Reimagine Delinquent Property Tax Enforcement

How to Reduce Vacancy, Advance Racial Equity, and Improve Public Services

Author(s): Kim Graziani. Contributors: Tarik Abdelazim, Matthew Kreis, Danielle Lewinski

In varying degrees, vacant properties exist in virtually every community. Isolated to certain neighborhoods, they can represent the legacy of unjust race-based economic and land use decisions over decades that steered investments away from communities of color. Widespread vacant properties can represent the slow but profound economic shifts that saw industries flee major urban centers. In some communities, they are the wreckage of climate change and a warning of the new normal. If vacancy becomes systemic, it changes the character of a neighborhood, deepens racial inequities, and threatens future opportunities.

Breaking this cycle requires policymakers and community leaders to identify warning signs of further destabilization and change state and local laws and practices to stabilize neighborhoods, reverse decades of injustice, and rebuild with a strong commitment to equity, inclusion, and resilience.

Property tax delinquency is a critical element of the vacant property cycle. Vacant properties, whose owners have walked away from responsibilities like basic upkeep of the property and paying property taxes, must be swiftly transitioned to new, responsible owners. However, too many communities’ delinquent property tax enforcement laws and practices allow vacant properties to languish for years—all the while, no one is maintaining the property and it is not contributing to the local tax base. This hurts the economic conditions, safety, and health of individuals and communities.

Aside from helping address vacant properties, the property tax system can prevent future vacancy. By proactively working with residents who are experiencing hardship, governments can provide support that prevents future tax delinquency and neighborhood decline while protecting the owner’s equity and ability to build intergenerational wealth.

This publication lays a general foundation for understanding the property tax system, but specifically focuses on ways to reform the delinquent property tax enforcement process for vacant properties—those properties that pose the greatest harm to a community. There are hundreds of different, complex variations of tax systems across the country, therefore it is important to consult your local legal counsel to understand your state and local government’s laws and practices.

In general, the property tax system has six major stages:

  1. Determine the value of the property
  2. Establish the rate of taxation
  3. Determine if property is subject to tax
  4. Apply applicable tax relief and determine the tax bill
  5. Collect the tax
  6. Enforce delinquent taxes

The first five stages have the greatest opportunity to prevent future vacancy and support financially insecure occupants. It is imperative communities focus on equity in these stages to prevent property loss and unintentional harm. While this publication does not focus on occupied properties, it provides some examples of supports to examine, such as:

  • Ensuring property value assessments are accurate
  • Providing homestead exemptions to owner occupants, and rebates or credits for financially insecure households to reduce property tax burden
  • Ensuring application processes for relief programs are not burdensome, providing application assistance, and driving multi-faceted public awareness campaigns
  • Offering many payment options such as monthly payments, cash payment, and payment at community locations

To break the continued cycle of vacancy and abandonment, communities must examine their delinquent property tax enforcement processes to identify where they are inequitable, ineffective, or inefficient, and doggedly pursue policy reform. Local and state governments in Maryland, New York, Missouri, and West Virginia are just a few that have pursued delinquent property tax reform and serve as informative case studies.

Recognizing comprehensive reform can take time, local governments can take steps to build momentum, such as:

  • Expediting the time frame for vacant properties first. For example, shortening the time period from delinquency to foreclosure only for vacant properties.
  • Ending tax lien sales for vacant properties and instead pursuing an in rem foreclosure action to bring the distressed property under local control.
  • Adding abatement costs to the tax bill ensuring that the costs the government incurred from mowing grass, boarding a property, removing trash, and other services are recorded as a lien against the property and added to the minimum cost private buyers must pay at tax sale.
  • Eliminating post-tax sale redemption periods will ensure the local government expends resources to move the property through foreclosure only if and after the owner fails to redeem. This also provides more certainty to private buyers at tax sale.
  • Reforming noticing provisions to ensure insurable title by providing constitutionally adequate notice and reducing the need for costly quiet title actions after tax sales.

Communities should also look both upstream and downstream of tax enforcement for additional reform opportunities, particularly as it relates to vacant properties. Other tools, such as housing and building code enforcement and land banking, are critical to prevent decline, acquire vacant properties, and responsibly return them to productive use according to community goals.

Madison Gharghoury, Development Associate and Special Assistant to the President/CEO

Published: October 2022

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