Public Advocate Calls for Major Reforms to the City’s Tax Lien Sale

Each year since 1998, the city has sold off landlords’ unpaid fines and bills to private investors, who then collect payments and can seize properties if the owners don’t pay. But when the debt is sold off the inflating interest can becoming a crushing burden, and residents often feel the brunt of the pain as landlords cut costs on crucial services, according to a report by Public Advocate Letitia James.

New York City Comptroller Scott Stringer wants the city to foreclose on the delinquent landlords’ properties and use the land to construct low-income housing. And Public Advocate James recommends selling the debt through a housing preservation trust to nonprofits, which would compel owners to fix up their buildings.

“The City is underutilizing its ability to help tenants in distressed buildings, which is why we must reform the tax lien sale,” said James. “Our investigation found the current sale is putting tenants at risk, worsening rent deregulation, and not maximizing the City’s potential to earn revenue.”

The Public Advocate’s Office conducted an in-depth investigation into 22 properties that have been through the tax lien sale more than twice within four years. The investigation included multiple interviews with stakeholders, a massive data review, in-person visits to each of the properties, and meetings with tenants. The investigation found that:

• The buildings were in extreme disrepair and poor condition, although they did not meet the city’s definition of ‘distressed’ despite numerous housing violations;
• Despite having gone through the tax lien sale multiple times, very few debts were discharged;
• Although each of the buildings was rent stabilized, some were not registered as such; and
• Many owners seemed to allowing their buildings to be in disrepair as a form of tenant harassment to vacate and destabilize the building.