What is the program?

Since our founding, Southwest Partnership knew that the traditional tax sale system was not always a helpful tool to reduce vacancy in our neighborhoods. More often than not, vacant and abandoned properties were being bought up by speculators and investors through a process that only cared if they had money to pay the overdue taxes, but not whether they had the experience to rehabilitate the property. As a result, hundreds of properties are stuck in an endless loop of tax sale, when the new owners realize that the costs to rehab often exceed what they can resell the property for. As a result, they would sit on the property, waiting for the market to appreciate, walk away from it themselves, or do very poor rehab jobs that allow them to prey on low-income tenants.

To address these shortcomings, SWP developed “homeownership zones” that leverage the tax sale process to acquire as many vacant properties as possible to ensure quality, affordable development of these strategic areas. In collaboration with community stakeholders, SWP identified target blocks with high vacancy (housing typology F-J) that were adjacent to stable blocks (typology A-E). We then work to acquire as many of the vacant properties as possible, issue a Request for Proposals to qualified contractors, and then rebuild the target block all at once. SWP supports the contractor by providing gap subsidy to make the housing accessible to families making 60-80% of Area Median Income, and provides marketing support to community stakeholders and area Live Near Your Work programs. SWP also partners with local organizations who provide housing/financial counseling, access to realtors with deep knowledge of the neighborhoods, and education around unique homebuying incentive programs.

FAQs

WHAT IS TAX SALE?

Tax sale is a process used by local governments like Baltimore City to collect money from property owners who are behind on their property taxes and water bills. If an owner is behind on their taxes, those taxes become a lien on the property. A lien is a debt that is attached to a property, like a mortgage.

Every year, Baltimore City holds a “tax sale” auction. At the auction, the City can sell the lien against a property to an investor who bids the highest on it.

HOW IS OUR PROCESS DIFFERENT?

SWP has developed “homeownership zones” that leverage the tax sale process to acquire as many vacant properties as possible to ensure quality, affordable development of these strategic areas. In collaboration with community stakeholders, SWP identified target blocks with high vacancy (housing typology F-J) that were adjacent to stable blocks (typology A-E). We then work to acquire as many of the vacant properties as possible, issue a Request for Proposals to qualified contractors, and then rebuild the target block all at once. SWP supports the contractor by providing gap subsidy to make the housing accessible to families making 60-80% of Area Median Income, and provides marketing support to community stakeholders and area Live Near Your Work programs. SWP also partners with local organizations who provide housing/financial counseling, access to realtors with deep knowledge of the neighborhoods, and education around unique homebuying incentive programs.

WHAT IS SWP'S HISTORY WITH BALTIMORE CITY'S TAX SALE PROGRAM?

Since our founding, Southwest Partnership knew that the traditional tax sale system was not always a helpful tool to reduce vacancy in our neighborhoods. More often than not, vacant and abandoned properties were being bought up by speculators and investors through a process that only cared if they had money to pay the overdue taxes, but not whether they had the experience to rehabilitate the property. As a result, hundreds of properties are stuck in an endless loop of tax sale, when the new owners realize that the costs to rehab often exceed what they can resell the property for. As a result, they would sit on the property, waiting for the market to appreciate, walk away from it themselves, or do very poor rehab jobs that allow them to prey on low-income tenants.

2019-2020

To address these shortcomings, SWP developed a new approach, whereby the City would reserve the vacant, abandoned tax sale properties in our footprint for us to vet applicants before purchasing the certificates.  The first year of this tax sale vetting pilot was in 2019, kicking off with a public workshop in March. Due to the ransomware attack and it being our first year, we only purchased 5 certificates. Nonetheless, we surveyed applicants to improve what we could about the process and prepared for a second year in 2020. We had another public workshop in February, after which we were quickly able to purchase 15 more certificates, and then the pandemic intervened.

The goal of the tax sale vetting pilot was to prevent slumlords and unqualified rehabbers from taking advantage of our neighborhoods. We also wanted to demystify the tax sale process and make it as accessible to the average person as possible, so that local residents and small developers would be able to participate. As a result, we initially designed the pilot so that if the applicant was approved, the Southwest Partnership managed the entire tax sale certificate purchase and foreclosure process on behalf of the applicant. In this way, we would both be preventing bad actors from buying certificates, and encouraging better actors to purchase them.

2021

SWP hired a new Executive Director, who has modified the program to target and control development in “homeownership zones”, whereby SWP would

  1. Directly acquire vacant tax sale properties,
  2. Advertise them once a majority of the vacant properties on a block are acquired, and
  3. Partner with qualified contractors, who demonstrate experience doing full-gut rehabs, financial ability, commitment to community engagement through the project, and commitment to rehab for affordable homeownership.

The goals are to: 1) reduce vacancy by increasing affordable homeownership 2) ensure quality, affordable development in strategic areas 3) restore the private real estate market by increasing housing values so that the costs to rehab do not exceed what homes can sell for.

WHY DID THE CITY'S OFFICE OF INSPECTOR GENERAL (OIG) ISSUE A REPORT ON SWP'S PILOT TAX SALE PROGRAM?

In June 2021, the OIG issued a report in response to a complaint from an unidentified source that our program, which relied (in part) on the City’s October Bulk Sale auction, was “unfair.” The major findings were as follows, along with our rebuttal and clarification:

1) The pilot program created a “perceived unfair advantage over other developers and community organizations interested in doing business with the City through the tax sale.”

  • Our response: The goal of SWP’s pilot was to prevent bad actors from buying up vacant properties through tax sale. As a result, SWP’s pilot allowed it to use the City’s Bulk Sale Auction to evaluate the experience and financial ability of applicants for all vacant tax sale certificates within our area, and decide who got to purchase them. Because no other community group or private entity was testing this approach, our program created a “perceived unfair advantage.” The City is within its right to test new ideas with private entities, however it has to ensure that the idea’s purpose and scope aligns with a public purpose, and that it’s formalized in a way that can be shared and reviewed by City management and ultimately the public. While SWP’s program aligned with a public purpose, and was widely shared among City staff, it has not yet been formalized into a written agreement. This created the appearance of the pilot being administered unfairly.

2) The Report also raised questions about fees for applying and profiting from development.

  • Our response: SWP has never charged a fee to an applicant to apply for a tax sale certificate.  A possible explanation for this perception is that in the second year of the pilot, SWP required the splitting of interest accrued on redeemed certificates, which interest accrues by law. 
  • In the first year of the pilot, SWP wanted to provide public subsidies to assist in the purchase or redevelopment of tax sale properties.  One potential source of that subsidy was stabilization funds from the State of Maryland to which SWP had access.  To avoid windfalls from future sales, these state funds include language requiring that profits are shared with the state.  Accordingly, we added similar language in case the state program required repayment.  Because we never ended up using State funds, we removed that clause from the application process in the second year of the pilot.

Did SWP break any laws with its pilot program? No. There was nothing illegal or inappropriate about the pilot. The core concern was establishing a clear, written agreement among various City Departments and SWP that sufficiently explained the scope, nature, and conditions of the pilot. When the Comptroller’s Department of Real Estate requested a Memorandum of Agreement (MOA) in March 2020, SWP quickly proposed core ideas to be included and gave them to the Housing Department. Housing then had their lawyers draft an MOA and they sent it to the Comptroller’s Department of Real Estate. Despite our repeated attempts to get a response on the status of this MOA, the City has not yet responded.

What are SWP’s next steps for the tax sale program? SWP will continue working with the City and other community leaders to reform the tax sale system to prevent bad actors from buying up tax sale certificates. SWP has already succeeded in getting increased scrutiny by Housing and the Comptroller over applicants for tax sale certificates, who have a history of code violations. And through our experience evaluating applicants, SWP has grown a network of qualified, small developers doing good work in our neighborhoods. While SWP will no longer be evaluating the experience and financial ability of applicants for every single vacant tax sale property, SWP will continue buying certificates like the general public, and evaluating the experience and financial ability of applicants in our homeownership target areas in Franklin Square, Mount Clare, and Pigtown. 

WHAT IF I NEED TO REDEEM MY PROPERTY?

While our program is about purchasing tax sale certificates, we understand that some may need help redeeming their property from tax sale.

To save your property contact

  1. Check to make sure your property is on the tax sale list. You can check this by going directly to Bid Baltimore (https://www.bidbaltimore.com) and clicking on “Advertised List.” In the drop down box on the upper left side of the page, choose “Property Address,” then enter the property address and click Search.
  2. Contact the City for follow-up questions and to arrange payment:

Baltimore City Bureau of Revenue Collections
Phone: 410-396-3987
Email: BaltimoreCityCollections@BaltimoreCity.gov

For more information: https://taxsale.baltimorecity.gov/ and http://www.taxsalehelpbaltimore.org/

Other Resources for Assistance

For legal assistance for nonprofits, contact:

Shana Roth-Gormley at Community Law Center

Phone: 410-366-0922 x 118

Email: ShanaR@communitylaw.org

For legal assistance for homeowners, contact:

Pro Bono Resource Center – www.probonomd.org/for-legal-help