The city’s controversial tax lien sale expires Monday. Absent legislation to create a new program or renew the existing one, a group of activists and elected officials have proposed abolishing the private sales and turning properties over to community land trusts (CLTs) instead.

New York City’s most recent property tax lien sale may be its last as momentum grows for a new debt collection model—including a plan to cut out private firms, reduce penalties and empower community land trusts.

Under the existing program, which expires Monday, New York City sells property tax and water debts to private investors for about 75 cents on the dollar, allowing those firms to collect servicing fees as they pursue the money and, potentially, take possession of people’s homes. After the city canceled the 2020 sale as a result of the COVID-19 pandemic, the City Council enacted a one-year extension that enabled the city to transfer more than 2,800 property tax debts to private investors in December 2021.

READ MORE: Which Neighborhoods Could Be Hit Hardest By City Lien Sales?

There is consensus among city leaders, including Mayor Eric Adams and Council Speaker Adrienne Adams, that the current system is broken, especially since the sales disproportionately affect low- and middle-income homeowners of color and their tenants.  A City Hall spokesperson said Monday that Mayor Adams wants to “explore alternatives to the current lien sale that ensure the city can continue collecting its debts while helping homeowners—particularly Black and Brown homeowners who have been disproportionately impacted by the pandemic—retain ownership.”

But Adams has not proposed specific modifications, and a replacement remains in flux with several months to go before another lien sale would typically take place.

Absent legislation to create a new program or renew the existing one, a group of activists have proposed a radical restructuring of the city’s debt collection scheme that would abolish the private sales and turn properties over to nonprofit community land trusts (CLTs) as a last resort, rather than pave the way for speculation. The CLTs would maintain permanently affordable properties and allow the previous owners to remain in place, according to the  coalition’s proposal.

Advocates and elected officials, including City Comptroller Brad Lander and City Council Housing and Buildings Committee Chair Pierina Sanchez, gathered near City Hall Monday morning to denounce the privatization of property tax collection and tout the CLT intervention model.

“What we’ve seen too many times is working class families, Black and brown families, immigrant families who have worked to make it in this city struggle and be able to buy a home and then have their wealth stripped from them,” by investors looking to flip the properties, Lander said. “Somebody else backed by wealth making a ton of money off that building.”

The advocates presented a map Monday showing that the majority of tax lien sales for Class 1 properties—buildings with no more than three units—occurred in census tracts with the highest percentage of residents of color. The tax liens sold in December 2021 were worth a combined $145 million, THE CITY reported. Debt servicers can rack up additional payment from late fees and other penalties.

The tax lien sale program was established in 1996 by then-Mayor Rudolph Giuiani and renewed every four years until 2020, when COVID-19 prompted Mayor Bill de Blasio to suspend the sale. The Council passed a bill in 2021 to enact a one-year extension of the program, while adding protections for owners of small properties affected by the pandemic. The Department of Environmental Protection removed water and sewer debt from the sale.

In most cases, property tax debts become eligible for the lien sale if they exceed $5,000 and are three or more years overdue, according to the Department of Finance (DOF). City rules protect low-income seniors, veterans and people with disabilities from having their debts sold. The agency contacts lien sale-eligible owners four times before a sale, and urges owners to agree to a payment plan to avoid the sale.

Lander sought to c​​larify that abolishing the tax lien sale would not let property owners off the hook for unpaid debts, but would instead end the privatization of collection. He also said the city would not take control of properties and act as landlord.

“The system we’re designing will continue to have a set of enforcement mechanisms and will not function as a disincentive to pay property taxes,” he said. “This is not pie in the sky.”

The replacement proposal put forth by progressive groups would feature a tiered system of enforcement starting with a payment plan similar to what the Department of Finance currently offers owners who appear on the lien sale list. Under the model, homeowners could also have their debts forgiven by transferring the land beneath their home—known as the ground lease— to a CLT while remaining owner of the physical structure.

Owners who choose not to sell to a CLT and still owe the city back taxes would face foreclosure, leaving it up to the city, rather than a private firm, to determine what to do with the property. Supporters of the CLT structure want the city to transfer the properties to them.

Under the plan, the CLT would guarantee the property remains permanently affordable rather than selling it off to a speculator, and would work with the homeowner to help them remain in place, said Will Spisak, a senior program associate at the progressive community development group New Economy Project.

“We want the city to take back its responsibility of collecting taxes. That’s a core function,” Spisak said in an interview Friday.

His colleague in the Abolish the Tax Lien Sale Coalition, Debra Ack, emceed the rally Monday, citing the experience of an East New York homeowner whose $40,000 debt was transferred to the private Lien Trust before investors imposed more than $20,000 in additional fines and interest. Those penalties make it even harder for homeowners to pay off their debts and lead to foreclosure and flipping, she said.

“The sales displace families, fuel speculation, increase home prices, abandon tenants and strip BIPOC families of the wealth in their homes,” said Ack, secretary of the group East New York Community Land Trust.

Landlord groups have also backed an end to the tax lien sale, though some property owners bristled at the CLT intervention plan.

Ann Korchak, a representative of the group Small Property Owners of New York, said the city should establish flexible payment plans for owners with tax debt that “don’t charge the owner gangster interest rates.” She also proposed tax forgiveness for owners who rented units to tenants who have not paid rent during the COVID pandemic.

Those who want to overhaul the current system have the ear of Council Speaker Adams, who has called for changes to the tax lien system and introduced the modified one-year extension last year. She said the Council would work with community groups and the mayor to “ensure this past system is a relic.”