“From the Have-Nots to the Haves”: Skewed Taxation Is Moving Deeds from Homeowners to Investors

As our readers know, property tax is an under-the-radar cost of acquiring a deed. Property taxes are up 27% from pre-pandemic days, according to CoreLogic figures.

The communities struggling the most appear to be paying the most, a recent ABC television investigation found. An ABC News report shows how “homeowners in minority communities often face steeper property taxes.” The resultant tax liens are forcing some to lose their lifetime homes to investment companies.

Baffled in Baltimore

ABC introduced viewers to Bonita Anderson of Baltimore. Anderson was baffled, said the reporter, to find out her home had been lost to investors.

A grandmother of eight, Bonita bought a home to pass down to family members. But just this year, her home went on the market. The sale price, $540K, was more than 5X her original purchase price back in 2009. But Bonita Anderson is getting nothing. That’s because Baltimore recorded a tax lien on the home and ultimately auctioned it off to a company that acquires deeds from tax sales. The investment company snagged the Anderson home for under $70K.

Beyond baffled, Bonita was feeling despair. She told ABC her reaction when she got the news: “Oh my god, I’m 70 years old and I’m homeless.”

Bonita Anderson has a daughter who was able to accommodate her mother as a housemate. Bonita would later take her case to a Baltimore courtroom.

Her case is far from unique. The Anderson home was one of thousands to be listed in Baltimore tax sales each year. More than 90% of these seized homes are in majority-nonwhite neighborhoods.

Not for Lack of Trying

After more than a decade of faithfully paying down a mortgage, Bonita Anderson received a cancer diagnosis in 2020. Paying medical bills and property tax bills proved overwhelming. This frazzled deed holder fell behind on her property taxes.

She did try to resolve the matter, though. She had paid the tax collectors nearly $19K in 2022. That actually amounted to more than 3X what she owed in past-due taxes. Now here’s the rub.

By this time, Baltimore was applying Bonita Anderson’s payments to taxes that were due from the new owner. Bonita was, in effect, paying the investment company — which had acquired the debt at a Baltimore City tax sale in 2022. The company foreclosed on Bonita’s debt in 2023.

Bonita’s lawyer claims that Baltimore failed to follow federal law. The city’s lawyer insists that Baltimore gave proper notice to Bonita, and that the government itself did not keep extra profits from the tax sale, which would be unconstitutional.

Keeping the profits over and above the debt that a taxpayer owes, according to a case the U.S. Supreme Court decided in 2023, offends the Constitution’s Fifth Amendment.

Uneven Tax Burdens Across Communities

The research carried out at ABC turned up an unsettling correlation. Throughout the United States, deed holders in areas with mainly minority-owned homes “are generally taxed more than those in mostly white neighborhoods for a house with similar market values.”

By the numbers:

• On average, homes in mainly white areas are taxed on about 70% of their market value.

• But in areas populated mainly by minorities, the tax assessments use 80% of the value on average.

Therefore, two homes worth, say, $300K are assessed at significantly different values. The minority households are paying higher taxes, relatively. In some places, much higher.

When a household’s tax assessment is “highballed” — as ABC News puts it — it’s easier to fall behind on payments. And falling behind on payments is the start of the road to a tax sale. This works out in the investment companies’ favor.

Meanwhile, in Pennsylvania…

In the Philly suburbs, 91-year-old Gloria Gaynor has lost the deed she held for 25 years. What’s the matter? A tax bill for $3,500. She failed to pay it during the pandemic, when local tax offices were in pause mode.

The local ABC News station found that Gloria made a payment once the local tax officers reopened for business. Gloria’s lawyer, Alexander Barth, said the office applied the payment to future taxes, not the overdue balance. Even for people much younger than 91, making sure money is applied to back taxes can be confusing. 

The upshot of this mix-up? The county took Gloria’s home for a tax sale. An investor picked it up for a mere $14K — the total tax debt, interest, and fees. Its market value is $247K. Reportedly, Gloria got nothing. Here again, tax officials insisted that they followed state law and sent the proper notices.

What if Gloria had been dealing with this issue in Philadelphia, rather than its suburbs?

The Philadelphia government would have applied rules that are much more protective of deed holders with overdue tax bills. They’d have provided more guidance. Gloria would have had the benefit of in-person notifications, and payment plans. 

But Gloria lost her case in Delaware County’s court system.  

Gloria’s lawyer summed up the matter to ABC in a nutshell: “This is stripping generational wealth from the have-nots and allowing the haves to have it.”

Don’t Let ‘Em Get Your Deed

Lawrence Levy, of Hofstra University’s National Center for Suburban Studies, believes federal lawmakers and the White House need to step in. This appears to be a long shot at this time, because the Trump administration is making major federal budget cuts, forcing local governments to cover more needs.

The more financial responsibilities cities and towns have to pick up, the more heavily they will rely on tax collection. In many states, that means property tax collection.

Already, yearly property taxes have risen above $9K (median) in New Jersey and New York City. (Contrast these nosebleed-level taxes with the typical property tax bill of under $800 for Alabama homes.) You might think California would have sky-high property taxes, but California deed holders get the benefit of tax ceilings and breaks for homes held as primary residences, so taxes on the high property values are kept within limits.

Wherever we may live, this is a matter for us all. Renters, too, pay to cover the owner’s cost of holding property. Rents predictably go up as property values rise.

We all need to know that taxes are not just high at this moment. They will often go up further, along with the inflation of real estate values. So, as a homeowner, assume you’ll need extra funds to buffer tax hikes by the percentage your home value could rise.