Baltimore is a step closer to creating a monthly payment-plan system that city leaders say will help more residents avoid losing their properties in the annual tax sale.

Maryland Legal Aid and the Gupta Wessler law firm in Washington, D.C., took the city to federal court in 2024 over the auction of homeowner liens to third-party debt collectors. Winning a lien allows a debt collector to charge homeowners steep fees and sometimes take possession of a property over a relatively small amount. To pause the lawsuit, the city agreed to create and roll out payment plans.

The City Council introduced the legislation in February, and on Tuesday a committee advanced the bill to another reading. The council must get the bill over the finish line by the end of this month so that city officials can race to sign up as many people as possible before next month’s annual tax sale.

Michael Mocksten, the city’s finance director, said the owners of more than 27,000 properties would be eligible to sign up for payment plans if the legislation passes. City Councilwoman Odette Ramos, the bill’s sponsor and an advocate for reforming tax sales, said eligibility would extend to all residential property owners, including out-of-town investors and landlords.

“We want people to stay in their homes,” Mocksten said. Giving people structured payment schedules can help them achieve stability and get the city more revenue, he said.

City data shows that of the properties behind on tax payments, the average debt amounts to less than $7,000. Of those that are owner-occupied, the average lien tends to be even lower, with roughly half owing under $1,000.

Homeowners who enroll in payment plans would be removed from the tax-sale list as long as they do not go more than 90 days without a payment, according to the legislation. The city can’t officially enroll taxpayers in the program until the bill passes.

City Administrator Faith Leach said the city would “sprint” toward reaching as many interested homeowners as possible, including at events, community meetings, senior centers and online.

Next month, Mayor Brandon Scott will remove some owner-occupied homes from the tax-sale list, as he has done every year he’s been in office. But Leach said the removal process, which only applies to homes with tax-assessed values under $250,000, still leaves people with debt they can’t repay.

Payment plans may help more people settle those debts, she said, which would give the city more money to spend on priorities such as code enforcement and vacant building repairs.

Tax sales have long bedeviled Baltimore, where the auction has been villainized by some as an unjust system that preys on low-income households and upheld by others as a routine way of collecting taxes.

A 2023 Banner analysis found just a handful of companies were responsible for purchasing the vast majority of liens. Tax sales are much more common in predominantly Black neighborhoods, the analysis also showed.

From 2016 to 2023, around 41,000 homes had a lien sold to a tax-sale investor, according to The Banner’s analysis. To satisfy the debt, a property owner must repay the investor with fees and interest — or risk the house being foreclosed upon by the lien holder.

The tax-sale system leaves some homeowners especially vulnerable, including older adults and those with very low incomes.

In many instances, homeowners facing financial hardship have fallen behind on their taxes and lost their homes over just a few hundred dollars. Others have complained that they didn’t receive notice of their liens until it was far too late to pay.

Though much of the council tends to agree that tax sales harm their communities, the legislation received some initial pushback.

City Councilman Isaac “Yitzy” Schleifer questioned the appropriation of about $800,000 to a digital payment plans vendor without knowing how many people would enroll in the service.

He also said he had reservations about the mayor ending the practice of removing some owner-occupied homes from the tax-sale list, which representatives from the mayor’s office confirmed could happen once payment plans become more widely used.

Schleifer, part of the budget committee that first considered the bill, eventually voted in favor of it. So did the rest of the committee, except for City Councilman Paris Gray, who left the hearing before the vote.

Leach said the software vendor will only be needed until the city builds the infrastructure to collect monthly payments on its own. She said the goal is to change the system so more people can satisfy their debts.

“We need every person paying taxes,” she said. “This is about supporting our residents in every way possible.”