Delinquent homeowners could have tax debt deferred under Council plan

City Council President Darrell Clarke has proposed creating a new foreclosure diversion plan for those with tax debt to the city. C.F. Sanchez / Staff Photographer

Philadelphia homeowners at risk of foreclosure over past-due property taxes could be given free housing counseling and have their debt deferred under a program being developed by City Council.

Council President Darrell L. Clarke, the plan’s architect, said the city has grown too aggressive in foreclosing on residents, pointing to a 1,200 percent increase in foreclosure petitions filed by the city from 2010 to 2016.

“Everybody is talking about affordable housing, and the most affordable housing program in the City of Philadelphia is keeping the person in the house they currently are in,” said Clarke, who introduced legislation to create the Tax Foreclosure Diversion Program on Thursday. “So we need to be in a position to make sure they stay in those houses. I mean, this is really a problem.”

The uptick in tax foreclosure petitions filed by the city has been gradual but significant, according to data compiled by Clarke’s office. The city sent 813 petitions in 2010, about 4,500 in 2012 and about 12,400 in 2014. For the last two years, the number has hovered around 10,600.

Mayor Kenney’s office, which was not included in the drafting of Clarke’s proposal, said Thursday it could not confirm those numbers. But it noted that the city offered a substantial tax-amnesty program in 2010 that contributed to so few foreclosure petitions being filed that year.

Mike Dunn, a spokesman for Kenney, said the city’s Revenue Department takes seriously its “responsibility to protect the vulnerable of our population.” He said the city offers payment plans for overdue taxes starting at $25 per month and provides information about housing counselors to residents who are delinquent. He said the city in 2017 also hired an employee to help residents enroll in assistance plans.

Dunn, who said the administration would review Clarke’s legislation and work with Council on the issue, called foreclosure a “last resort.”

Clarke, though, said the Revenue Department has been using the option too aggressively because it is under pressure to collect more delinquent tax revenue. Clarke said he, too, has beaten that drum. But he said the push has had a negative impact.

“Tax foreclosures have gone through the roof,” he said. “And it's directly related to government’s approach to collecting taxes.”

He wants the city to go one step further in its assistance options and defer past-due debt for its poorest residents. Deferred debt is often collected only when a home is sold or when homeowners are deceased.

He said deferring debt often would save the city more money over time because homeowners would not end up becoming homeless and costing the city more in increased social services.

Under Clarke’s proposal, the city would be required to provide eligible homeowners with a housing counselor and give them the debt deferral option.

The city could defer up to $10 million in tax debt each year, an increase from its current $3 million limit. The legislation includes a stipulation that the deferred real estate taxes will not result in any less revenue going to the general fund or the School District.

Monty Wilson, a senior attorney for Community Legal Services, welcomed the idea.

He said prior to 2009, people rarely came into his nonprofit's North Philadelphia office to seek help on overdue city-tax debt. Today, he said, it is the number one issue his office deals with. He said some people are just a few months overdue, but many others are facing the imminent threat of foreclosure.

“The city rightly needs the money,” Wilson said. “I think the issue here is: What’s the priority? Do we go after the big tax scofflaws who own six to seven properties and live in New Jersey? Do we go after the businesses who don't pay? Or do we go after homeowners who owe $2,000 to $4,000?”