Activists monitoring the effect of the city’s tax lien sales program on apartment building tenants recently discovered something they weren’t looking for: The sales are hurting poor, often elderly outer-borough homeowners as well, thanks in large part to the program’s tough debt collection tactics.

The Giuliani administration and the City Council created the tax lien sales program in 1996. Rather than take over buildings whose owners failed to pay taxes, the city began selling outstanding tax, sewer and water debts to a private trust. The trust, in turn, hires collection agents to fetch the debts. If the debt is not collected, the trust sells the properties at auction.

A study by South Brooklyn Legal Services shows that low-income owners of one- and two-family homes often can’t pay their debts–60 went to auction over a recent six-month period. Based on this evidence, neighborhood and senior citizen groups hoped to convince the City Council when the program came up for renewal in October that vulnerable homeowners deserved protection, like credit counseling and low-interest loans.

In early June, however, the Council quietly voted to extend the program for two more years. “It’s a slap in the face of community advocates,” said Eduardo Canedo of South Brooklyn Legal Services.

Council staffers close to the issue argue, however, that the renewed program is far from that. Safeguards are in place for low-income homeowners, like removing some vulnerable homes from tax lien sales, says Larian Angelo, deputy director of the Council’s finance division. And “if the safeguards aren’t working well enough,” she adds, “the Council will look at the legislation again.”

The June vote did hold good news for tenants of apartment buildings. Responding to protests from housing groups, the Council rejected a proposal made by the city Finance Department last fall to increase the number of large buildings that go into tax lien sales. This would have reduced the well-regarded third party transfer program, in which the city fixes up troubled multi-family buildings and transfers them to qualified nonprofits and private landlords, rather than auctioning them off.