Tool 2: Motivating Owners to Reuse Properties
While the purpose of a vacant property registration ordinance is to enable the city to track property owners, and to encourage minimum standards of maintenance for vacant properties, a city may want to craft a strategy – either within the VPRO or separately – to more actively encourage owners to restore their properties to productive use. This can be done through fee and tax structures or by creating the threat of public action. These strategies rarely work except where it makes economic sense for the owner to restore the property.
Cities may set high fees in their VPROs in order to motivate owners to rehabilitate their properties. Vacant property registration fees in California, for example, range from $0 to over $600. The effect of the fee can be enhanced by (1) waiving or deferring the fee for buildings scheduled for rehabilitation; and/or (2) rebating fees paid for the year (or two years) when a vacant building is restored and put back to use. Some cities have set graduated fee schedules: with every year that the building remains vacant and must be re-registered, the fee goes up. This practice was initiated in Wilmington, Delaware.
In addition to making sure that a fee can be legally justified on the basis of the city’s costs, cities should evaluate the potential consequences of a high or escalating fee. Under adverse economic conditions, high fees could lead some owners who are paying taxes and at least minimally maintaining their properties to abandon them. Under these circumstances, the municipality should be willing to take responsibility for these properties.
A variation on this approach, where permitted by law, is to establish differential property tax rates for vacant properties. The District of Columbia taxes occupied residential property at $0.85 per $100 value, but vacant properties at $5 per $100 and blighted property at $10 per $100. They are part of a larger strategy, which includes exemptions from the higher rates under certain circumstances. These punitive tax rates may be effective in many parts of Washington DC, where the housing market is fairly healthy. In weaker market cities, however, they risk increasing tax delinquency rather than motivating property improvement.
Many owners would rather improve their properties themselves, rather than risk having the city or a non-profit do it and bill them for the cost, or risk losing the property. Under New Jersey law, cities can create abandoned property lists. Once they have done so, the law permits the city to take properties on the list through spot blight eminent domain, a powerful and speedy procedure under New Jersey law. In Newark, where they have used this process, they find that roughly one-third of all of the owners of vacant, abandoned properties rehabilitate them and put them back into use rather than risk having the city take the property.
When Baltimore initiated a concentrated vacant property receivership program in the Patterson Park neighborhood, they found that roughly half of the owners voluntarily improved their properties, in order to avoid the possibility of a receiver being appointed by the court for that purpose.
The City of San Diego requires the owners of vacant, boarded structures to file a Statement of Intent with the city, including “a plan and time line for the lawful occupancy, rehabilitation or demolition of the boarded structure.” Failure to carry out the terms of the statement of intent can result in significant financial penalties.