Commentary: When the largest asset of low-income Marylanders is held hostage

A woman who is the head of a multigenerational household lives in the East Baltimore home that has been in her family for 66 years. She has been struggling to afford her property taxes and home repairs, but she doesn’t give up. Her grandparents worked so hard to keep this house with the family. So, she is going to fight to keep it. But, while living below the federal poverty line, she can’t get home repair grants or homeowner tax credits because she is behind on her bills.

Her situation exemplifies how many low-income Marylanders are kept in poverty by a law that seems benign: property taxes and other property bills must be paid before a property can change ownership. In most cases, this law makes perfect sense because any past due bills are paid from house sale proceeds. The buyer is protected from unexpected liens and the government gets paid.

The problem is that not all property transfers are sales. If a property owner dies, the property needs to be transferred to their heirs. But many low-income families get behind on their property bills and they have trouble catching up, especially when normal ups and downs are compounded with the loss of a loved one.

Instead, ownership of these properties is left somewhere between the living and the dead. That status has become known as a “tangled title.” The deceased person’s name is on the deed, but the heirs are the real owners. The heirs don’t have a title, however, meaning they are not legally recognized as the owners. Without a clear title, the heirs cannot access the wealth in the property by getting a loan against it or by selling it.

Further, the heirs are not eligible for home repair grants or the Homestead Tax Credit, a credit that limits the amount that the property taxes can increase each year. Heirs are also essentially ineligible to claim the Homeowners’ Tax Credit, a different credit that reduces taxes for low-income homeowners. So, families behind on their bill are disadvantaged further. They are punished for their poverty.

The government holds the home hostage to make sure it gets paid. But this is completely unnecessary because the government knows it will be paid anyway. Allowing the property to be passed to the heirs would not forgive the bills. And if the family doesn’t pay the bills, the government will eventually sell the home to an investor to pay the debt.

By allowing property to pass to the heirs even though the bills are behind, the government has nothing to lose and so much to gain. If property without a clear title represents even half a percent of the property value in the state, that’s more than $4 billion of assets that cannot be fully used. That’s money in the hands of low-income Marylanders that they should be able to use to help them get out of poverty. With a clear title, the family can build generational wealth and be able to take out a low-interest loan against the property to fix the roof, send a kid to college or start a business.

By contrast, property without a clear title is often abandoned due to the threat of tax sale or when needed repairs leave the property uninhabitable. This costs the government immensely in the long run. A recent study estimated that Baltimore’s vacant housing costs $210 million per year in lost revenue and direct costs. Stopping a property from transferring into a living person’s name because of unpaid taxes is nonsensical and counterproductive, and it ultimately hurts everyone.

The homeowner referenced here can’t get the property in her name until she pays several thousand dollars in property taxes and water bills. In the meantime, she isn’t eligible for grants to repair the roof, the plumbing or the electrical system. She also isn’t eligible for the Homestead Tax Credit, so her property taxes that she already was struggling to afford could more than double during the next three years. She will end up paying more in taxes because she already couldn’t afford them.

We used to have debtors’ prisons. We abolished them because people can’t pay their debts if they can’t work. Why do we think it’s any better to lock up a family’s largest financial asset until they pay their bills?

The General Assembly is considering several bills to address this issue this legislative session. I urge lawmakers to make it so no one needs to pay the bills before the home can be inherited, for the sake of low-income families, our communities and our state.

Steven Messmer, an attorney who works to resolve tangled titles, is with the Maryland Volunteer Lawyers Service. To learn more about MVLS or get assistance, visit mvlslaw.org.

The Baltimore Banner welcomes opinion pieces and letters to the editor. Please send submissions to communityvoices@thebaltimorebanner.com or letters@thebaltimorebanner.com.

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