Raymond Thompson, pictured in front of his Baltimore City residence, was once at risk of losing his home to the upcoming tax sale due to lost paperwork. (Photo Credit: Raymond Thompson)
ANNAPOLIS (March 26, 2021)—Some low-income homeowners in Baltimore may be at risk of losing their homes due to the city's tax sale system and the ongoing burdens of the coronavirus pandemic.
Raymond Thompson, 63, recently received a letter from Baltimore City telling him that his home would be included in an upcoming tax sale if his property debts weren't paid by April 30.
For the last decade, he has lived in Baltimore City, where he cared for his mother, who struggled with dementia until she died in 2018, Thompson told Capital News Service.
Soon after her death, he was granted the property but for several months lived in fear of losing his home to the Baltimore City tax sale system.
Thompson said he was eligible for a property tax credit and filed it with the city, but that paperwork was lost.
"It's been really annoying, I did everything I needed to do," Thompson told Capital News Service.
The property tax credit would have covered the property fees, but due to the delay in paperwork, interest on the tax bills accumulated.
Thompson said he has been struggling to find work because of the lack of jobs, and with his underlying respiratory health issues, it makes him specifically vulnerable to the coronavirus.
"The pandemic has kept me from getting enough money to pay for the taxes," Thompson said. "I don't want to put myself out there right now without being vaccinated."
Fortunately, Thompson was able to pay off his tax bills through a benefactor, he said, however, others have had to endure the complexities of the Baltimore City tax sale system.
Baltimore City's tax sale system has particularly affected specific demographic groups—African-American communities, households making less than $30,000 per year, older adults and people with disabilities—according to advocates and tax sale experts.
Every year, there are a number of people who don't pay their property taxes or other related bills and these unpaid debts are known as liens. These properties include owner-occupied, non-occupied resident and commercial properties.
The pandemic has only made it harder for property owners to pay off their debts.
In Baltimore City, any residential property owner who owes more than $750 in property-related taxes can have their liens on the property go up for auction, according to the report.
During a typical tax season, local jurisdictions auction off these liens and the highest bidder is given a certificate of ownership.
These bidders are typically private companies that target homeowners for their debt and additional fees, which are a money-maker for them.
Amy Hennen, managing attorney for consumer and housing law with the Maryland Volunteer Lawyers Service—a nonprofit organization that connects low-income individuals facing financial hardships from tax sales with volunteer attorneys—said the tax sale system incentivizes private investors.
A handful of companies invest millions of dollars into the tax sale system, buying liens on indebted homes, Hennen said.
The bids start at 18% of the property tax owed, according to the Baltimore City Department of Finance. A debt of $3,000, for example, could be purchased for $540, or more.
"They target homeowners because they are much more likely to pay off their property taxes because of the risk of losing their home," Hennen said.
A homeowner may recover their property after paying the debt holders. However, the debt may increase because of interest and fees, according to tax sale experts.
If a Baltimore City homeowner doesn't pay their debts in nine months after the tax sale, the investor may file in Circuit Court to foreclose on the home, tax sale experts said.
During the 2020 tax sale, there were a total of 10,067 property liens offered for sale among the state's 24 jurisdictions, and Baltimore City had the most property liens offered for sale with 5,651 liens.
There were over $81 million in total lien sales in 2020, and the average debt was $14,000 in Baltimore City. For owner-occupied properties in Baltimore City, the average lien, on 1,015 properties, was $5,709.
The Office of the State Tax Sale Ombudsman, Maryland's new tax sale office, was contacted by at least 835 homeowners during the first half of 2020 about assistance dealing with the tax sale system.
"We expect these numbers to increase as more homeowners become aware of our service," the report states.
Hennen said there needs to be a better system in place that would include an automatic renewal of property tax credits, annual payment plans and a system more focused on equity.
Property tax credits are life lines to low-income households, and these credits would supply homeowners with additional funding to pay off their debts, according to Hennen.
"These folks are pillars of the community; these homeowners need to be prioritized over the influx of cash," Hennen said.
Maryland lawmakers are trying to help these vulnerable communities in the upcoming tax sale season, which begins in May.
HB252, sponsored by Del. Robert B. Long, R-Baltimore County, would defer owned residential property from tax sales for the next two years.
The bill would allow all 24 local jurisdictions to withhold owner-occupied property from tax sales starting June 1, 2021, through June 30, 2023.
Anne Arundel County recently announced that they were deferring the annual tax sale season until 2022.
Long said he brought this bill forward because of the financial hardship that is burdening the state's residents, and he doesn't want anyone to lose their home.
"People are losing their jobs and losing income," Long said. "The last thing we want to see is someone losing their home, especially in today's pandemic."
The Maryland House of Delegates passed this bill unanimously on March 10, and the Senate Budget and Taxation Committee held a hearing on the legislation on Thursday.