Mayor Bill de Blasio’s administration is using a controversial program that transfers properties with outstanding municipal debt to third-party owners “too broadly and carelessly” in minority communities, City Council members argued at an emotional public hearing this week.
The Third Party Transfer program, which allows the city to hand over apartment buildings with unpaid taxes or utility bills to nonprofit caretakers or for-profit developers, was founded in 1996 by the city’s Department of Housing Preservation and Development (HPD) as a mechanism to preserve cash-strapped buildings as affordable housing.
But the exchange comes at the price of stripping landowners and co-op shareholders of potentially lucrative real estate. Several city lawmakers argue that the program has morphed into a “blunt instrument” that targets communities of color and essentially robs modest landlords of their properties over minuscule debts.
“The cruel irony of the Third Party Transfer program, is that a program whose purpose is preservation has come to represent in the minds of many the destruction of home ownership in communities of color,” said Bronx councilmember Richie Torres, the chairman of the Oversight and Investigations Committee.
To be considered for the program, properties must meet specific criteria. The parcel must have a debt-to-value ratio at or greater than 15 percent, and meet at least one of the following criteria: have five or more hazardous building violations or be subject to a tax lien of $1,000 or more.
But a City Council investigation found that 210 of the 420 properties recently reviewed by the city for inclusion on average only had a 3 percent debt-to-value ratio. The bundle of buildings were worth some $152 million, with just $4.5 million in debt, the probe’s findings show.
Complicating matters, three parcels that were initially considered for the program had no outstanding debts. The city ruled out some of these properties, and ultimately 62 lots were transferred under the program with an average of $800,000 of taxes owed to the city, according to HPD, but some buildings with questionable eligibility fell through the cracks. In one particularly egregious case, retired nurse Marleen Saunders had the deed to her Crown Heights brownstone, which was appraised for $2.2 million, taken from her over $3,792.20 in outstanding water bill charges.
The lion’s share of the properties mulled by HPD officials reside in gentrifying communities of color in Brooklyn and the Bronx. Queens had just 10 parcels reviewed and not a single property in the majority-white Staten Island made it on to the city’s radar, according to HPD figures. The data paints a “racially insensitive” portrait of the program, charged Brooklyn councilmember Robert Cornegy, who represents Crown Heights and Bedford-Stuyvesant—two neighborhoods majorly impacted by the Third Party Transfer program.
“[These neighborhoods] are the highest gentrifying areas at this particular moment in history, and that can’t be a coincidence,” claimed Cornegy, chairman of the council’s Committee on Housing and Buildings. “In minority communities, one of the only ways to build and transfer wealth is through the accumulation of equity in properties.”
HPD Commissioner Louise Carroll repeatedly stressed that the program is only a “tax enforcement mechanism” for properties that owe the highest outstanding debts to the city, but acknowledged that the system does require modernizing.
“The city has changed dramatically since the program was created more than 20 years ago and it’s time to take a fresh look,” said Carroll. HPD is launching a “working group” in partnership with the City Council to update the system.
The way the current statue is written mandates that HPD must pursue all properties that meet the program’s minimum criteria of $1,000 in debt, meaning in order to target the very worst offenders HPD must also consider properties that owe significantly less to comply with the law, according to Carroll.
This is unaccepted and points to the program’s dire need for reform especially when those who lose their properties after years of pouring labor and resources into the buildings are not compensated despite building values that often far exceeding the debts that are owed to the city, added Torres.
“The ends do not justify the means,” said Torres. “The notion that the government can threaten to strip you of all equity based on one cent in tax arrears is crazy. It’s crazy.”