NYC Considers Reviving Property Seizure Program

The original Third Party Transfer program ran from 1996 until it was frozen in 2019 due to intense criticism and lawsuits. The program was accused of stripping wealth from minority communities, with a City Council audit finding most seized properties were in gentrifying areas of Brooklyn and the Bronx. Homeowners alleged their properties were taken without proper notice for relatively small debts, sometimes just a few thousand dollars in unpaid water bills. A federal class-action lawsuit filed in 2019 argued the program was unconstitutional because it seized homes without providing just compensation for the owners' equity. The new bill, dubbed the "Housing Rescue and Resident Protection Act," is sponsored by Council Member Pierina Sanchez. It aims to prevent past abuses by targeting only the 500 properties with the most municipal debt and housing code violations, and it eliminates the controversial "block pickup" rule that allowed the city to seize non-distressed properties on the same block as a targeted one. The rebooted legislation would also create an ombudsperson to help property owners in distress and enhance notification requirements for both owners and tenants before any foreclosure action. Additionally, it establishes a formal process for former owners to claim surplus equity from the property's transfer, a key demand from critics of the original program. Despite the proposed reforms, the city's Department of Housing Preservation and Development (HPD) has expressed concerns, stating it could not support the bill as initially written. Critics remain wary, pointing to the disproportionate impact the former program had on Black and brown homeowners and the potential for any seizure program to be misused.