Nonprofit Legal Services Help Homeowners Struggling With Property Taxes Keep Their Homes

Elizabeth Vermillera, a retired pharmaceutical technician, spends her days handing out donated clothes and food to people in Baltimore. Since 1997, she has lived in the three-level rowhouse on East Monument Street that her dad gave her, a home she shares with a Shih Tzu and a fox terrier. Occasionally, neighbors trying to get back on their feet after hard times will stay there, too.

In 2021, the city notified Vermillera that she might lose her home due to unpaid property taxes. She panicked. Vermillera, who is disabled and unable to work, lives on a limited income.

She says she paid $300 of the $600 in taxes she owed for 2019. Then in 2020, she paid the city another $300, intending for that to cover the 2019 balance. However, her 2020 taxes also were due so the city applied part of the last $300 payment to her 2020 tax bill. The notice said the remainder of the unpaid 2019 taxes was overdue and Vermillera also owed interest and other fees.

She turned to the Maryland Volunteer Lawyers Service for help. Aja’ Mallory, a lawyer at the nonprofit, which helps people having financial difficulties, worked with Vermillera and the city to sort out the problem. She was able to keep her home.

“I almost lost my house for $1,000,” Vermillera said.

Maryland Volunteer Lawyers Service, Community Legal Services of Philadelphia, and other nonprofit legal organizations in large U.S. cities with high percentages of low-income homeowners have helped thousands who risked losing their homes due to unpaid property taxes.

The nonprofits, funded by private donations, government grants, and other sources, help homeowners navigate foreclosure threats by providing free legal assistance, helping homeowners get tax credits to lower their taxes, and working to reduce taxes on properties that are assessed higher than they’re valued.

Working with advocacy groups and city governments, the nonprofit legal groups also push for legislative and systemic changes to address a growing problem made worse by income challenges during the Covid pandemic. Without the legal assistance, many low-income homeowners could lose their houses.

While the Legal Services Corporation funds 132 nonprofits in the United States, it doesn’t track how many local groups are working on the property-tax issue. However, housing experts say the problem is occurring around the country.

Christopher Berry, a University of Chicago professor who researches property-tax fairness, said in a 2021 report that property taxes disproportionately burden owners of the least valuable homes. Berry found that property-tax rates are 50 percent higher in neighborhoods where more than 90 percent of the residents are Black.

Foreclosures Rise

Margaret Henn, director of program management at the Maryland Volunteer Lawyers Service, said that in the past, people who needed foreclosure assistance were usually struggling with mortgage payments. But from 2008 to 2014, most of the nonprofit’s clients had paid off their mortgages. Instead, unpaid property taxes were causing the foreclosure threats.

Baltimore didn’t keep foreclosure data before 2020, according to the lawyers, but based on the cases the nonprofit was handling, nonpayment of property taxes led to a lot of foreclosures there. By 2020, as the pandemic hit, 1,015 homeowners in Baltimore were facing foreclosure due to unpaid property taxes, according to a Maryland tax office 2021 report.

To keep low-income families in their homes during the pandemic, the legal service, housing advocates, and the City of Baltimore were able to temporarily save 900 homes from possible foreclosure in 2021, according to the nonprofit.

Using a 2021 budget of $3 million, a staff of 30, and 1,700 volunteer lawyers, the free legal service handled consumer, family, housing and other cases. The nonprofit’s funding comes from foundations, individual donors, the government, and the Maryland Legal Services Corporation, which distributes revenue from surcharges on court filing fees, the interest generated from clients’ trust accounts, and the state’s abandoned-property fund.

Much of the foreclosure work that Maryland Volunteer Lawyers Service did in 2020 and 2021 was funded by grants of $367,000 from the state Department of Housing and Community Development, Henn said. The nonprofit also used $105,000 from the legal corporation for its work to help families in foreclosure.

Maryland law states once an owner’s property taxes are overdue, the city or county can sell the debt on the property at a public tax auction. Meanwhile, the homeowner pays 12 to 18 percent interest, as well as other fees, to the investor who purchased the home.

The people hurt the most by tax auctions are Black homeowners and people who are older, disabled, or low-income, according to the nonprofit legal service.

The tax auction may leave them little choice if they want to keep their homes even with the increased interest rates and fees, Henn said. “People who are desperate to keep where they live, do what they have to do to be able to stay there,” she said.

With more Maryland homeowners facing difficulties, legal nonprofits and housing advocates are working to develop ways to keep people in their homes.

For instance, some homeowners may be eligible for tax credits to reduce their property taxes. The nonprofit legal service helps owners apply to the state for property-tax credits, which sets a limit on the amount of property taxes homeowners pay based on their income. Lower taxes mean they are less likely to fall behind in payments.

When Baltimore homeowners fall behind, they may be able to turn to Fight Blight Bmore, a nonprofit advocacy housing group started in 2016. The legal nonprofit refers homeowners to the advocacy group, which can use its Stop Oppressive Seizure Fund to pay property-tax balances.

Maryland Volunteer Lawyers Service is working with Baltimore city officials to make other changes. The group encouraged the city to raise the foreclosure debt limit for owner-occupied residences from $250 to $750. Also, after the debt on a house is sold at auction, the owner has a chance to avoid losing his or her home by paying the money owed within nine months. Homeowners used to have only six months. The nonprofit legal service worked to get that period extended, according to Henn.

The city has created a Tax Sale Work Group that’s working to build a more equitable tax sale process. Henn, a member of the work group, says Maryland Volunteer Lawyers Service will continue advocating to change the system to help keep people in their homes.

Philadelphia’s Challenges

Two hours northeast of Baltimore, the Community Legal Services of Philadelphia works to save homes as a rise in gentrification has led to an increase in property taxes, according to Caitlin Nagel, the group’s director of advancement and communication.

Nagel said approximately 90 percent of the group’s clients are people of color, which matches the demographic of residents who live in the neighborhoods affected most by gentrification.

She describes Philadelphia as a city of homeowners even among low-income residents. But owners there faced some of the same issues nonprofit legal groups are seeing nationwide. In 2010, the city filed approximately 1,100 tax foreclosures. In 2015, lawyers noticed a spike to more than 11,000, half being owner-occupied, according to Jonathan Sgro, a lawyer at the nonprofit group.

The nonprofit, which in 2021 had a $16 million budget funded by contracts, individual donors, and foundation grants, has a 150-member staff that tackles a range of legal issues. For many years, help with tax-foreclosure threats was the number-one reason clients sought services at their North Philadelphia office, Sgro added.

Individual donations support the nonprofit’s work on tax foreclosure cases, which cost about $250,000 a year.

In 2017, the Philadelphia legal service pushed for the Court of Common Pleas to create a tax-foreclosure prevention program. Before the program, homeowners received notice of a property-tax foreclosure by mail and by a posting on their property. If the homeowner did not file a written response to the notice within 15 days, the court would enter an order allowing the city to list the property for tax sale without a hearing, Sgro said.

Because homeowners were not personally served with the notice, many did not realize what was happening, according to Sgro. Now lawyers and housing counselors are available in the courtroom as homeowners face foreclosure hearings, even if the owner doesn’t respond to the notice within 15 days.

The nonprofit, together with other legal-service organizations and City Council members, also persuaded the city to create the Owner-Occupied Payment Agreement in 2013. The agreement allows homeowners to make income-based monthly payments if they have unpaid property taxes. Once enrolled, the city is prohibited from placing the property on the tax-auction list. In 2020, 11,700 homeowners were enrolled in the payment program.

Mobile-Home Owners

The United Way of Chester County and the nonprofit Legal Aid of Southeastern Pennsylvania are tackling a related but different kind of taxation issue in the region outside of Philadelphia.

Christopher Saello, CEO of United Way of Chester County, says the state taxes a mobile home as if it were a house instead of a vehicle, even though mobile homes decrease in value like cars instead of going up in value like houses. “A mobile home doesn’t even have a deed like a house,” Saello said. “It has a title like a car.”

United Way got involved after learning many of those getting help at a local food pantry also were struggling to pay the tax on their mobile homes. The United Way worked to reassess hundreds of mobile homes in the county and found on average they were overassessed by 70 percent. Then it worked with local groups and legal-aid lawyers to address the assessment problem. United Way spent $53,000 from 2019 to 2021 on the project.

Some mobile homes in the county haven’t been reassessed since they were built decades ago, lawyers said. As the homes age, problems like leaky roofs, plumbing issues, or mold can lower a home’s value, but the property-tax assessment may not be adjusted accordingly.

Legal Aid of Southeastern Pennsylvania

To lower the tax, Brian Doyle, a lawyer at Legal Aid, said the property-tax assessment must be appealed. Lawyers help homeowners determine their home’s actual value and then attend hearings with them as they appeal.

The United Way and Legal Aid partnership has completed 766 reassessments since its start in 2019 and saved homeowners $6.9 million in taxes over 10 years, according to Saello.

For individual homeowners, those savings can be life-changing. Vermillera summed up how she felt when she learned the Maryland Volunteer Lawyers Service was able to keep her home from being put up at tax auction: It was an “instant relief,” and an “answer to prayer beyond expectation.”

Reporting for this article was underwritten by a Lilly Endowment grant to enhance public understanding of philanthropy. See more about the grant and our gift-acceptance policy.