Property Tax Foreclosures as a Strategic Approach for Affordable Housing: An Opinion Piece

In the heart of New York City, the ongoing housing crisis has become a pressing concern for policymakers and residents alike. The city's housing landscape is undergoing significant changes, with the resumption of tax lien sales and the debate surrounding this decision taking centre stage.

Banks are increasingly moving mortgage default buildings from special servicing to foreclosures, a trend that has put pressure on the administration and council to decide whether to continue taking tax lien revenue or take properties into public ownership, with the responsibility for the consequences. This decision could have far-reaching implications for the city's affordable housing market.

The resumption of tax lien sales, approved by the City Council in June 2024, comes with safeguards intended to help small property owners. This move is a departure from the past, when tax lien foreclosures were common in New York City, often requiring the city to step in and pay necessary expenses and make repairs.

The concept assumes that public ownership can avoid financial shortfalls that private owners face. However, the use of these preservation tools is limited by the capacity of owners and agencies to navigate requirements and funding availability.

Rudy Giuliani's administration created a program to sell property tax liens, generating a revenue stream for the city and removing it from management of the properties. This model, which relies on nonprofit management and public subsidies, similar to the Koch program, has been a point of contention. The Koch housing plan, active over a decade and at a cost of over $5 billion, resulted in the building or rehabilitation of approximately 250,000 units of housing.

The Covid pandemic has driven up the number of one and two family homes, and smaller apartment buildings foreclosures, particularly affecting lower income communities of colour. Rising interest rates, costs for insurance, and rent limitations under the 2019 Housing Stability and Protection Act in New York City are squeezing multifamily owners.

The decision to resume tax lien sales has been controversial, with opponents arguing it leads to speculation and displacement. A counterproposal to create community land trusts and land banks for foreclosed properties has gained political support among progressive elected officials. The outcome of the November election may determine whether the prevailing approach is transactional or aspirational.

In the midst of these changes, the current mayor of New York City is Eric Adams, and the president of the City Council is Adrienne Adams. Their leadership will play a crucial role in shaping the city's housing future.

Property Tax Foreclosures as a Strategic Approach for Affordable Housing: An Opinion Piece