On Sept. 9, Mayor Vincent Gray called for a moratorium on tax lien sales in the District after a 10-month investigation by the Washington Post uncovered that property owners were losing their homes over petty amounts of property tax debt. The investigation found that 1 in 3 people who recently lost their homes had under $1000 dollars of unpaid taxes.
The District’s tax office, using a tactic worrisomely reminiscent of the reckless behavior that led to the 2008 financial crisis, was foreclosing homes and packaging the debt to sell to financial companies. This process is called a tax lien. What’s more, the report showed that these financial groups colluded to drive down the prices of repossessed homes.
In 2001, the city’s tax office passed on the responsibility of handling foreclosures to lien investors, saying it was too “overwhelming” for the agency to handle. The move motivated investors to begin charging legal fees to debt-strapped homeowners for processing their foreclosures and tax lien sales, which included attorney costs and even the cost of legal paper.
District homeowners behind on their property taxes are not wealthy yuppies. They simply do not have the money to compete in court against predatory property investors looking to seize their home and flip it for a profit. As the process stood, they had no option but to lose their homes, a chief reason why foreclosures across the District have doubled in the past five years.
Property owners effectively enter an agreement with the state to pay for taxes when they purchase either a residential or commercial holding. Tax lien sales are an effective measure by which the United States government scares property owners to pay for their fiscal obligations. Instead of using a carrot, however, this practice proves that it uses the stick. The government must take measures to protect those who are most vulnerable.
Gray has proposed a bill to ensure that legal fees are capped at $1500 and that sales of liens for debts of under $2500 for primary residences are forbidden. While he and other politicians may consider their legislation to be a final solution to the problem, it is hardly a beginning.
The tax lien problem, although horrifying, is a small one in terms of District-wide housing issues. Until governments devise holistic approaches to homeowner issues and take steps to connect at-risk residents with the correct resources, the District and other cities will not make meaningful progress on foreclosures.
Gray’s new perspective on tax liens is encouraging, but it is only tokenism until his administration can devise a program to keep all types of residents in their homes. The Voice encourages the D.C. government to treat every foreclosure with the same critical mentality it finally came to assume with tax liens.
