Rebuilding Place in the Urban Space

"A community’s physical form, rather than its land uses, is its most intrinsic and enduring characteristic." [Katz, EPA] This blog focuses on place and placemaking and all that makes it work--historic preservation, urban design, transportation, asset-based community development, arts & cultural development, commercial district revitalization, tourism & destination development, and quality of life advocacy--along with doses of civic engagement and good governance watchdogging.

Sunday, September 08, 2013

Washington Post investigative reporting on DC tax sales

While there is no question that while the Post's coverage of "local issues" has declined over the past few years, as judged by the number of articles and topics presented in the Metro local news section, the paper continues to do some serious investigative work, such as the big series on the use of federal funds in DC housing production ("Forced Out: A Washington Post Investigation Into the Casualties of the District's Real Estate Boom"), and insider dealing at the Metropolitan Washington Airports Authority (e.g., "H.R. Crawford says friends, relatives worked at MWAA).

Today the Post published the first of three pieces on how the sales of tax liens as a revenue generating device for DC ends up displacing homeowners, sometimes for a debt as little as $134.

From "Homes for the Taking: How a small tax debt can become a big problem in the District":

For decades, the District placed liens on properties when homeowners failed to pay their bills, then sold those liens at public auctions to mom-and-pop investors who drew a profit by charging owners interest on top of the tax debt until the money was repaid. But under the watch of local leaders, the program has morphed into a predatory system of debt collection for well-financed, out-of-town companies that turned $500 delinquencies into $5,000 debts — then foreclosed on homes when families couldn’t pay.

As the housing market soared, the investors scooped up liens in every corner of the city, then started charging homeowners thousands in legal fees and other costs that far exceeded their original tax bills, with rates for attorneys reaching $450 an hour. Families have been forced to borrow or strike payment plans to save their homes.

Two more articles will run on Monday and Tuesday:

&bull: "As federal agents investigated a sweeping bid-rigging scheme at Maryland’s tax auctions, some of those same suspects were in the District, engaging in dozens of rounds of unusual bidding."

&bull: "District tax officials have made hundreds of mistakes in recent years by declaring property owners delinquent even after they paid their taxes, forcing them to fight for their homes."

Note that such problems with property taxes and related issues aren't unique to DC.

The Baltimore Sun has run a number of series, ranging from problems with "ground rent" in Baltimore, and how this can lead to property foreclosure ("Part 1 of 3: On shaky ground"), significant problems with property tax assessments in the city, massive failures within the water billing process ("Baltimore City Water Bills | City home seizure for unpaid water bills," "Water bills: Lazy workers faked water meter readings," "Baltimore seeks bidders to replace entire water-billing system"), misuse of the homestead deduction, and how the state tax assessment process (in Maryland property tax assessment is handled by the state) often leads to improper tax credits being awarded to property owners (such as with historic property exemptions), costing the City of Baltimore needed revenue.

The issue is why are "things" so fouled up and how to change them.

Of course, with the tax lien process, the problem is that the Government is not a disinterested party. They just want the money and don't have to take responsibility either for their mistakes or for the consequences to individuals--many of whom aren't mendacious but perhaps have diminished capacities, and aren't able to make sound decisions. In these kinds of situations, we expect government to step in and first attempt to "help" rather than merely be punitive.

And while the Post series is to applauded, it's not necessarily uncovering new stuff, even as it makes the point that the scale of the "game" of  the tax lien and tax foreclosure process has changed considerably, and the problems for seniors ("The elderly at risk," Post)

I remember coming across a similar case back when I lived in Ann Arbor in the mid-1980s. A very aged person stopped paying his taxes. He couldn't take care of himself. Rather than trigger involvement from the County Human Services Department, instead the City of Ann Arbor sold the guy's house at a tax foreclosure auction, and the guy was left to die on the streets.

But as the first article states, the government's position is clear:

Officials at the D.C. Office of Tax and Revenue said that without tax sales, property owners wouldn’t feel compelled to pay their bills.  “The tax sale is the last resort. It’s also the first resort — it’s the only way in the statute to collect debt,” said deputy chief financial officer Stephen Cordi.

But the District, a hotbed for the tax lien industry, has done little to shield its most vulnerable homeowners from unscrupulous operators.

Foreclosures have upended families in some of the city’s most distressed neighborhoods. Houses were taken from a housekeeper, a department store clerk, a seamstress and even the estates of dead people. The hardest hit: elderly homeowners, who were often sick or dying when tax lien purchasers seized their houses.

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