Tax Lien Securitization of New York City

Abstract

The tax lien securitization of New York City has been a financial success by reducing the cost of collecting delinquent taxes and bringing in more revenue than the amount of delinquent taxes due to interest and penalties. For investors, it was a low-risk and high-return investment thanks to the super lien status. The main factors behind its success are the exclusion of distressed properties, the existence of active bond and real estate markets. However, the negative aspects of securitization, such as the large redemption costs for owners and the loss of homes, were concentrated in black residential areas historically discriminated against in housing loans and taxation. Then, the reauthorization of the securitization was suspended in 2022. The securitization has raised many issues, such as basic questions of how to view housing, how to raise awareness of tax payment, the balance between strictness in tax collection and relief for those who are unable to pay, validity of public auction of tax collection rights, and etc.