City homeowners lose property for just $250 in unpaid taxes

City homeowners lose property for just $250 in unpaid taxes
A new report calls on Baltimore officials and the Maryland General Assembly to add protections for owner-occupied homes and simplify a city system that often confuses homeowners, enriches investors and adds to the number of vacant properties that line neighborhood streets. (Baltimore Sun file photo)

Homeowners in Baltimore can lose their houses for as little as $250 in unpaid taxes — a threshold far lower than in other cities — according to a new Abell Foundation report that urges a change in the practice.

The report calls on Baltimore officials and the Maryland General Assembly to add protections for owner-occupied homes and simplify a city system that often confuses homeowners, enriches investors and adds to the number of vacant properties that line neighborhood streets.


City Councilwoman Mary Pat Clarke said she's seen many residents, often elderly, get swept up in tax lien sales, and she wants the city to raise the threshold that triggers a sale to $750 in back taxes.

"So many elderly people go into tax sale," she said. "They get confused. They maybe don't account exactly for what's owed. Bills get misplaced and sometimes they don't have the money. We need to raise the limits."

A homeowner in Washington needs to be $2,500 behind in taxes before a property is subject to a tax lien sale, 10 times higher than the threshold in Baltimore. Residential homes in New York City are subject to tax sales at $1,000.

Property taxes are a primary source of revenue for government budgets, and holding the tax lien sales is a way for cities to collect the money to pay for services, such as police and fire protection.

In Baltimore, the city sells tax lien certificates to third-party investors that charge 18 percent interest and act as collection agencies for the city. If property owners don't pay up, the investors can ask the court to foreclose on the properties and take ownership.

To reclaim their houses — and all the equity in it — after a tax sale, homeowners must pay the debt, the interest and hundreds of dollars in court costs and legal fees, according to the report. A $500 tax bill could turn into $3,000 two years after the tax sale.

More than 2,800 open tax lien cases were pending in Baltimore Circuit Court as of Jan. 31, the report found. Advocates say those sales can lead to eviction and homelessness for low-income homeowners.

Mayor Stephanie Rawlings-Blake said she's committed to finding ways to make sure residents can stay in their houses, but her administration sees the $250 threshold as constructive by forcing homeowners to address the debt before it grows any larger.

Rawlings-Blake pointed toward multiple programs the city has in place to help low-income and elderly residents, including discounts on water bills, savings accounts for future tax bills and energy assistance. She said the city also has an early warning system in which city agencies reach out to identify residents at risk of losing their homes.

"My administration is currently in the process of identifying additional reforms to help families in need, because no one wins when residents are forced from their homes due to situations that oftentimes are avoidable," the mayor said in a statement.

City officials contend that increasing the threshold would take a change in state law, but the Abell report found that Baltimore County made the change administratively in 2008, increasing the threshold from $250 to $500. The threshold of tax sales in much of the state remains at $250 in back taxes.

City Council passed a resolution in 2010 urging the General Assembly to increase the threshold to $750, but the legislature hasn't changed state law.

Janice Simmons, chief for Baltimore's Bureau of Revenue Collections, said city officials discussed whether to seek an increase in the threshold, but decided raising the debt limit was too risky for vulnerable homeowners.

"To leave it at $250, we feel like we're doing a service," Simmons said. "They could borrow the money or have the means to get it. At $750 or $1,000, you're in too deep."


Simmons also challenged the report's comparison of Baltimore to other cities.

"The housing stock in Baltimore is different than in Washington and New York City," she said. "You can't compare the locations."

Another recommendation in the Abell report is to eliminate the ability of city officials to sell properties for unpaid water bills. An outstanding water bill of at least $350 that's nine months delinquent can trigger a tax sale, even if all of the homeowner's taxes are paid.

Homes in Washington or New York City can't be sold at a tax sale based on an unpaid water bill.

The city no longer allows tax sales for delinquent water bills that were issued based on estimated water use. The policy changed after officials discovered in 2012 that the city had overbilled 38,000 customers, owing residents $4.2 million in refunds, according to the report.

Joan Jacobson, author of the Abell report, called Baltimore's tax sale system more "punitive" than any other she researched.

"In places like New York City and Washington D.C. and the state of Rhode Island, they have found ways to still collect taxes and hold tax sales, but protect homeowners," Jacobson said. "The study is a road map for how to change the laws."

The report recommended the threshold for tax sales in Baltimore be increased to $1,000 and called for homeowners' unpaid water bills to no longer be used as a trigger.

Recommendations also included lowering the interest rate that homeowners pay to redeem their houses, improving the process to notify residents of the tax sale process, offering installment payment programs based on income and creating an ombudsman position to assist at-risk homeowners.

Lester Davis, spokesman for City Council President Bernard C. "Jack" Young, said tax lien sales have been a matter of ongoing discussion between Young and the administration.

"In the council president's mind, it doesn't make a whole lot of sense to kick someone out of their home for what's in the grand scheme of things a minuscule amount," Davis said. "You're being penny wise and pound foolish, and you run the risk of having someone be even more dependent on social services."

Margaret Henn, foreclosure prevention project manager at the Pro Bono Resource Center, urged city and state officials to change laws and policies based on the report's findings. She said much is at stake, especially for elderly and low income residents.

"They are facing homelessness over such a small bill," Henn said. "It's people who have built up a lot of equity in their house and are losing everything."