Tax-forfeited properties at 20-year high in Hennepin County

  • Article by: RANDY FURST , Star Tribune
  • Updated: February 26, 2012 - 9:40 PM

Hennepin County says it tries to avoid seizures, the majority in north Minneapolis, by negotiating with owners.

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Moxamuud Abdallah , a graduate student at the Hubert Humphrey Institute, bought an empty lot adjoining a new house he built in North Minneapolis. He has discovered he owes more than $22,000 on it.

Photo: Richard Tsong-Taatarii, Star Tribune

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The number of houses and lots seized by Hennepin County because owners failed to pay property taxes has reached a 20-year high.

The majority of the tax-forfeited property is in Minneapolis, where it's concentrated in the foreclosure-ravaged North Side neighborhoods of Jordan and Hawthorne.

Last year, the county paid $465,000 to cut grass, plow snow, remove trash and provide security for the glut of more than 600 vacant houses and lots, 255 of which were forfeited last year alone.

The county says it tries to avoid forfeiture by negotiating payment plans with property owners. But if that fails, the county tries to sell off the parcels at auction, often at bargain-basement prices, to get the property back on the tax rolls.

The city of Minneapolis, meanwhile, has acquired about 60 of the tax-forfeited properties since 2007 as part of its effort to demolish substandard and decrepit housing. It also wants to assemble parcels it hopes to sell to developers for future high-density housing. But the city says it isn't selling any of the property until the housing market improves.

Mark Chapin, director of the county's taxpayer services department, blames the surge in tax forfeitures on the same problem that drove the foreclosure crisis: people unable to pay their taxes because they lost jobs or had major health problems.

"Many of the forfeitures we are seeing now probably began at the height of the recession three years ago, so we are seeing a delay effect," he said. "The legal consequences that happened to that person or family are now showing up."

There are hopeful signs the forfeitures will ease, he said. The number of tax delinquent properties in Hennepin County last month fell to 6,060, the lowest level since 1997.

The county's records on tax-forfeited property, which date back to 1991, show 255 newly forfeited parcels in 2011, compared to 158 in 2010 and the 20-year low of 34, in 2004.

The city of Minneapolis now owns about 500 developable parcels, less than 10 percent of them tax forfeited, said Elfric K. Porte II, manager of single-family housing development for the city's Community Planning and Economic Development Department.

The city of Minneapolis acquires some of the tax-forfeited property under an arrangement with the county to transfer up to 20 percent of that property in targeted areas at $1 per parcel. The city is negotiating with the county to increase that figure to 40 percent.

Federal dollars

But most of the city-owned parcels were purchased from banks under the city's Neighborhood Stabilization Program, using federal dollars, and most of the homes on the lots have been demolished, Porte said.

"The city's responsibility is to remove blighted property," he said. But it may be some time before the city puts the vacant lots up for sale.

"There's an overabundance of property in the market place," he said. In addition, he said, the cost of building a new house would exceed its value, so the city is waiting until the market stabilizes.

County officials say they are not eager to seize people's property. The county works with individual taxpayers facing forfeiture to see if they can retain their property by making arrangements for paying their back taxes, said Jeff Strand, an administrative manager in the county's property tax division.

One person who may soon lose land through tax forfeiture is Moxamuud Abdallah, who bought a newly built house at 1218 25th Av. N. and moved in with his wife, Jill, in 2007. They have since rented it out.

Next door, at 1216 25th Av. N., was a boarded-up house frequented by transients. In October 2008, the city tore it down.

Abdallah said he saw a lawn sign advertising the empty lot for sale and bought it for about $5,000 in 2009 in order to have a larger lawn. Abdallah said he was assured by the seller that he would not have to pay the demolition costs.

Abdallah concedes he did not hire anyone to do his own title search and learned after he purchased the lot that the assessments were not paid and he now owes the county $22,600 in taxes, which includes the original demolition cost of $15,542, plus ballooning late fees, interest and assorted other assessments.

He received a letter from the county stating that if he does not pay up in 60 days, the parcel could be forfeited.

Abdallah, a graduate student at the Humphrey Institute for Public Affairs at the University of Minnesota, fears he is about to lose his $4,500 investment and cannot afford at least $20,000 in legal fees that an attorney told him would be the cost of fighting it.

"If it goes back to the county, they're going to have to maintain it and people will be dumping garbage on it again," he said.

Costs stay with property

Kellie Jones, manager of the problem properties unit for Minneapolis, said that she sympathizes with Abdallah but that the demolition cost for the property was posted on a public website and anyone could have called her office to confirm it. She said that under city practice, assessments -- including demolition costs -- stay with the property.

"The message I have given him, unfortunately, [is that] it is between him and the seller and title company," Jones said.

Some investors see the tax-forfeited properties as an opportunity. Last year, Kevin Allendale of Minneapolis, a landlord with several properties in the city, bought a tax-forfeited empty lot at 2626 Bryant Av. N. for $2,000, next to another lot he said he bought about 2007 for less than $1,000.

"The lots were once running about $30,000, the crisis came, and they are cheap now," said Allendale. He said he plans to hang on to them until prices rise again, at which point he will either build a house on the combined lot and sell it, or sell the lots to a developer if the price is right.

"I think it's a long process," he said. "It's supply and demand. Once the lots are all bought up, the demand will come."

Randy Furst • 612-673-4224

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