Vacant and Abandoned Properties: Turning Liabilities Into Assets

• The absence of universal definitions of vacancy and abandonment complicates efforts to assess the number of vacant and abandoned properties nationally.
• Vacant and abandoned properties are linked to increased rates of crime (particularly arson) and declining property values. The maintenance or demolition of vacant properties is a huge expense for many cities.
• It is critical to match strategies for combating vacancy to neighborhood market conditions.

Vacant lots can be greened and repurposed for new uses, such as this play area in Pittsburgh’s East Liberty neighborhood.

Photo courtesy: Sara InnamoratoDerelict houses, dormant factories, moribund strip malls, and other types of vacant and abandoned properties are among the most visible outward signs of a community’s reversing fortunes. Properties that have turned from productive use to disuse are found in cities, suburbs, and rural areas throughout the country, and they vary widely in size, shape, and former use. But these vacant and abandoned properties are more than just a symptom of larger economic forces at work in the community; their association with crime, increased risk to health and welfare, plunging property values, and escalating municipal costs make them problems in and of themselves, contributing to overall community decline and disinvestment.1 Local government officials, community organizations, and residents, however, increasingly view vacant properties as opportunities for productive reuse, reimagining blight and dilapidation as urban farms, community gardens, and health facilities. To them, empty homes can become assets in neighborhood stabilization and revitalization that can be renovated and reoccupied.

Vacant and abandoned properties have long plagued the industrial cities of America’s Rust Belt, but the spike in foreclosures following the recent recession has compounded problems for these areas and has caused vacancy rates to surge nationwide, especially in recently booming Sun Belt states such as Florida, Arizona, and Nevada. These communities face mounting blight and physical deterioration of properties, declining tax revenues, and rising public costs. Although nationwide factors (in particular, the foreclosure crisis) helped create these vacancies, local factors — the condition of the properties, the health of the local housing market, and the strength of the regional economy — are what shape the range of options available for returning these properties to productive use. The approach taken to reclaim one vacant property among many in a distressed Detroit neighborhood, for example, will be different from that taken to reclaim a property in a rebounding Phoenix suburb — or, for that matter, in another Detroit neighborhood with a healthy housing market.

Local political and economic contexts, as well as limitations of capacity and resources, shape the tools that local governments, nonprofits, and neighbors employ to address and reuse vacant and abandoned properties. The most desired outcome is to quickly return a property to its previous use — an owner-occupied residence or a thriving business. However, tight credit, weak markets, population loss, or other factors may require other solutions such as demolition, conversion of owner- occupied housing to rental housing, or replacement (such as constructing a solar farm on a former industrial site). Strategies for reuse aim to stabilize and revitalize neighborhoods and may stimulate economic recovery and growth or, in the case of shrinking cities, manage decline in ways that improve quality of life for the remaining residents.

Defining the Problem

Source: United States Census Bureau. 2012. American Community Survey 1-Year Estimates. Note: Vacant units do not include seasonal, recreational, or occasional uses.Properties may become vacant for a variety of reasons, some of which are relatively benign. A property that is for rent or sale can be vacant for a short time, and a vacation home might be vacant for most of the year. If these properties are well maintained by responsible owners, they will not become eyesores or depress neighboring property values. In general, a vacant property becomes a problem when the property owner abandons the basic responsibilities of ownership, such as routine maintenance or mortgage and property tax payments.2 Multiple variables can lead authorities to designate a property as either vacant or abandoned, including the physical condition of a structure, the amount of time that a property has been in that particular condition, and the relationship of the owner to the property. For example, in Baltimore, the city building code defines residences as vacant only if they are uninhabitable, not if they are merely unoccupied.3

The absence of universal definitions of vacancy and abandonment complicates efforts to assess the number of vacant and abandoned properties nationally. The best aggregate sources include the U.S. Census Bureau and the U.S. Postal Service, although these are not without limitations. Using these sources, the U.S. Government Accountability Office (GAO) reported in 2011 that vacant residential units, not including those used seasonally or by migrant workers, increased from 7 million in 2000 to 10 million in 2010.4 The Joint Center for Housing Studies of Harvard University reported that a subset of this category, homes vacant and not being marketed for sale or rent, reached a record high of 7.4 million in 2012, with increases concentrated in the high-foreclosure areas of the South and West.5 Although vacant homes can be found throughout the country, they tend to be concentrated; nearly 40 percent of the nation’s vacant homes are located in just 10 percent of all census tracts.6 More than half of the census tracts with vacancy rates of 20 percent or higher were in just 50 counties, most of them in metropolitan areas. Wayne County in Michigan and Cook County in Illinois, for example, each have more than 200 high-vacancy neighborhoods.7 In addition to the many vacant and abandoned residential properties across the nation, estimates place the number of brownfields — idle former industrial properties with real or perceived environmental contamination — at approximately a half-million.8

The current inventory of vacant properties results from two main causes: the foreclosure crisis as well as long-term urban decline, depopulation, and disinvestment. Many Rust Belt cities have seen substantial population loss since their twentieth-century peaks as residents left for suburbs or other regions. This decline in the number of households has created a tremendous gap between housing supply and demand. Not only does this mismatch leave many structures vacant, but it severely weakens local housing markets, limiting the potential of market-based solutions to vacancy.9 Jobs and retail likewise suburbanized in the latter half of the twentieth century, leaving behind former sites of industrial production and commercial activity. The shrinking population — and the typically lower incomes of those who remain — are often insufficient to support commercial revitalization.10 Former industrial centers such as Baltimore, Cleveland, Detroit, and Gary, Indiana are dotted with empty factories and have thousands of foreclosures and vacant residential properties. Sun Belt metropolitan areas that were booming just a decade ago now suffer from widespread foreclosures.11 Both residential and commercial foreclosures are at high risk of becoming vacant or abandoned.12 Former occupants are likely to vacate the property, and because the costs associated with the foreclosure process are high and the value of a given property is often very low, lenders or servicers may walk away.13 In Nevada, Arizona, Florida, and Georgia, all states with high foreclosure rates, nonseasonal vacancies increased by more than 85 percent between 2000 and 2010.14

Measuring the Impacts

Vacant and abandoned properties have negative spillover effects that impact neighboring properties and, when concentrated, entire communities and even cities. Research links foreclosed, vacant, and abandoned properties with reduced property values, increased crime, increased risk to public health and welfare, and increased costs for municipal governments.

Studies attempting to quantify the effect of foreclosures on surrounding property values find that foreclosures depressed the sales prices of nearby homes by as little as 0.9 percent to as much as 8.7 percent.15 Foreclosed homes may or may not become vacant or abandoned, at which point a distressed property may have a more pronounced effect on surrounding properties. In a study of Columbus, Ohio, Mikelbank finds that vacant properties have a more severe impact on their immediate surroundings than do foreclosures, which have a relatively modest impact but over a larger area.16 Whitaker and Fitzpatrick also separate vacant properties from foreclosures in assessing spillover effects, finding that in the Cleveland area, being within 500 feet of a vacant property depresses the sale price of a nondistressed home by 1.7 percent in low-poverty areas and 2.1 percent in medium-poverty areas.17 Research also suggests that the longer a property remains vacant, the greater its impact on surrounding property values and the larger the radius of this effect.18 A study of Baltimore finds that this impact is confined to within 250 feet of properties that have been abandoned for less than 3 years; after 3 years, however, the impact can extend as far as 1,500 feet (although at a smaller magnitude).19

The “I Wish This Were A…” project in Lansing, Michigan invites community members such as the woman pictured above to reimagine use of this abandoned store.
Photo courtesy: City of Lansing Development OfficeVacant and abandoned properties are widely considered to attract crime because of the “broken windows theory” — that one sign of abandonment or disorder (a broken window) will encourage further disorder.20Increased vacancies leave fewer neighbors to monitor and combat criminal activity. Boarded doors, unkempt lawns, and broken windows can signal an unsupervised safe haven for criminal activity or a target for theft of, for example, copper and appliances.21 Cui’s study of Pittsburgh shows that foreclosure has no effect on crime; however, after a property becomes vacant, the rate of violent crime within 250 feet of the property is 15 percent higher than the rate in the area between 250 and 353 feet from the property. In addition, longer periods of vacancy have a greater effect on crime rates.22 In a study of Philadelphia, Branas, Rubin, and Guo report an association between vacant properties and risk of assault, finding vacancy to be the strongest predictor among almost a dozen indicators after controlling for other demographic and socioeconomic variables.23

Arson is a particular problem for vacant and abandoned properties. The U.S. Fire Administration estimates that there were 28,000 fires annually in vacant residences between 2006 and 2008, with half of these spreading to the rest of the building and 11 percent spreading to a nearby building. The organization also estimates that 37 percent of these fires were intentionally set and that 45 deaths, 225 injuries, and $900 million in property damage result from these fires each year.24 Because vacancies are so closely associated with arson, vandalism, and other crimes, local ordinances routinely label vacant or abandoned properties as a threat to the health and welfare of the community.25

Local governments bear the cost of maintaining, administering, and demolishing vacant and abandoned properties as well as servicing them with police and fire protection and public infrastructure. One study calculated that the city of Philadelphia spends more than $20 million annually to maintain some 40,000 vacant properties, which cost a conservatively estimated $5 million per year in lost tax revenue to the city and school district.26 In their 2005 Chicago study, Apgar, Duda, and Nawrocki estimate direct municipal costs ranging from $430 for a foreclosed and vacated property sold at auction to $34,199 for a vacant property destroyed by fire, based on varying durations of vacancy, remediation efforts, and other circumstances such as crime.27 Doors and windows must be secured and often covered with plywood, lawns cut, and trash removed. Maintenance costs vary according to the property’s location and condition. For example, Chicago officials estimated costs of $875,000 to board up or secure 627 properties in 2010, whereas Detroit officials estimated costs of $1.4 million to do the same for 6,000 properties over a period of nearly a year and a half. Lawn mowing costs can add up quickly, as in the case of the $25 spent on each of Detroit’s 45,000 city-owned lots and properties.28 A 2009 study from Baltimore concluded that each vacant property on a block increased annual police and fire expenditures by $1,472.29. According to a study of vacant and abandoned properties in Oklahoma City, commercial properties disproportionately affect these public safety costs. Although commercial properties make up only 3 percent of Oklahoma City’s vacancies, they account for approximately 40 percent of all police and fire calls.30

Demolition costs can vary widely based on several factors, including whether the home is attached to occupied residences, such as a Baltimore row house that can cost $40,000 to demolish, or whether it contains asbestos or lead-based paint. GAO states that demolition typically costs between $4,800 and $7,000 per property.31Municipalities also incur administrative costs as they search for owners, enforce codes, and oversee foreclosures, although they may recover some of these costs through fines or fees if an owner can be identified and compelled to pay. Vacancies also reduce local government revenues directly, because owners may walk away from their tax obligations, and indirectly, because of their impact on nearby property values and tax assessments. Although in some instances cities can recover this lost revenue through tax lien sales, in others property ownership reverts to the city, which has no viable option other than demolition.32

Responding to Vacant and Abandoned Properties

Sources: 1965 to 1999 data from “Table 7. Annual Estimates of the Housing Inventory: 1965 to Present,” and 2000 to 2010 data from “Table 7a. Annual Estimates of the Housing Inventory.” U.S. Census Bureau. 2012. “Housing Vacancies and Homeownership: Historical Tables,” Current Population Survey/Housing Vacancy Survey. See sources for additional explanatory notes. www.census.gov/housing/hvs/data/histtabs.html. Accessed 6 February 2014.Because of the mounting costs and difficulties that vacant and abandoned properties place on communities, government, nonprofit, and community stakeholders are taking measures to stem and even reverse the tide of foreclosure, vacancy, and abandonment. In some cases, the scale of the problem — and the data infrastructure, code enforcement staff, expertise, and funding required to tackle it — overwhelms the capacity of local governments to manage it.33 A significant challenge for most jurisdictions is to identify the number, location, and ownership of vacant properties.34 Information regarding possible vacancies is often spread among several agencies, and records of ownership or responsibility for a property can be murky, dispersed among occupants, investors, servicers, and lenders. Despite these difficulties, communities need recent and reliable data to understand the problems they face, inform decisionmaking and policy, and tailor responses to the varying conditions and characteristics of the cities, neighborhoods, and properties in question.35 To help local officials track problem properties, many jurisdictions have enacted vacant property registration ordinances that require owners to register their property and, typically, pay a fee.36Fees that escalate the longer a property remains vacant can create a disincentive for owners to mothball properties, encouraging them to return these properties to productive use; in addition, revenue from these fees offsets the costs associated with vacant properties.37

The Reinvestment Fund and the National Neighborhood Indicators Partnership have been critical resources for localities developing data tools and systems to track and address their vacant properties. In the city of Syracuse, New York, an IBM Smarter Cities team developed a forecasting model to help identify neighborhoods and properties at risk of vacancy-related problems and those in which an intervention would have the greatest impact. As the researchers put it, “The city’s goal is to move from decision-making based on ‘educated anecdotes’ and reactive strategies aimed at the most urgent need, to policy development based on informed, holistic insight, and proactive interventions that prevent and reverse decline,”38 (see “Targeting Strategies for Neighborhood Development”).

As local officials learn of potential vacant and abandoned properties through registration, neighbor complaints, visual surveys, property tax delinquency, or other means, they typically turn first to code enforcement and tax liens to make owners take responsibility for the property and return it to productive use. Vacant and abandoned properties can quickly fall into enough disrepair that they no longer comply with local building codes. Code enforcement officials, who are empowered to secure properties that pose a threat to public health, safety, and welfare, can then issue citations and levy fines on problem properties.39 Successful early intervention is the best course of action because deterioration compounds quickly over time. One of the greatest obstacles to timely and effective code enforcement, according to Joseph Schilling, director of the Metropolitan Institute at Virginia Tech, is tracking down and holding responsible the owners and servicers of loans in default.40 Real estate owned (REO) properties pose special challenges. Mortgage servicers, which are usually national or international companies, must contend with the local laws and codes that apply to a given property. When officials can identify the property owners and hold them responsible, they can ensure that code violations are rectified and mitigate the negative impact of the property. If the owners are not responsive, local governments can take control of the property and pursue the appropriate course: either rehabilitation or demolition and reuse.

Although neglected upkeep may be the most visible sign of vacancy (and one that is likely to result in a code violation), “property tax delinquency,” Alexander and Powell find, “is the most significant common denominator among vacant and abandoned properties.”41 When an owner stops paying property taxes, local governments initiate a tax-foreclosure process by placing a tax lien on the property. The lien is intended both to recover taxes owed and to prompt the owner to take responsibility for the property. Owners typically have the opportunity to pay off the lien, but the property reverts to the municipality if the owner has walked away from it. Both lost property tax revenues and reverted properties can pose problems for local governments, although the latter can also present an opportunity to exert some control over reuse of the property if the municipality is prepared to do so, such as through a land bank.

When a local government takes ownership of a property, it typically will attempt to transfer responsibility to a new owner as quickly as possible through the sale of either tax liens or the properties themselves. These processes, which can vary in form, must balance the rights of property owners with the public’s interest in promptly moving properties into responsible ownership and productive use. Tax liens and tax-foreclosed properties can be auctioned, sold in bulk, or, where legal, transferred to land banks, community development corporations (CDCs), or other nonprofits. In a study of tax-foreclosure practices in Flint and Detroit, Dewar finds that expedited property auctions, which require full payment on the day of the auction and do not give bidders an opportunity to assess the quality of the property beforehand, favor investors and speculators. These sales provide municipalities with immediate revenue, but they ultimately result in continuing disinvestment and recurring foreclosures.42 Similarly, laws that require municipalities to sell tax-foreclosed properties to the highest bidder favor speculators over other types of bidders.43Speculative investment in vacant and abandoned properties is not necessarily bad for neighborhood stability; these investors may well be responsible property owners. Dewar argues, however, that more deliberative processes could result in more property being taken over by owner occupants, neighbors, land banks, and nonprofits.44 Among the tools available to local governments to discourage irresponsible investors are strict code enforcement; rental registration and licensing; a rental conversion fee imposed when an owner-occupied property becomes a rental; and a requirement that all liens, taxes, and code violations be resolved before any transfer of property.45

Matching Strategies to Market Conditions

Code enforcement and tax foreclosure can result in owners taking responsibility for or selling properties, public ownership of vacant properties, or public sale of properties to new owners. Local market conditions will govern the possible reuses of these properties. Governments and nonprofits are using data tools to create neighborhood typologies based primarily on market conditions to guide reuse strategies. In stronger markets, policymakers and community organizations attempt to prevent vacancies in the first place or keep them from spreading, get responsible owners and occupants into vacant properties as quickly as possible, and try to stabilize property values and reverse decline. An emerging trend among these stakeholders is to target resources in stronger neighborhoods that are at risk but are not yet distressed.46 In other cases, resources have been concentrated in low-income target areas to reach the critical mass needed to sustain private investment.47 In such distressed neighborhoods, markets may be too weak to facilitate the reoccupancy of vacant properties. In shrinking cities, large-scale demolition and repurposing are needed to reduce the supply of housing to match demand as well as to deal with properties that cannot be rehabilitated cost effectively for market sale or rental. (For more detail on the methodologies and applications of such efforts, see “Targeting Strategies for Neighborhood Development.”)

Strategies for Stronger Markets. Stronger markets offer the possibility of keeping owner occupants in homes at risk of becoming vacant or quickly reoccupying homes that have already become vacant. Foreclosure prevention programs, rehabilitation for sale, or scattered-site rental housing are among the stronger market strategies that promise to reduce the inventory of vacant homes. Neighborhood marketing and commercial revitalization strategies can help these neighborhoods retain and attract residents by stimulating the demand necessary to reoccupy vacant homes. Some severely dilapidated vacant properties in these neighborhoods might still require demolition, but these typically would be single lots, which would provide opportunities for small-scale reuse such as side-lot adoption or community gardens.

Because foreclosures are a major cause of vacancy in stronger markets, limiting them could go a long way toward stabilizing these neighborhoods. “Not all distressed borrowers can avoid losing their homes,” explains law professor and financial services expert Patricia A. McCoy, “but in appropriate cases — where modifications can increase investors’ return compared to foreclosure and the borrowers can afford the new payments — loan modifications can be a win-win for all.”48 Loan modification and refinancing programs, augmented by foreclosure counseling, aim to keep owner occupants in their homes. Major initiatives in foreclosure prevention include two federal programs: the Home Affordable Modification Program (HAMP) and the National Foreclosure Mitigation Counseling program (NFMC). HAMP has processed more than 1.2 million permanent loan modifications since 2009.49 HAMP participants have high rates of redefault, however, reaching 46 percent in 2013 for modifications initiated in 2009.50 A 2012 assessment of HAMP found that although the program led to a modest reduction in the rate of foreclosures, it reached only about a third of eligible households and had an adverse effect on loan renegotiations outside of the program.51 Mayer et al. find better results for NFMC, concluding that the program improved loan quality for participants, reducing monthly payments by 7.8 percent.52 By keeping owner-occupants in their homes, foreclosure prevention programs can avoid many of the problems such as code violations (the visible signs of neglect) that arise once a property becomes vacant.

In partnership with community-based Operation Better Block’s Jr. Green Corps, Pittsburgh nonprofit GTECH Strategies engaged local youth to green this vacant lot in the Homewood neighborhood.
Photo courtesy: GTECH StrategiesVacant properties may require rehabilitation before they can be reoccupied. Healthy markets may offer private investors sufficient economic incentives to purchase, rehabilitate, and resell formerly vacant properties. In other cases, public subsidy or a nonprofit’s intervention may be able to turn a vacant home into an owner-occupied one. Although owner occupancy might be the most desirable reuse of foreclosed and vacated properties, investor activity, through both market sale and tax-foreclosure auctions, has opened up scattered-site rental of single-family homes as one way of dealing with still-habitable residences located in neighborhoods with sufficient rental demand. Danilo Pelletiere, former research director of the National Low Income Housing Coalition and current HUD economist, suggests that “the new and returning households that are needed to reduce vacancy and stabilize neighborhoods are most likely to be renters, whether by choice or from necessity, a trend that is already observable.”53 CDCs would also likely have an interest in acquiring tax-foreclosed properties and operating them as rentals, both to increase the stock of affordable housing and to stabilize the neighborhoods in which they have already invested. CDCs are likely to face significant challenges, however, in managing scattered-site rental properties, which by one estimate cost 25 to 30 percent more to manage compared with multifamily properties.54 “First look” programs allow nonprofits or a particular type of buyer, such as neighbors, to bid on REO or tax-foreclosed properties before other investors do. The National First Look Program gives Neighborhood Stabilization Program grantees the opportunity to acquire properties owned by Fannie Mae and Freddie Mac before they are offered to the highest bidder.55 In some instances, lenders or mortgage servicers may agree to rent to the former owners of foreclosed homes, offering some of the same benefits to the community as foreclosure prevention.56

Strategies to reoccupy vacant homes, either by owners or renters, depend on a neighborhood’s ability to retain and attract residents. Efforts to market a neighborhood can help stabilize housing markets and reduce vacancy and abandonment. The Healthy Neighborhoods Initiative of the Greater Milwaukee Foundation, for example, conducted tours of neighborhoods that it had targeted for image promotion, resulting in the sale of 22 vacant homes to first-time homebuyers.57 NeighborWorks America, a national housing and community development nonprofit, has recognized neighborhood marketing and branding as a strategy for strengthening housing demand and attracting private investment. In 2012, the organization worked intensively with 16 neighborhood organizations to aggressively market neighborhoods.58

Residential stabilization and revitalization would be aided and complemented by commercial revitalization in areas with markets strong enough to support it. Vibrant residential neighborhoods can better support neighborhood retail, and abundant retail options, in turn, will help attract and retain residents. “Rebuilding neighborhood retail should be planned comprehensively as an integral piece of the larger community that surrounds it, and it should be tailored to the realities of the area,” write Beyard, Pawlukiewicz, and Bond.59 They argue that public-private partnerships with a long-term commitment to reinvestment are necessary to rebuild neighborhood retail.60

The community of McAllen, Texas reclaimed this abandoned big box store as a new home for its main public library.
Photo courtesy: McAllen Public LibraryEven in neighborhoods with relatively healthy housing markets, however, selective demolition may be necessary when vacant properties are severely dilapidated. When the cost of rehabilitating a vacant or abandoned property exceeds its expected market value after rehabilitation, market-based solutions would be unlikely to result in remediation. Although a vacant lot typically has less adverse impact on surrounding properties than a vacant or abandoned structure, demolition programs could also plan for what to do with the vacant lot that remains once the structure is removed, such as turning the lot into a landscaped pedestrian pathway or bike trail, a park, a parking lot, or a community garden.61Research shows that the Pennsylvania Horticultural Society’s Philadelphia LandCare program, which clears and landscapes vacant lots, has improved residents’ perception of safety, reduced certain gun crimes, and boosted property values.62 Vacant properties that have been reused as community gardens, according to one study, have a positive effect on nearby property values up to 1,000 feet from the garden. The researchers find that these gardens can have the greatest impact in high-poverty neighborhoods.63

Strategies for Weak Markets and Shrinking Cities. In neighborhoods where housing markets are weak, where supply far exceeds demand, and in cities that are losing population, many of the strategies discussed above are unlikely to result in owner-occupied use of once-vacant properties. As Mallach and Brachman advise, “Cities such as Youngstown or Detroit, where 30 percent of their land areas are vacant — and which continue to lose population — need to think about land reutilization in fundamentally different ways than a city in which 10 percent or less of its land area is vacant, or where the city’s population appears to be stabilizing, such as Milwaukee or Newark.”64 Even cities with overall population stability or growth may still have neighborhoods or groups of neighborhoods in which markets cannot support revitalization strategies such as scattered-site rental housing or neighborhood marketing.

Cities that have lost half or more of their peak populations have a far larger housing supply, transportation and utilities infrastructure, and service area than they have people to use and pay for them. For decades, planners and politicians alike have attempted to grow their cities out of such problems. Increasingly, however, they are looking toward “rightsizing” or “smart decline” as a way to adjust city services and housing stock to suit smaller populations. Youngstown, Ohio and Flint, Michigan are two cities in which planners have explicitly acknowledged the need to adjust to declining populations.65 Rightsized cities will more efficiently allocate limited resources if, for example, residents are concentrated in denser areas, allowing the city to shunt infrastructure currently serving few residents. But, says Brent D. Ryan, professor of urban design and public policy at the Massachusetts Institute of Technology, rightsizing is a controversial, “yet-unproved process” that raises issues of equity, among others.66 City officials cannot force residents to relocate to denser areas, and creating incentives to encourage residents to leave their homes can be difficult. Even cities with rampant vacancy have residents scattered amidst otherwise empty blocks.67

The interventions that may be necessary to address vacant and abandoned properties in neighborhoods with weak markets and in shrinking cities include large-scale demolition and repurposing.68 Cities such as Buffalo, which in the 2000s conducted a “5 in 5” campaign to demolish 5,000 properties in 5 years, can barely keep up with the backlog of thousands of vacant properties.69 As noted above, demolition can be extremely costly. To aid state and local efforts to fund large-scale demolition, the U.S. Department of the Treasury has authorized the use of the Hardest Hit Fund (part of the Troubled Asset Relief Program) for demolition in 18 eligible states and the District of Columbia, although no funds had been expended for that purpose as of June 30, 2013.70 In Ohio, the attorney general chose to designate up to $75 million of the state’s share of the National Mortgage Settlement to reimburse counties for demolition. As of February 4, 2014, Ohio counties had expended over $65 million to demolish 8,390 units, with approximately $41 million of that total reimbursed by the attorney general.71 Although these funding sources are vital for communities struggling to keep up with demolition demands, they are not ongoing, so alternatives will be needed if large numbers of properties continue to be slated for demolition.

Large swaths of vacant land require large-scale repurposing strategies such as urban agriculture, woodlands, or parks and recreation facilities.72 Such green reuses promise the added benefit of improving stormwater management. Heavy rainstorms frequently overwhelm the combined sewer and stormwater infrastructure of many older cities, forcing them to dump untreated sewage mixed with stormwater into waterways at an estimated rate of 850 billion gallons annually.73 Diverting rainwater to these 13 repurposed properties not only addresses this significant environmental problem but also reduces air pollution and surface area temperatures, lowers municipal stormwater management costs, and enhances neighborhood aesthetics.74 Land banks can be especially effective in banking contiguous lots for larger repurposing projects (see “Countywide Lank Banks Tackle Vacancy and Blight”). Brownfields, which are common in former industrial centers, present opportunities for large-scale repurposing as open green or recreational spaces, community gardens or farms, or brightfields — sites for generating wind or solar power.75 Would-be developers of brownfields must consider the costs of site assessment, remediation, and liability against profit expectations, which can be limited by weak markets and other macroeconomic factors.76 Creative, organic, and sometimes temporary uses of vacant land emerge when neighbors and other residents act ahead of city governments, land banks, or developers (see “Temporary Urbanism: Alternative Approaches to Vacant Land”). In Brightmoor, a Detroit neighborhood with a high vacancy rate and a population of roughly 1,700, residents purchased or took responsibility for nearly 100 nearby vacant lots, consolidating them with their own property for their own use. Sometimes such organic use is illegal, as in the case of scavenging or squatting.77

Turning Liabilities Into Assets

Vacant and abandoned properties present daunting challenges to communities nationwide. Evidence shows that vacant and abandoned properties drag down local economies, impede population growth, depress property values, increase crime, and impose heavy cost burdens on local governments.

An example of successful brownfield redevelopment, the former Pfister & Vogel leather tannery (left) is now the site of The North End apartments along the Milwaukee River in downtown Milwaukee, Wisconsin (right).
Photo courtesy: Mandel GroupCities and communities are increasingly using data to inform the targeted deployment of limited resources and are addressing problem properties with a range of strategies that fit local market and demographic conditions. “What you have to be able to do,” says Alan Mallach of the Brookings Institution and the Center for Community Progress, “is to come up with ways to reuse the lots so that they will hopefully enhance, and at a minimum not detract from, the attractiveness of the neighborhood to homebuyers, investors, and rehabbers.”78 In some cases, such measures might spur redevelopment and economic revitalization. In other cases, it might be more appropriate to focus on managing decline in ways that improve the quality of life for those who remain. “Instead of cities focusing so much on growing, they should really focus on making themselves attractive and having the market respond to that,” says Justin Hollander, associate professor of urban and environmental policy and planning at Tufts University. “If a place becomes more desirable, it likely will lead to further growth in the future.”79

More research will be needed to empower policymakers, investors, and citizens to make evidence-based decisions on difficult choices, such as when to rehabilitate and when to demolish, whether to have a judicial or administrative foreclosure process, whether to convert a brownfield to an affordable housing development or a green space, or whether a particular area should pursue smart growth or smart decline. Innovative design techniques promise to expand the range of options for reuse. As practitioners experiment with creative new uses of formerly vacant and abandoned properties, researchers will need to evaluate strategies and determine which work and which do not, which are most cost effective, and which are most sustainable. More research will help decisionmakers become better equipped to turn problem properties into assets that will stabilize and revitalize neighborhoods and improve residents’ quality of life.

Read it from the source.

In 2010, the Beach Street corridor of Flint, Mich., was pockmarked with 16 trash-filled vacant lots. A year later, this two-acre area a mile south of downtown Flint had been consolidated into Flint River Farm, the city’s largest urban farm, replete with a passive solar hoop house for year-round growing, in what had previously been a blighted stretch of food desert. The two women who farm this land own three of the lots and lease the others from the Genesee County Land Bank.

Neighbors have welcomed the endeavor—for its beauty, for the valuable food choices it offers the community, for the job prospects it has created, and for lending hope to residents who are toughing it out in one of the nation’s most famous Rust Belt cities.

photo by Ann Morrow

In the decade since Genesee County first took steps to create its nonprofit land bank, a growing number of municipalities, counties, and states have begun to embrace land banks as a tool to systematically address vacant and abandoned properties. A land bank is an entity, public or nonprofit, with the authority to acquire vacant or distressed property, clear title and taxes, and assemble it, redeploy it, or maintain it in strategic ways, rather than based on the short-term highest bid.

Land banks offer public agencies a number of robust options to undercut dynamics in the real-estate market that often foment, rather than avert, urban blight. Properties that are too deteriorated, low-value, or constrained by title problems to be feasibly preserved or rehabbed either by the market, partnerships, or even subsidized nonprofit programs, can often be turned into assets, or at least less actively negative influences, by the intervention of a land bank.

Interrupting Speculation

Typically, abandoned properties are forced upon the open market through tax foreclosure sales, where speculators concerned with quick profits rather than long-term community viability flip them or simply let them lie fallow. Local authorities have little say in how these properties are repurposed, leaving significant percentages unoccupied, unused, and forgotten. County treasurers are typically legally compelled to put these properties’ tax liens up for sale. Where clear title to abandoned properties does not exist—often the case with tax-sale properties—public officials find their hands tied when trying to move properties back into productive use. And yet, taxpayers and their public agencies continue to shoulder the financial and social costs of these blighted properties—crime, deterioration, falling property values, and a foundering tax base.

Land banks change this dynamic. They have the legal authority to efficiently acquire, hold, manage, and develop tax-foreclosed property. They can clear liens and title problems. They can systematically assemble multiple lots and properties for productive reuse, where before a developer might have struggled to stitch together multiple parcels of land to construct senior housing or commercial space, or local governments may have strained to assemble multiple lots for a new school or parkland. They can sell properties on the open market, or to targeted purchasers such as adjacent homeowners or nonprofits. They can hold other properties off the market until the time is right, renting them out, or demolishing structures and greening lots to reduce harmful effects in the meantime.

With these powers, land banks give local governments the capacity to have some say in the path that development and reuse takes and think about redevelopment efforts beyond a single property, at the level of a block, a neighborhood, and a region.

Above all else, public land banks democratize development decisions, giving local residents and the business community the capacity to have a say in ensuring that blighted property is not just identified and regulated, but responsibly remediated to the greater good of the community. Where before, neighborhoods struggled with the consequences of neglected properties, land banks allow cities and counties to take responsibility not just for the economic consequences of blighted land, but for the process of ensuring that this land is put in the hands of those committed to responsibly redeveloping that property.

All land banks are not created equal, however. Successful land bank programs rely on four critical elements:

• a connection to the tax foreclosure process in the community as an alternative to the auction process;

• formation around the largest, most diverse market possible, typically at the county or regional level;

• decisions that result in transparent, accessible documentation; and

• a commitment to be engaged with the community and to encourage ongoing interaction with residents.

The Flint Model

Flint pioneered the modern version of the public land bank in 2002. Within a few years, land bank intervention caused surrounding property values to be restored by more than $100 million, according to a study by Nigel Griswold and Patricia Norris of the MSU Land Policy Institute.

As a first step in formally launching the Genesee County Land Bank, elected officials first had to introduce legislation that reformed the state’s obsolete foreclosure system, establishing a direct connection between foreclosed properties and the land bank, which became the primary mechanism for managing and repurposing thousands of properties.

Then, the land bank and county government created a self-financing mechanism, in which the county treasurer’s office issues short-term bonds to fund unpaid taxes, then collects the taxes to repay the bonds, effectively acting as a benevolent tax lien purchaser. That critical step ensured that vacant, abandoned properties no longer posed an investment opportunity for speculative investors, and the county was able to earn a return on its investment that could be distributed back into rebuilding its tax base.

Genesee County understood that development cannot necessarily be simply left to its own devices, particularly when a city and a region are confronting systemic dynamics like deindustrialization. In practical terms in Flint, that has meant using the land bank as a mechanism to demolish more than 1,200 blighted properties and sell thousands of others–returning millions of dollars to the property rolls. It gave Flint the power to create hundreds of units of affordable housing through sales and rentals to carefully selected buyers. While challenges still abound, the data clearly show that the land bank has played a critical role in helping to stabilize neighborhoods, deter blight, and give local residents not just hope but real practical solutions.

Embracing the Model

The Genesee County Land Bank has become a model for other programs in Michigan and across the country. Today, 37 land banks operate in Michigan–just under half of the land banks in the United States. Pennsylvania, Michigan, Missouri, Ohio, Kentucky and Georgia all have specific legislation authorizing public land banks, and about a dozen other states have development authority statutes or similar mechanisms in place that can function to some degree as land banks.

One exciting example is the Cuyahoga County Land Bank, covering the Cleveland metro area, which has been in place since 2009. In the last two years, the land bank has acquired more than 1,200 abandoned properties and crafted groundbreaking partnerships with HUD, Fannie Mae, and leading banks to take vacant land out of the downward spiral of speculation, blight and disinvestment by having low-value, obsolete properties not remain on the market or in REO status, but transferred to the land bank, with a donation to cover demolition costs. Those relationships have begun to have a profound effect in slowing the volume of what the land bank describes as “speculative trafficking in low-value, abandoned properties in Cuyahoga County.”

Cuyahoga County modeled its land bank on Genesee County’s innovations, integrating sweeping reforms in the tax foreclosure process within a leverageable funding stream. The land bank funds its operations each year with roughly $6 to $7 million dollars it collects in penalties and fees from delinquent property tax bills—dollars that previously would have gone into the coffers of tax-sale speculators.

In Kalamazoo, Mich., local officials have used their county land bank (created in 2009) for blight removal and corridor redevelopment, to foster new construction of commercial areas, to support community garden and beautification programs, and to assemble and reposition property across the city. Land banks aren’t limited to acquiring tax foreclosures. The Kalamazoo County Land Bank also has entered into purchase agreements on bank-foreclosed properties near other targeted investments, allowing the city to craft a block-by-block approach that maximizes the strategic impact of its redevelopment efforts.

The Community Role

For land banks to maximize their positive impact, it is critical for them to earn the trust of residents in distressed communities, who are often suspicious of government’s role in managing blight or being involved in real estate at all. Land bank authorities can earn the trust of community members and increase the level of community participation in the redevelopment process by providing responsible oversight and a commitment to transparency.

Residents of local communities and the business endeavors that employ them share a commitment to the long-term viability of their neighborhoods and the larger region. When these core constituencies—residents, the local business community, nonprofit partners and engaged developers—come to see land banks as partners in responsible, comprehensive redevelopment goals, land banks can bring real scale and long-term benefits to distressed neighborhoods and communities seeking a path forward to long-term economic and social well-being.

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