Sometimes a Lien Is Just a Lien: New York City’s Third-Party Transfer program has its flaws, but it’s not a government conspiracy to strip minority residents of wealth. – City Journal

Over the last six months, reports emerged that ownership of single- and multi-family houses around New York City had been assigned to nonprofit organizations, to the surprise of the original owners—mostly middle class, retired black residents who had paid off their mortgages and maintained their properties. In the most egregious case, the elderly, proud owner of a multimillion-dollar Brooklyn brownstone had paid her water bill with an incorrect account number and then discovered that the city—as part of its Third-Party Transfer program—had stripped her of her asset.

In the 1970s and 1980s, entire blocks of New York were hollowed out. Owners abandoned tens of thousands of buildings, which the city took over, selling them, when possible, for the price of unpaid taxes. In 1996, Rudolph Giuliani’s administration introduced Third-Party Transfer (TPT), which enabled the Department of Housing and Preservation to transfer derelict, tax-delinquent buildings directly to nonprofits that could rehabilitate and manage them, typically with income restrictions geared to working-class people. This process spared the city from having to assume possession of buildings and take responsibility for remaining tenants.

New York is a different city now than it was 25 years ago. Neighborhoods once written off as irredeemable are now hotspots of gentrification. Few blocks in the city can now be described as blighted, though many buildings have multiple housing-code violations, or owners who have failed to pay taxes or other fees.

The latest round of TPT—the tenth in 23 years—appears to have been clumsily implemented. Half the buildings selected for inclusion were not “statutorily distressed” because their lien-to-value ratio was less—in many cases far less—than 15 percent. Many of these buildings did not have serious code violations, either. The Department of Housing and Preservation appears to have robotically followed the local rule that if a building is selected for TPT, every other building in the same tax block with a lien—even for a few hundred dollars—must be selected for transfer, too. And dozens of non-distressed buildings not even located on TPT-indicated tax blocks were also selected for inclusion.

It’s no surprise that a New York City agency would mess up the administration of a consequential program. The New York City Housing Authority, for example, responsible for 400,000 tenants, is practically in federal receivership. City streets and subways are a mess, the schools do a poor job, and street homelessness is on the rise. That well-maintained houses with relatively insignificant tax liens became ensnared in a foreclosure process is objectively awful—but also the sort of thing that New Yorkers are used to.

A city council oversight hearing went characteristically over the top, with elected officials claiming that the TPT debacle was a racist conspiracy to strip wealth from minority communities. “The properties selected for inclusion,” said council member Robert Cornegy of Bedford-Stuyvesant and Crown Heights, “were primarily located in gentrifying areas of the city, many owned by people of color, where property values had increased many-fold from the date of purchase.” Ritchie Torres, representing the East Bronx, elaborated on this theme, identifying the TPT program as “entangled with America’s treacherous history of race and home ownership.” According to Torres, the de Blasio administration’s TPT implementation is tied directly to the New Deal practice of redlining, which “systematically excluded people of color from owning homes and building wealth that could be passed down from one generation to the next.” Torres added, “We must subject to the strictest scrutiny any public policy program that strips away intergenerational black and brown wealth . . . The weaponization of TPT against black and brown wealth is an outcome that we cannot and will not accept.”

Cornegy went on to accuse the Department of Finance of intentionally assessing properties well below their real market value in order to boost their lien-to-value ratios, in what amounts to “an assault on wealth.” This allegation overlooks how property owners in New York City—as everywhere—battle to keep assessments low, in order to decrease property taxes, and that the city’s baroque property tax schedule disproportionately favors older brownstones over newer developments. Councilmember Ben Kallos of the Upper East Side insinuated that for-profit developers, who took over a small percentage of the TPT properties, had engineered the process in conjunction with the mayor in exchange for political contributions.

Some perspective is in order. About 5,000 properties in Brooklyn have tax liens that have been on the books long enough to make them eligible for sale of the debt. In theory, these buildings could have been considered for third-party transfer. But only 420 properties across the whole city were even considered for TPT, most of these were dropped from the process early on, and only 62 buildings were ultimately transferred. Even Torres acknowledges that most of the transferred properties were in poor repair, and that their tenants ultimately benefited from having responsible management take charge. And minority neighborhoods like Bedford-Stuyvesant and the East Bronx have the highest concentration of financially distressed buildings in need of repair.

In the end, the number of truly egregious cases in this story seems to be in the single digits, and the city has taken steps to rectify the situation. It’s beyond question that the city should be cautious about seizing private property—but it’s also absurd for elected officials to contend that New York City’s ultra-liberal government is engaged in a conspiracy to strip black residents of their wealth.

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