Maryland tax sale process must change to stop harming Black residents

The U.S. Supreme Court granted cert in January for a case arguing violations of the Fifth Amendment due to unlawful taking without just compensation by the government and the Eighth Amendment for excessive fines and fees (Tyler v. Hennepin County).  The case based in Minneapolis challenges the government’s ability to seize a property because of delinquent taxes, and profit from any remaining equity.  The case stems from a tragic circumstance, when Geraldine Tyler fell behind on her property taxes of $2,300 in 2010.  By the time all penalties, interest and fees were added in 2015, she owed $15,000.  The county sold the condominium for $40,000 and kept all of the proceeds.  Ms. Tyler, a 93- year-old widow, is being represented by the Pacific Legal Foundation, which notes that between 2014-2021, 1,360 homeowners in Minnesota lost their homes for debts averaging only 8% of the property value.  Currently, 22 states permit the keeping of property equity by the government in all or some circumstances for tax debt.

The good news is that Maryland isn’t on the list. But is that accurate?

As with many things, what happens on paper versus reality is often two different things.  By law, every county in Maryland, and Baltimore City, conducts an annual tax sale.  The threshold for losing one’s home for a delinquent tax sale remains shockingly low.  In Baltimore City, it’s $750 in unpaid taxes and in the remaining counties, it’s $250.  It should shock the conscience that one can lose their home for such a small amount.  Particularly in Baltimore City, thousands of Black residents in disinvested communities, many living on Social Security retirement funds, face the loss of their home every year.  The Baltimore City 2023 tax sale list was just published, with more than 20,000 properties on it.

Like Ms. Tyler, individuals who find themselves struggling to pay their tax bill, see the costs for redemption balloon as interest and attorney fees get tacked onto the redemption price tag.  A Maryland resident that has a $1,000 delinquent tax that goes to tax sale, can easily need $3,000 – $5,000 to redeem their home.  If they aren’t able to redeem, they lose their home, which often displaces multiple generations, and there is no other place to go, making them housing unstable.

While Maryland on paper isn’t taking without compensation, in reality, tax sale leads to both housing loss and equity loss.  A Baltimore Banner article, published on February 13, found that there is $6 million in unclaimed funds from tax sale seizures sitting in Baltimore City’s accounts.  When a homeowner loses their home, the city does not have a process for notifying them of the funds or what process they need to follow to collect the remaining funds.  And Baltimore City isn’t alone; Anne Arundel has $3 million in excess funds, and Baltimore County has $1.7 million.

Homes that go to tax sale in Baltimore City are disproportionately located in majority-Black census tracks and the majority of the excess funds, a whopping $4.8 million of the $6 million in Baltimore City, are owed to these same neighborhoods.

The Maryland General Assembly is considering a number of bills this year to address problems with the tax sale. One bill would require counties to have a process for tracking down former homeowners and remove the requirement for the homeowner to obtain a court order to receive the funds. While this is a good first step, true reform in our tax sale system is overdue.

Baltimore City Mayor Brandon Scott has made tax sale reform a major initiative for his office.  Bills under consideration would establish protections for owner-occupied properties and would permit the City to enter into payment plans for municipal debt.  Importantly, one bill would permit counties to not hold a tax sale or remove those who are most in need from the tax sale.  This makes good financial sense.  Tax sale clinics conducted by legal services programs found that 72% of attendees at the clinics were older adults, 48% were disabled, 85% were Black and 72% had a household income of $30,000 or less.  These are individuals and families struggling to get by; they aren’t trying to game the system by avoiding paying their taxes.  Models like one used in Rhode Island work with these struggling homeowners to get them connected to available services and resources, and they are able to sustain better financial and housing stability, including being able to pay their municipal expenses.  Fewer tax sales also avoid more vacant properties, a concern for all communities, but particularly in Baltimore City.

We encourage Maryland legislators to take a close look at the tax sale process, like the U.S. Supreme Court, and end a system that unlawfully, at least in practice, and unethically harms primarily Black Maryland residents and negatively impacts all of our communities.

EDITORIAL ADVISORY BOARD MEMBERS

James B. Astrachan, Chair

James K. Archibald

Gary E. Bair

Andre M. Davis

Eric Easton

Arthur F. Fergenson

Nancy Forster

Susan Francis

Leigh Goodmark

Roland Harris

Julie C. Janofsky

Ericka N. King

Susan F. Martielli

Angela W. Russell

Debra G. Schubert

H. Mark Stichel

The Daily Record Editorial Advisory Board is composed of members of the legal profession who serve voluntarily and are independent of The Daily Record. Through their ongoing exchange of views, members of the board attempt to develop consensus on issues of importance to the bench, bar and public. When their minds meet, unsigned opinions will result. When they differ, or if a conflict exists, majority views and the names of members who do not participate will appear. Members of the community are invited to contribute letters to the editor and/or columns about opinions expressed by the Editorial Advisory Board.