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Property Tax Foreclosures Never Slowed During Pandemic

Poor, Black and disabled homeowners often suffer in Shelby County ‘tax sales’. Reforms are needed, critics say.

Denise Thomas, 60, and her partner, disabled Vietnam veteran Jack Mitchell, 71
Denise Thomas, 60, and her partner, disabled Vietnam veteran Jack Mitchell, 71, lost their home near Orange Mound in a tax sale last year. “It was really heart wrenching,” Thomas said. (Action News 5)

Denise Thomas’ mood darkens when she recalls the eviction notice that came on that gloomy summer day last year.

“It was really heart wrenching,” says Thomas, 60, reciting a series of events — health crises and loss of employment — that caused her and her disabled partner to lose the home they’d worked so hard to buy 15 years earlier.

“I just didn’t have the money. Point blank period. I did not have the money.”

The debt that cost the couple their modest two-bedroom house in inner-city Memphis wasn’t a high-interest predatory home loan or an equity-stripping scheme — it was $12,000 in unpaid property taxes, interest and fees owed to Shelby County government and the City of Memphis.

Their home was auctioned off to the highest bidder in a November 2020 tax sale so the local governments could recoup the property taxes they were owed.

Document of a tax sale that Denise didn't know about.
Denise Thomas said she didn’t know her home was scheduled for a tax sale or that it had been sold in an auction until she received eviction paperwork from the new owner.

At the height of the COVID-19 pandemic, the couple suddenly faced homelessness.

Even as the federal government halted rental evictions and mortgage foreclosures for millions of Americans facing economic hardship during the coronavirus shutdown, tax foreclosures continued virtually unimpeded across the country.

In the Memphis area, officials auctioned off hundreds of homes on behalf of the county and city governments.

An analysis by the Institute for Public Service Reporting in collaboration with The Daily Memphian and Action News 5 found officials auctioned nearly 1,700 tax-delinquent properties between August 2020 and February 2021 while federal eviction and foreclosure moratoriums were in place. Most were abandoned homes or vacant lots.

Yet nearly a quarter — as many as 400 or more — appear to have been owner-occupied houses. In such cases, residents often face eviction or are forced to scramble for money to repurchase their own homes. Many other tax-foreclosed homes house vulnerable renters.

Like Thomas and her partner, the overwhelming majority of these homeowners are poor and Black, living in neighborhoods where more than a third of the residents live below the federal poverty line: $26,500 a year for a family of four.

Andrew Kahrl researches land use and inequality and says the nationwide blitz of tax foreclosures during the pandemic illustrates how reform is needed to help struggling families save their homes.

“Neglectful homeowners are treated the same as those families who desperately want to hold onto their homes,” said Kahrl, a professor of history and African American Studies at the University of Virginia.

Shelby County is not alone in aggressively pursuing tax foreclosures since the coronavirus struck in March 2020. Only a handful of jurisdictions nationwide halted tax sales during the pandemic, most notably Chicago, Detroit, New York and Washington, D.C.

Critics such as Kahrl consider tax sales so corrosive, in part, because of the ubiquity of for-profit investors who snatch up tax-delinquent properties. The new owners seize years of built-in equity and then rent those properties at steep rates and high profits.

“There’s a lot of evidence to show that tax sales have become a predatory marketplace for investors looking to profit off of homeowner distress,” he said.

Many homes that are sold via tax sale in Shelby County go to for-profit investors, although an exact number isn’t available.

In theory, there are incentives for tax sales to continue amid a global health crisis. New owners can mean property taxes are paid and renovations are made on those homes, which in turn means higher assessments, and thus, more property taxes.

Tax sales also can be used as a tool to fight blight, which lowers property values for homeowners living near distressed properties. 

But even when that is the intention, tax sales are an imperfect approach, a Memphis community leader says.

“(A tax sale) can be an effective way to fight blight but it is too randomized,” said Steve Lockwood, who led the Frayser Community Development Corp. for nearly 20 years, which among other things works to improve the Frayser neighborhood, fight blight and increase home ownership among Frayser residents.

Lockwood believes the way Shelby County selects the homes scheduled for tax sale hurts owners who don’t have the resources to hold on to their homes.

“(The County) needs to think seriously about who’s falling through the cracks.”

Adequate notification is questioned

Some who lost their homes in recent tax sales contend communication was so bad during the pandemic they were unaware of their predicament.

Archie Robinson said he didn’t know the childhood home he inherited from his mother had been auctioned off until a sheriff’s deputy came to the door with an eviction notice.

Archie Robinson looking out at neighborhood
Archie Robinson’s childhood home in the Glenview neighborhood was sold in a February 2021 tax sale for less than $5,000 in unpaid taxes. Robinson said he had to beg family and friends for the money to buy back his house, paying the county $9,000 including interest and penalties. (Mark Weber/The Daily Memphian)

“Some young lady served me some papers stating that someone had bought the home,” said Robinson, 54.

He said his mother was behind on her taxes when she died. He moved in and, as a stroke survivor on disability, he paid what he could, he said. But his home in Memphis’ Glenview neighborhood — which was valued at $65,000 by the Shelby County Tax Assessor — was sold for less than $5,000 in unpaid taxes in a February 2021 tax sale.

Robinson was sick and bedridden at the time but roused himself to beg family and friends for the money to buy back his house, paying the county $9,000 including interest and penalties.

“I think it’s unfair and unfortunate,” he said.

He said he called the County Trustee’s Office after receiving that eviction notice and asked, “How could you sell my property without me knowing?’’

The answer he got: “We sent out notices.”

Shelby County Trustee Regina Newman, who is responsible for collecting property taxes and scheduling tax sales, told a reporter in an emailed statement that Robinson received three notices in the mail.

United States Postal Service document unknown to Archie Robinson
Archie Robinson contends he never received notice that his home was being sold for property taxes. The Shelby County Trustee’s Office says it mailed three notices.

Still, Robinson insists he never got them.

He is not alone in his claim.

Tennessee law requires that notice be given to any homeowner facing a tax sale. Shelby County gives notice by certified mail, which requires the homeowner’s signature or the signature of another authorized person as confirmation that it’s been received.

However, the U.S. Postal Service modified its signature requirements in April 2020 allowing the postal carrier to sign for the certified mail instead of the recipient. Notices to delinquent taxpayers would then be returned to the Trustee’s Office marked with a “COVID” or “C-19” in the signature line.

Newman told the Shelby County Commission in October 2020 that her office could not prove those facing tax sales were properly notified.

“This year, the post office decided for certified mail they would not get signatures from people,” Newman told the commission. “Our return receipts for 30,000 pieces of certified mail came back marked ‘COVID’ so we could not prove to the courts that anybody received that mail or that due process was provided.”

Newman said her office published the addresses of the tax sale properties in the Memphis Daily News, fulfilling a state requirement to publish addresses in a newspaper of general circulation.

The notices are also published on the newspaper’s website and on  opens in a new, a web site listing all public notices in Tennessee. Housing advocates and neighborhood groups, as well as potential buyers, use the Memphis Daily News and its site to monitor foreclosure notices.

Robinson said he’d never heard of the publication before. Neither Thomas nor her partner, disabled Vietnam veteran Jack Mitchell, 71, had seen the notice prior to losing their home near Orange Mound. The historic neighborhood was one of the first planned Black neighborhoods in America.

Like Robinson, Thomas said she didn’t know her home was scheduled for a tax sale or that it had been sold in that November 2020 auction until she received eviction paperwork from a fellow Memphian who’d bought the home for $30,000.

What’s more, while she and Mitchell were in court to contest their eviction, she says their belongings were removed from their home. That included precious keepsakes by which she remembered her mother, aunt and grandmother, all of whom have died.

“The next thing I know the neighbor was calling saying, ‘You need to come over here. They done put your stuff outside,’ ” said Thomas.

Trustee Newman’s former tax delinquent attorney, Jack Turner, concedes that the pandemic mailing disruption clouds the question of what is proper notice and whether homeowners could claim their constitutionally guaranteed right to due process was violated.

“I’m sure people will come back, truthfully or not, and say ‘I didn’t get notice,’ ” said Turner. “If that happens, they’re still going to have back taxes due but it might set aside a tax sale.”

How much unpaid taxes are recovered?

In response to the pandemic crisis, Newman delayed one tax sale set for April 2020, rescheduling it for that August.

Critics say that’s insufficient.

“Postponing a tax sale for a couple of months doesn’t really do anything to address the underlying problems,” said Kahrl, the University of Virginia professor. “These are pretty dire conditions that would lead someone to not pay their property taxes or not be able to.”

According to Kahrl, most people who lose their homes in tax sales simply can’t afford the taxes and tend to be elderly, poor or Black.

decorative - how tax sales work

Tax sales are held to recoup unpaid property taxes but the process involves multiple steps. And the financial results are mixed.

The Institute’s analysis found the county recovers a small percentage of the taxes it’s owed through the tax sales, although much more revenue is generated in sales that follow the tax sales. 

That’s because most tax sale properties end up being owned by Shelby County government, where they are often — but not always — subsequently sold off.

Of more than 8,200 properties that have been auctioned off in 25 tax sales from 2016 to 2022, Shelby County came to own more than 5,500 of those properties because no one else wanted to buy them.

“A lot of these are, what you call, distressed properties — either a house that’s not in great shape or a vacant lot and there’s just not enough investors who want to buy all those,” said Turner, the former tax delinquency attorney for the Trustee’s Office.

Rather than paying money for the tax-foreclosed properties it comes to own, Shelby County instead wipes the tax slate clean and moves the properties to the Shelby County Land Bank, where potential owners from around the world can buy Memphis real estate online.

“I can just tell you my experience being there: the goal is to get taxes paid so county services can be provided,” Turner said.

A trustee’s report for the August 2020 tax sale suggests the county collected nearly $7 million in bids during the tax sale. However, Shelby County recovered less than $800,000 in unpaid property taxes for that sale. The remaining $6 million comprised properties in which Shelby County placed the winning bid. No money was actually collected on those properties. 

However, the county does continue to attempt to sell the properties it has bought via the Land Bank. According to data released by the Land Bank, the county has generated between $2.2 million and $5.3 million in revenue in each of the last five years through third-party sales of properties the county has taken in tax sales.

It was unclear, however, how much the previous owners had owed in unpaid property taxes on those properties. 

The Trustee’s Office can’t profit from a tax sale, but it can earn money for the county on any excess funds it accumulates when the Land Bank in turn sells tax-foreclosed properties to third parties.

The Institute found several properties in the Land Bank that sold for a lot less than the taxes owed. For example, a lot on Davis Street that carried more than $19,000 in back taxes failed to sell in the August 2020 auction. It was purchased 10 months later by a Florida-based limited-liability company from the Land Bank for just $500.

Possible reforms

“That’s showing you the system’s not working,” said Kahrl, who believes one solution might involve cities and counties tracking owner-occupied homes slated for tax sale and segregating them from vacant properties. 

Washington and Baltimore have taken steps to protect owner-occupied homes from tax sales and did not include those properties when they resumed their tax sales in 2021 and 2022.

pandemic tax sales heat map of Memphis, TN source Shelby County Records

How did they do it? Baltimore identified owner-occupied homes by checking the index of Maryland’s Homestead Tax Credit, which offers tax breaks to people living in their principal residences. Similarly, officials in Washington consult a database for that city’s Homestead Deduction, which also offers tax breaks to owner-occupied households. The method doesn’t identify all owner-occupied homes, officials said, but it can help save many from tax foreclosure.

“We don’t go look at houses,” Trustee Newman said in a phone interview. She said the best identifier of an owner-occupied home is if the owner’s mailing address matches the home’s street address.

That can be a daunting undertaking.

The Institute identified 404 possible owner-occupied homes by matching addresses as Newman suggested. A precise number remains elusive even after knocking on dozens of doors and making numbers of phone calls to locate residents as well as conducting extensive records searches.

Turner said identifying owner-occupied homes and removing them from tax sales would require additional manpower. He’s unsure state law would even allow such a process. 

“You’d have to change the statute and the General Assembly would have to say there’s a difference between owner-occupied and abandoned homes,” he said.

Meanwhile, Shelby County offers tax freezes and relief for some taxpayers ages 65 or older as well as disabled citizens and veterans to help pay their property taxes and stay in their homes. Brochures are mailed out and community forums are held to alert qualified individuals.

However, Kahrl believes that these programs rely on the taxpayer to apply and wants the government to do more to differentiate categories of taxpayers, which would require additional funding.

Said Kahrl, “That requires money, that requires investment, it requires a commitment, not just on the part of government but on the part of residents and voters and taxpayers to say this is a priority we need to get a handle on.”

Meanwhile, Memphis families with homes included in pandemic tax sales are still dealing with the aftermath.

“I guess I’m one of the fortunate ones if you’d like to look at it like that,” said Robinson, the homeowner who was able to buy back his home.

The company that had purchased Robinson’s house, a property management group called Red Door Memphis, states its mission is to “glorify God by providing good housing at a good value.” It purchased four other properties in the same tax sale; one now is a rental house that recently was listed on its website for $1,500 a month — pricey for Memphis.

While Robinson was able to stay in his home for now, he’s behind on the property taxes again.

Meanwhile, Thomas and Mitchell now live in a rental that gobbles nearly all their monthly income.

“I’m worried about making sure that I have somewhere to live,” said Thomas. “A roof over my head, that’s what’s important. Not having to sleep out there in the park or in the shelter.”

The couple secured a property in a new neighborhood, which became available after the family friend who lived there died of COVID-19, which doesn’t concern Thomas.

“I’m not scared of COVID,” said Thomas. “I’m worried about making sure that I have somewhere to live. That’s what’s important: keeping a roof over my head and not having to sleep out there in the park or in the shelter.”

Written By

Jessica Jaglois is a Murrow-award winning, Emmy-nominated investigative journalist with more than fourteen years of local TV news experience. She has been covering quality-of-life issues in Tennessee for more than seven years.

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