In Scavenger Sale, Land Bank Sees Big Opportunities

By Odette Yousef, WBEZ Chicago  |  July 11th, 2019   (Click here for the original article)

George Porter wistfully remembers the Saturday morning smell of bacon and eggs wafting out of homes on the 6500 block of South Sangamon Street, where he grew up. Neighbors would be outside cutting their grass and sitting on their front porches.

“I … could walk down this street, and about six, seven elders would be like, ‘Son, you hungry?’” Porter said. “‘Here, here you go. Some Kool-Aid? You want pop? Take these bottles to the store and cash them in.’”

Porter, now 50 and no longer living on this block in Chicago’s Englewood neighborhood, said the street was clean and neighborly. But he said that changed as the original homeowners passed away and left their homes to their children.

“Then, they can’t keep it up [and] end up losing it because of taxes,” he said.

This year, 13 homes on this block alone will be among those listed in Cook County’s biennial tax scavenger sale, which begins Thursday. That means they fell at least three years behind on taxes. The county will offer outside investors the opportunity to purchase their debt, potentially for less than what’s owed. In so doing, the investors become debt collectors and may charge homeowners interest that exceeds 48% over time. If homeowners don’t pay what they owe to the investor and the county, a process known as “redeeming” their taxes, they could, ultimately, lose the property itself.

Historically, the scavenger sale has yielded relatively little money for the county. In 2017, Cook County sought to recover more than $433 million in unpaid taxes through the scavenger sale. Private investors only bought under $12 million of that — less than 3% of the total. But in the last four years, the scavenger sale has presented an entirely different opportunity: a chance for the county to scale up its neighborhood revitalization efforts after the 2008 housing crisis.

“What we’re doing is unprecedented in the history of this sale, and we continue to do this because we think that this is a way for us to be a facilitator with solving blight in the county,” said Robert Rose, executive director of the Cook County Land Bank Authority (CCLBA).

Cook County created the CCLBA in 2015 to acquire vacant and abandoned properties. Rose said initially the CCLBA worked with lenders such as Fannie Mae to obtain real estate-owned properties that had been foreclosed. But he said that pipeline has started drying up. So now, the CCLBA is turning to the scavenger sale as its primary mode of property acquisition.

Illinois statute allows the county and the CCLBA to “bid” on properties without putting any money down. Rose said they target concentrated areas with the goal of ultimately acquiring the actual properties. Once the land bank does that, the county has the power to clear the title of any liens and wipe out back taxes. That allows the CCLBA to sell properties to nonprofits and community partners free and clear, and at rock-bottom prices.

Rose said it’s an awkward method for the CCLBA to obtain properties, one filled with bureaucratic red tape. But he said it’s the only way the authority has, for example, been able to go after eight properties on the 6500 block of South Sangamon Street at once. And he says it subverts a tax collection system that has disproportionately stripped wealth from low-income communities of color, all while yielding very little to the county.

“What we’re disrupting is this very cottage industry of acquiring [tax] certificates and then going through other methods to extract money from owners, but never satisfying the tax bill, and ultimately never trying to own the property,” explained Rose.

But some observers say the CCLBA’s strategy has, so far, appeared disorganized.

Cook County Treasurer Maria Pappas criticized how the CCLBA used the 2015 scavenger sale. The Treasurer’s Office conducts the scavenger sale. Pappas noted that the CCLBA is returning nearly two-thirds of the 7,500 tax certificates it took in that sale. For many of those, enough time has passed that the land bank could pursue ownership of the properties themselves. Instead, it has decided to give them up for now and have those properties listed in the 2019 scavenger sale again.

“To the land bank, get your act together here,” Pappas said. “Research this property before you take it; that’s what the tax buyers do. They shouldn’t have any special position here to come take whatever they want without researching it, then come back [and] dump it on the county.”

Rose acknowledged that the land bank has had a learning curve when it comes to using the scavenger sale for its purposes. He noted that the Treasurer’s Office announces which properties will be listed in the scavenger sale only one month before the sale takes place, which is not sufficient time for field inspectors to visit thousands of properties. But Rose said he will not apologize for how aggressive the land bank has been in the scavenger sale.

For starters, Rose said communities are still hurting from the widespread damage of the 2008 housing crisis. Indeed, in 2007, the scavenger sale listed just 4,266 properties. This year, the Treasurer’s Office was preparing to list more than 28,000 — a more than sixfold increase.

Just as important, said Rose, has been the damage wrought by Cook County’s extractive method of collecting unpaid taxes from low-income communities of color.

“When you think about race and when you think about equity, you’re talking about systemic issues,” said Rose. “Right now, we’re a great Band-Aid. We’re a great fix for the symptoms. But as long as there’s a scavenger sale, there’s an issue.”