Millions in home equity taken under unfair state tax foreclosure law

Ronald Mitchell

As I sat in a recent listening session of Governor Maura Healey’s Advisory Council on Black Empowerment, I heard many community members request assistance from the state government in many areas. But none seemed more urgent and justified than a call for relief from property tax foreclosures.

property taxNow, we have all heard the saying, “The only guarantees in life are death and taxes,” and it is true that for our society to thrive, everyone has to chip in. But every once in a while, local governments go too far and take far more than what is fair. That is what happened in Massachusetts, according to a report from the Pacific Legal Foundation, a libertarian public interest law firm in California. I do not agree with many of the firm’s positions on other issues, but they are right on this one.

This report outlines a Massachusetts Land Court rule that allows a municipality taking a property for back taxes to take all the homeowner’s equity at the time of foreclosure, even money beyond the tax debt owed. Over the course of about seven years, homeowners in Massachusetts lost around $97 million in equity in their homes. Massachusetts is one of only 12 states allowing this type of foreclosure.

This is one of the most unfair systems in local government. The damage is devastating, especially when you take into account that the equity someone gains from home ownership is the number one way that families build generational wealth. The value gained from homeownership can be one of the most universal equalizers.

The Pacific Legal Foundation determined the Massachusetts cities that benefited the most from this unfair system were Springfield, Boston and Worcester. Taken was $15 million in Springfield, $12 million in Boston and nearly $5 million in Worcester.

Springfield was the worst municipal exploiter of this system in the state. The data make it clear that victims in Springfield who lost their property due to tax title foreclosure had the equity in their homes taken at almost three times the rate of Boston and six times the rate of Worcester. This pattern is most concerning in light of the recent Supreme Court decision that deemed practices like Springfield’s of taking more equity from homeowners than the debt owed unconstitutional. That the city has not made any effort to make whole the 129 people whose equity it took makes the situation even worse.

Springfield City Councilor Justin Hurst is calling for the city to compensate those 129 people in light of the Supreme Court decision. Hurst’s efforts bring light to this great injustice that is still affecting those families. It is only right that the state and the local governments come up with swift compensation for the people of Springfield who suffered such foreclosures. They lost an average of $119,000 in home equity. Hurst has raised the issue as he mounts a challenge to longtime Mayor Domenic Sarno in the upcoming general election in November.

Along with Springfield, Boston and Worcester, Lowell and Lawrence round out the top five cities that took the most from their homeowners. As those cities have the state’s largest communities of color, this practice amounts to one more systemic attack on the generational wealth of those communities. This economic discrimination amounts to a modern-day form of redlining.

There must be real compensation for these homeowners, who, in many cases, lost a large bulk of their life’s wealth because of the state’s unconstitutional equity grab under its tax law. We must hold municipal officials accountable for allowing this to happen for years and for so far failing to provide just compensation. The time for justice is now. For every day that goes by, the damage from this systemic discrimination gets worse.