City Council Criticizes City’s Third-Party Transfer Program

Over the past few months, reports have emerged that ownership of single- and multi-family homes around New York City had been assigned to nonprofit organizations, to the surprise of the original owners. Reportedly, these owners were mostly middle-class, retired black residents who had paid off their mortgages and maintained their properties.

In 1996, Rudolph Giuliani’s administration introduced the Third-Party Transfer (TPT) program. This tax enforcement program conveys ownership of properties with significant tax arrears, and in many cases, hazardous violations, to qualified mission-driven and nonprofit affordable housing developers. This measure is taken only as a last resort if the owners don’t pay their outstanding tax arrears or enter into and maintain a payment plan. Unlike in a traditional foreclosure, TPT ensures that all residents remain in their homes with affordability and rent stabilization protections.

According to HPD, since its inception, more than 6,000 homes in approximately 520 buildings have been rehabilitated. The program focuses on the most extreme cases; the 62 properties transferred in the most recent round of TPT in 2018 and early 2019 owed an average of more than $800,000, putting them in the top 0.02 percent of properties that owe back taxes and fees to the city. The goal of the program is to put properties on track to address issues and exit the round before the point of transfer, which the vast majority of properties were successful in doing. More than 80 percent of the 420 properties included in the last TPT round were removed from the foreclosure action.

In response to recent attention directed towards the program, HPD announced a working group to reboot the city’s TPT program. The working group, which includes tenant advocacy groups, community-based housing organizations, legal service providers, and elected officials, will be charged with developing recommendations to modify the program to address key concerns identified by stakeholders and make sure it effectively targets the most distressed tax delinquent properties.

Most recently, the City Council held an oversight hearing, and City Council members accused Mayor Bill de Blasio’s administration of throwing minority landlords off their properties. Brooklyn Councilman Robert Cornegy noted that the city had most recently used the TPT to expropriate a number of buildings in his own historically black district and adjoining areas, but none in majority-white Staten Island. He also called attention to a memo HPD sent the council in 2017 in which it indicated it was taking over an increasing number of Housing Development Fund Corp. co-ops. The fund was created in the 1970s to allow tenants to take over abandoned or insolvent buildings, often in what were then low-income neighborhoods.

Bronx Councilman Ritchie Torres pointed out that the program’s description of being a strictly tax collection mechanism clashed with the administration’s past characterization of TPT as a tool for taking over “distressed properties” in “blighted” areas. Further, his Committee on Investigations found seven of the 420 buildings swept up in the last assessment had no arrears whatsoever or owed less than the $1,000 threshold.

At the hearing, Torres further noted that those dispossessed through TPT receive no compensation, despite the high value of their buildings and the years and resources they have invested in their homes—which are often worth far more than their overdue bills to the city.

HPD Commissioner Louise Carroll maintained that her agency uses third-party transfer only as a “tax enforcement mechanism” for those properties with outstanding bills of more than $1,000, and that the city offers assistance to owners before dispossessing them. A number of the homes most recently transferred owed $800,000 or more, she said—but the statute as written obligates the city to implement the policy by entire tax blocks, meaning it must pursue all neighboring properties with $1,000 in debt in order to get at the very worst offenders.

Carroll appeared to imply this was to blame for the appearance of targeting particular communities, but highlighted that the city impounded only 62 of the 420 properties it most recently identified as susceptible to takeover. She added that the administration was open to a “fresh look” and had already impaneled a commission to consider alterations to the law.