trust backed by investors, the “tax lien sale.” In doing so, the City gave up its ability to use tax debt as leverage over landlords to pay their delinquent taxes and improve conditions in their buildings.
Our unprecedented analysis of the buildings on which such liens were sold in the last four bulk sales reveals that the vast majority of residential properties impacted by the tax lien sale are rental properties located in Black and Hispanic/Latino communities and exhibited indicators of tenants living in distress at higher rates than similar rental properties not impacted by the tax lien sale.
Further, these rental properties are primarily owned by absentee landlords, including individuals, LLCs and other business owners. In other words, the lien sale enriches private investors and landlords at the expense of our Black and Brown neighbors, who often live in terrible conditions.
As the City considers how to address tax delinquency, any legislation must ensure that property owners are accountable to New Yorkers and their elected officials, not private investors and financial firms. The Abolish the NYC Tax Lien Sale Coalition has developed a policy framework to achieve this, Leaving the Speculators in the Rearview Mirror, which would provide an equitable debt collection system while ensuring safe and stable housing through community control of land and housing.
Key Findings
- In any given year more than 85% of residential units in lien sale
properties with residential units are rental units. The vast majority of
these properties are owned by absentee landlords.
- Tax lien sale-affected rental properties and units are concentrated
in Black and Brown city council districts: 63% of all tax lien
sale-affected units are in majority Black and Brown Council districts
while less than half of all rental units in the City are located in
those districts.
- Residents of tax lien sale-affected properties are evicted at rates 2 to 3 times higher than tenants living in similar buildings. Similarly, these tenants live in units with 6 to 7 times more HPD violations than properties unaffected by the lien sale.
About This Research Brief
This research brief focuses on rental properties on which the City of New York sold liens in the four bulk lien sales that happened between 2017 and 2021.
We start with an account of our outreach to residents, mostly tenants, of tax lien sale-affected properties and highlights an exemplar in Western Queens of what we have heard around the City. This is followed by a short description of our methodology and how we developed the data used for this analysis. The brief then delves into the data, providing a general overview and data by council district before moving more deeply into the highly racialized character of the tax lien sale that disproportionately burdens communities of color. We close with our recommendations for a more equitable and just approach to tax debt.
Background
From 1996 through 2021, New York City transformed property debt owed to the City into financial securities that private investors can earn stable returns from, whereas in years prior it would foreclose on properties and take ownership of them, often converting buildings to cooperative ownership or transferring to not-for-profit entities. Through this process, the City receives a marginal infusion of revenue when measured against the City’s total property tax revenue while relinquishing control over properties affected by lien sale.
As the City considers how to address the collection of delinquent municipal debt and how to handle the properties that the debt is owed upon, there is a need to understand the degree to which the tax lien sale has aided and abetted unscrupulous, speculative landlords. Thousands of New York City residents live in these properties, which the present analysis suggests are more distressed than similar buildings in their respective boroughs and council districts.
While the tax lien sale is often touted as a tax collection enforcement mechanism, this is misleading. Buildings cycle through sale after sale without any impact on how owners treat their tenants or resolution of their arrears: twenty percent of the rental properties that had liens sold between 2017 and 2021 had liens sold in at least two separate sale years.
In addition, considerations must be made for what the City gives up when it relinquishes control over tax delinquent properties to financially-motivated Wall Street firms with no accountability to the people of New York City. This impacts both renters and homeowners. For tenants of rental buildings, the City neutralizes the threat and possibility of City-initiated foreclosure to encourage property owners to provide safe and adequate housing. For homeowners that also rent out units in their homes, the tax lien sale precludes consideration of unique circumstances and disproportionately opens Black and Brown homeowners to exploitation by real estate investors and speculators. The City also loses the ability to coordinate the transfer of a tax delinquent property to non-profit affordable housing providers, such as Community Land Trusts, without incurring significant costs.
When Wall Street is put in charge of making decisions about properties with municipal debt, the people of New York City are silenced. Profit for Wall Street investors and real estate speculators is prioritized over the concerns of everyday New Yorkers who have to live in poorly maintained properties or in neighborhoods dotted with vacant and abandoned properties that their representatives, council members and advocates, have little say or sway over.
Surveying the Tax Lien Sale Landscape
In summer and fall of 2023, Abolish the NYC Tax Lien Sale Coalition member organizations visited tax lien sale-affected buildings that were likely to still have outstanding liens on them. We canvassed buildings and spoke with people living in them. Visits to over 60 properties in East Brooklyn, Southeast Queens, and Western Queens, revealed that nearly all of these properties were owned by absentee landlords.
We had anticipated speaking to some building owners because most of the properties on our lists were smaller homes: single-family homes and multifamily properties with six or fewer units. Yet, we primarily encountered tenants in buildings with absentee landlords.
Tenants spoke of ceilings that were caving in, mold from water leaks and landlords that harassed tenants. One tenant told us that they had recently received notice from the property’s lender indicating that the owner had not been paying their mortgage, despite both of the building’s tenants being current on their rent. Rarely did we encounter tenants who felt that their building was in good shape and that their landlord was responsible and responsive to their needs.
