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Delinquent Property Tax Enforcement Could Be the Missing Piece in Fighting Vacant Properties

February 21, 2023

A vacant property with boarded up windows.

By Libby Benton, Associate Counsel to National Initiatives

Every year, property owners across the country receive property tax bills. Most people pay, because the consequences of not paying your property taxes seem cut and dry: Fail to pay and you may lose your property. 

But what happens when a private property owner walks away from a declining investment property and stops paying their taxes? And what happens to the vacant, abandoned, deteriorated properties that haven’t generated property tax revenue for their municipality in years, or even decades? 

Even at a time of record low housing supply, vacant and deteriorated properties—referred to by some as “blighted properties”—exist in every community. They drain municipal resources (in fire, police, and code enforcement calls) without giving anything back to the local tax base. These properties, as Community Progress Senior Fellow Alan Mallach recently discussed on NPR’s 1A, actively harm neighbors and neighborhoods by threatening public health and safety, keeping residents from building wealth, and destabilizing local government finances.  

Ways vacant, abandoned, and deteriorated properties negatively impact communities.
Ways vacant, abandoned, and deteriorated properties negatively impact communities.

But local leaders often overlook a powerful tool to address vacant and deteriorated properties: the delinquent property tax enforcement system.  

How can the delinquent property tax enforcement system help?

Delinquent property taxes are often the first warning sign that a property is going into decline. Upstream, early intervention—like tax relief to low-income and vulnerable property owners, deferrals and payment programs, and other off-ramps and circuit breakers—is crucial for advancing racial equity in communities and helping people stay in their homes. However, what happens when a property heads down the path of tax foreclosure is equally important. 

The problem is, delinquent property tax enforcement systems in many communities, especially those that sell their tax liens to private investors, perpetuate vacancy. The system of selling tax liens (that is, selling the debt on a property rather than the property itself) can allow vacant properties to linger in limbo for years, discouraging investment in the community and contributing to decline in surrounding property values. A recent analysis by the Baltimore Banner found that 15,000 properties have appeared on the tax lien sale list twice since 2016 and 4,300 properties have appeared three times. In Lake County, Indiana, Community Progress found that from 2009-2014 on average 92% of tax liens did not sell, leaving over 10,000 likely abandoned properties recycling through the system each year.  

Result of Lake County Tax Lien Sales, from 2009–2014, as provided by SRI Incorporated, the private firm that handles nearly all tax sales in the state of Indiana.

In many communities, delinquent property tax enforcement systems also unfairly burden communities of color. In Baltimore, investigative reporters recently found that properties in the city’s majority-Black census tracts have tax liens that are sold at much higher rates than minority-Black census tracts.  In Washington, DC, investigative reporters found that Black homeowners disproportionately lost their homes to tax foreclosure and researchers have found that tax foreclosures can contribute to gentrification by displacing homeowners of color.  

At the same time, a well-designed delinquent tax enforcement system can help communities return properties to productive use. In a well-designed system, the local government oversees the foreclosure process and provides required notices, making it more likely that minimum legal standards for notice will be met and that title acquired at the foreclosure sale will be insurable. Communities report that when they can offer a property with insurable title for sale, rather than a tax lien on a property, the property is more likely to be purchased by a responsible owner. And in a well-designed system, properties that don’t sell can be transferred to a land bank, which can help direct the property to a use that meets the community’s needs.  

Property taxes are delinquent and remain unpaid. What happens next?

Many communities across the country have already taken steps to reimagine their systems. The City of Poughkeepsie, New York, recently stopped selling its tax liens to private investors, ending a practice that research showed was disproportionately harming Black homeowners. The City of Baltimore is implementing a judicial in rem foreclosure process to help it gain control of harmful, vacant properties, rather than allowing them to continue to cycle through tax lien sale process. And the City of St. Louis recently updated its property tax foreclosure process to help ensure property owners receive notice of the foreclosure and properties emerge from the foreclosure process with marketable and insurable title, facilitating redevelopment.  

When communities improve their delinquent property tax enforcement system, they have the chance to disrupt a system that exacerbates vacancy and racial inequality, and they gain a new tool to return vacant, deteriorated properties to productive use.  

Your community can be next, and Community Progress can help.

Here’s how you can learn more about how to make this powerful change in your community:   

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