Black homeowners fight program that allows property seizure for unpaid utility bills
Sherlivia Thomas-Murchison's mother worked for nearly 25 years to make sure her family had a permanent home in the Brooklyn borough of New York City.
The home of her mother, Margaret Blow, was in a co-op building, where Thomas-Murchison was a shareholder, on Madison Street in the Bedford-Stuyvesant neighborhood. Thomas-Murchison owned her apartment, as well as an apartment she and her siblings inherited after their mother died.
But in 2018, she learned that the city had signed the building's deed over to a partnering developer. It meant she and her two children — like her neighbors in the eight-unit building — were without a home.
The transfer happened through a controversial citywide program called the Third Party Transfer program, or TPT, which experts who spoke to NBC News said has had an outsize effect on Black and Latino homeowners. Thomas-Murchison is one of three lead plaintiffs in a class-action lawsuit against New York City and its partnering developers, alleging that the program unfairly aided gentrification, is pushing out Black and Latino residents and has siphoned millions of dollars from families of color.
In June, the 2nd U.S. Circuit Court of Appeals said the suit could move forward after it was stalled by a lower court, PoliticsNY reported.
Through the program, which began in the 1990s when Rudy Giuliani was mayor, private property can be seized on the grounds of unpaid utility bills or abandonment. The purpose was to give properties to developers to create low-income housing while eradicating widespread blight.
The plaintiffs say the city seized properties that did not meet the "distressed" criteria and failed to notify nearly 700 homeowners, most of them Black and Latino, in a timely manner that their property was at risk of confiscation or offer any way for them to keep their homes.
It is unlikely that the plaintiff homeowners will get their homes back, but they are asking for payment in the amount of lost equity and wealth, which they estimate to be a collective $1 billion, said Gregg Weiner and Matthew Berman, attorneys for the plaintiffs. In 2019, Thomas-Murchison told the New York Senate in written testimony that her family and neighbors had lost at least a cumulative $20 million in "real, personal and future assets" because of the program.
"The same laws were craftily manipulated and re-interpreted to usurp property rights, and steal resident-owned and controlled cooperative apartment units and eradicate me and my extended family's position as shareholders and equity owners, and our right to pass our shares and residences on to our children," she wrote. "I imagine the same has happened to hundreds of residents in my immediate community, which consists of predominantly Black and Brown people."
Amanda T. Boston, an assistant professor at the New York University Marron Institute of Urban Management, whose work focuses on gentrification in New York City, said the Third Party Transfer program targets "gentrification hot spots."
"At a time when homeownership is increasingly inaccessible for all New Yorkers, the TPT program has facilitated the loss of homes and wealth for the city's marginalized residents," she said. "This is especially true among Black homeowners, who primarily reside in areas which were very recently considered unworthy of investment, yet are now sites of real estate speculation.
"The TPT program is just one in a long history of policies geared toward transforming the city for more affluent and 'desirable' residents," Boston added. "Black homeowners have disproportionately borne the burdens of these policies due to histories of structural racism and economic inequality that have, quite frankly, made their relationship to homeownership more precarious than other demographics. The fact that historically Black neighborhoods are gentrification 'hot spots' only adds a historically grounded level of suspicion of a policy that seizes hard-won homes from local residents."
The suit, initially filed in 2019, is led by Thomas-Murchison, McConnell Dorce and Cecelia Jones. Soon after it was filed, the Third Party Transfer program was suspended in a growing backlash until a working group could issue a report and recommendations for its future.
New York City Law Department spokesman Nick Paolucci said the appeals court's advancing the case was procedural, not a merit-based or jurisdictional decision.
"The City believes the case is meritless and should be dismissed," he said in a statement.
The attorneys for the other defendants did not respond to requests for comment.
Weiner and Berman said their clients' properties did not meet the legal criteria for seizure when the city took them as recently as 2019.
For a property to be considered "distressed" enough for seizure, outstanding tax liens on it had to be at least 15 percent more than its market value and there had to be a minimum of five violations per unit in the building ranked as at least "immediately hazardous." In the absence of the latter, the city must have previously issued fines or incurred costs of at least $1,000 when addressing the violations. The program guidelines say owners can enter into payment plans at any time to stop the foreclosure process.
"I do think the TPT program started with noble intentions and a noble purpose," Weiner said. "There's two problems that have developed that made this, frankly, a pernicious program. One is that the city has extended the program to properties that themselves are not statutorily distressed, but they may be near other properties that are distressed. The second thing is that because the values have increased in many instances, there is substantial value to the owner far above any tax charges or water and sewer charges."
Berman argues that other laws, like eminent domain, allow governments to seize property for public purposes like building highways "as long as it provides just compensation for that property." But, he added, "they have to pay the proper price for that, and here, they take property without paying for it."
Berman and Robert Valli, a partner at his firm, said the program cuts off the transfer of generational wealth in Black and Latino families. Black wealth is generally one-tenth that of white wealth, according to the Brookings Institution. And Latino wealth is nearly one-fifth that of white wealth, according to the Federal Reserve.
Boston, the NYU professor, said: "While TPT proponents hail the program's ability to make it easier for residents to remain in place, it has instead stripped properties and equity from individual homeowners and their communities, widened an already staggering racial wealth gap, opened up possibilities for further real estate speculation and gentrification and facilitated the externally determined development of Black, other marginalized neighborhoods."
Berman and Weiner said the lawsuit is unlikely to result in the city's returning the properties to the previous homeowners. Nonetheless, Weiner said he hopes the suit will end the TPT program.
"This is one of those cases where we heard about it," Valli said, "and when you tell the lay person, 'The city had the ability to take someone's property and then not give them the surplus equity,' they look at you quizzically, like 'how is that possible?'"
