Lien Days Ahead

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For the first time since the 1970s, tax-delinquent buildings are being auctioned off in New York. A total of 105 buildings, 22 of them apartment buildings or houses, were slated to go on the block on November 2. But the other half of the city’s tax arrears policy, a plan to rehabilitate broken-down buildings in low-income neighborhoods by transferring them to responsible landlords, has yet to get underway.

Before Rudolph Giuliani took office, the city would take buildings from landlords who refused to pay taxes. The policy left the city government in charge of some of the worst–and least profitable–buildings in the city. So in 1994, the mayor ordered the city’s housing department to get out of the housing management business, stop taking buildings and sell off the remaining stock to private landlords, community groups and tenant associations. But without the threat of foreclosure, the city no longer had the muscle to get tax payments from deadbeat landlords.

Two and a half years ago, the administration hit on a novel plan: privatizing the tax-collecting business. The city sold off close to 15,000 property, water and sewer tax liens, worth about $500 million, to a private trust. The trust then hired white-shoe collection agents to fetch those debts, plus 18 percent interest and penalties. Owners who don’t pay up will see their buildings auctioned off–these 105 buildings are the first of the lot.

“To a certain extent, it’s a good thing this is happening,” says New York University law school professor and real estate expert Michael Schill. “It makes owners of tax-delinquent buildings understand that they have to begin paying taxes, or else there will be real consequences.”

But Schill points out that the process is not well supervised–and this could lead to a replay of the housing disasters of the 1970s, where dilapidated buildings were run into the ground by debtor landlords. One worry is that the program is being managed by the city’s revenue-generating finance department instead of the housing agency, whose mission is to preserve buildings. “We need to be tracking the buildings, making sure some responsible owner takes them, manages them,” says Schill.

“A lot of questions are raised by this auction issue,” agrees Anne Pasmanick of the Community Training and Resource Center, which provides technical assistance to small landlords. “There are a lot of unknowns. They’ve had success in getting revenue in, but we don’t know if other measures of success are being evaluated.”

Distressed buildings in poor neighborhoods can’t be auctioned off under this plan–instead, they are supposed to go into an alternate program where the properties are temporarily transferred to private agencies, then handed off to responsible owners. But while the auctions are now underway, the city has not moved ahead with this alternative plan. A pilot version of the program is scheduled to begin soon in the South Bronx, but, according to Celia Irvine of the Association for Neighborhood and Housing Development, it remains bogged down in technicalities.

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