It seems like simple math to housing advocates.
The city of Baltimore needs more property tax revenue; the state of Maryland has millions of dollars in federal COVID relief to help homeowners pay their property taxes.
The city and state both have a financial incentive to get that money to residents, advocates say, but instead they’re about to let debt collectors once again profit off longtime Baltimore homeowners.
Friday is the last chance for Baltimore homeowners to pay off delinquent property taxes before being put on the city’s annual tax sale list. That’s where the city auctions off the right to collect those past-due property taxes. The sale offers a quick infusion of cash for the city, but the buyers are often debt collectors who tack on fees and a 12% interest rate. If homeowners can’t pay, it can lead to foreclosures, clouded titles and vacant homes.
Housing advocates consider the practice predatory.
In 2020, Baltimore sold liens on 1,015 owner-occupied properties with an average unpaid property tax bill of $5,709, for a total of about $5.8 million, according to a state report.
Advocates say the sale should not take place this year because the state is sitting on an unprecedented amount of federal money — the $250 million Homeowner Assistance Fund — that can be applied to people’s property tax bills.
A spokeswoman for the Maryland Department of Housing and Community Development declined to say how much money had been disbursed from the Homeowner Assistance Fund, which has been accepting applications since the beginning of this year.
Department spokeswoman Sara Luell said the city of Baltimore agreed to remove applicants from the tax sale list if the homeowner has “a high likelihood of being approved.” On Tuesday, Luell said there are 40 applicants who are on the tax sale list.
Mayor Brandon Scott told The Baltimore Sun he expects to make an announcement soon about the tax sale, but declined to elaborate. Baltimore holds a tax sale every year, typically in the third week of May. Several jurisdictions in Maryland also hold tax sales, which are outlined in state law. Cities across the country have similar auctions.
The city of Baltimore released its preliminary tax sale list earlier this year. There were 4,154 owner-occupied properties on that list. The median debt was $2,192. The properties have been owned for a median of 17 years, meaning most of the homeowners paid their property taxes for nearly two decades.
Housing advocates say only a fraction of these homeowners are aware of the Homeowner Assistance Fund.
Nneka N’namdi and John Kern run the Stop Oppressive Seizures Fund, which raised about $81,000 last year to bail out 60 homeowners with delinquent property taxes. They have been trying to sound the alarm this year — with residents and city and state officials — that there is federal money available.
“This is an opportunity for them to clear a lot of the property taxes that otherwise would not get paid,” N’namdi said.
They said an official with the state housing department told advocates last week that the state had received about 3,800 applications and approved 70 of them so far.
Luell said in an email that the housing department has so far approved 18 Baltimore applicants to fund and has paid their delinquent taxes and utility bills.
To Kern and N’namdi, it doesn’t make sense to proceed with the tax sale when Maryland has unused funds that can pay off these delinquent property taxes. Any money that Maryland does not disburse must go back to the federal government by the end of 2024.
“It’s like a debt collector that doesn’t want to collect the debt,” Kern said of the city and state. “They want to let someone else make money off it. It’s really weird.”
Heidi Kenny is one of those people who makes money off the tax sale. She founded the Kenny Law Group and has been buying delinquent property taxes at Baltimore’s tax sale for years. Kenny and N’namdi both sit on Baltimore’s task force to reform the tax sale process.
Kenny was unaware of the $250 million Homeowner Assistance Fund, but said the tax sale should go on as planned.
“The problem isn’t the tax sale,” Kenny said. “The problem is people not taking responsibility for the situation and trying to rectify it.”
According to Kenny, there are lots of programs and resources available to help people pay off their property taxes.
“There has to be an incentive or a strong deterrent to keep people paying,” Kenny said. “Otherwise, if there’s no consequence to nonpayment of taxes, what options does the government have to get those funds?”
Kenny, whose husband pleaded guilty to a tax sale bid-rigging conspiracy in 2008, said the most effective debt collectors are fair and compassionate because those are the most likely ones to get repaid. While some debt collectors are bad actors, Kenny said, some homeowners are bad actors, too, and they simply want to avoid paying taxes.
Claudia Wilson Randall, executive director of the Community Development Network of Maryland, sees it differently.
Wilson Randall called private debt collectors “bottom feeders” and said that just three to five firms purchase the majority of liens in Baltimore. She compared the tax sale process to sharecropping because it puts people — primarily Black folks — in a cycle of debt and can end with them losing their property.
Wilson Randall said the tax sale directly contributes to the city’s vast number of vacant homes, estimated at about 15,000, as people lose their homes and get evicted. Ending or reforming the tax sale is an important first step to fixing the vacant homes crisis, she said.
“We’ve got to stop the bleeding as well as make progress,” Wilson Randall said.
She said the typical Baltimore homeowner on the tax sale list is an older, Black woman living below the poverty level.
Staff at legal clinics in 2015 surveyed 151 clients on Baltimore’s tax sale list and found that two-thirds of them reported an annual household income of less than $20,000, according to a report from the Center for Community Progress. More than a third said they were disabled, more than half were 60 or older, most owned their home outright, and more than 80% were Black.
That aligns with what N’namdi and Kern have seen at the Stop Oppressive Seizures Fund.
“Many of our clients have paid their taxes consistently 20, 30 and 40 years in a row and now have fallen on hard times because they’re elderly, because they are widowed, because they’ve become disabled,” N’namdi said.
N’namdi and Kern said it’s nearly impossible to get a breakdown of delinquent property taxes or other bills from the city’s finance department.
“They are from the late 1970s,” Kern said of the city’s computer systems. “We don’t see a breakdown of bills, we get screenshots of computer screens … It is rife for mistakes, billing mistakes, billing errors.”
The city’s finance director, Henry Raymond, sent a memo to City Council this month, acknowledging his department’s antiquated technology.
“These are long-standing platforms that do not interact with each other, creating many operational and customer services deficiencies,” wrote Raymond, adding that issues in the system sometimes incorrectly place residents on the city’s tax sale list.
That alone should be reason enough to delay or cancel the tax sale, Kern said.
N’namdi said the tax sale disrupts and damages communities.
“It can potentially take generational wealth from Black families and transfer it to money for investors,” she said.
She and Kern have been spreading the word about the Homeowner Assistance Fund and helping Baltimore residents apply. Homeowners impacted by the COVID-19 pandemic can get grants up to $20,000 for delinquent taxes and unpaid water bills.
They’ve found that most people are totally unaware of the program or need significant help to complete the paperwork.
It feels like a race against time, Kern said, but he’s optimistic for the future. He said attitudes toward the tax sale have changed in recent years, and more people seem open to reform.
The Evening Sun
In 2021, Scott removed 973 owner-occupied homes from the tax sale. He said he wanted to protect legacy homeowners and called the action a “first step.”
“This marks a historic shift in Baltimore’s thinking around the tax sale,” Scott said in spring 2021. “Homeownership is one of the most important factors when it comes to building generational wealth for our Black and brown communities and our low-income households.”
N’namdi acknowledged that state law requires the city to hold a tax sale, but Scott should put his constituents first and suspend the sale.
“We’re caught in a downward spiral. So he has to stop it at some point and say, ‘Enough is enough, it doesn’t make any sense anymore,’” Kern said. “We’re cannibalizing our own tax base at this point because of decades and decades and decades of racist housing policy.”
Scott told The Sun the city is “considering every option” surrounding this year’s tax sale.
“We’ll have more to say very soon, I suspect,” Scott said.
Interested in learning more about the Maryland Homeowner Assistance Fund? Visit https://dhcd.maryland.gov/Residents/Pages/HomeownerAssistanceFund.aspx for more details.