Who owns Baltimore's vacant houses and how to fix them up?

The first steps of a new $3 billion effort to acquire and repurpose thousands of vacant homes across Baltimore have begun with a state pledge and a package of bonds being considered by city lawmakers aiming to undo blight. (Baltimore SUN)

How removing thousands of vacants kept the total number of vacants the same

Baltimore's vacant rowhouses have vexed mayors for all the decades Baltimore has been a shrinking city. Their programs to eliminate vacant houses had colorful names: Mayor Martin O'Malley inaugurated his Project 5000 (or P5k) in 2002 and in 2010 Stephany Rawlings Blake created Vacants to Value (V2V). The SUN reported that "it took [O'Malley] two years to clear title to the first 2,250 properties. It took seven months to clear the next 33." Vacants to Value was adopted by Mayor Pugh as well ran on all the way to the current administration. The City website described the project this way:

Vacant lots and buildings in Sandtown (Photo: Philipsen)

Launched in November of 2010, Mayor Rawlings-Blake’s Vacants to Value initiative seeks to encourage reinvestment in neighborhoods impacted by blighted properties by strengthening code enforcement, promoting rehabilitation; streamlining the sale of vacant city property, and, by providing new, targeted incentives for homebuyers and developers who invest in vacant homes. 

Back then the number of vacant houses was estimated to be 12,500. Not that these programs didn't work at all, but for every rowhouse that was repurposed, one or more new vacant ones popped up due to continue
d deeply depressed property values in large swaths of the city combined with continued population shrinkage. As the University of Baltimore showed in various studies, even one or two vacant rowhouses can create instability and ruin housing values and livability on an entire block. It would stand to reason, then, to focus on stabilizing neighborhoods with those individual vacant houses, the so called middle housing neighborhoods. However, none of the programs used such an approach, instead, all aim for the biggest total numbers of eliminating vacants. 

Vacant houses are not only destabilizing neighborhoods, they also represent a huge amount of lost revenue for the City. In a 2022 report the Abell Foundation estimated these staggering numbers:

• Vacants cost the city at least $100 million in lost revenue annually. The depressed value of vacant properties creates a shortfall of potential property tax revenue of approximately $50 million each year, with an additional $22 million loss attributed to the “contagion effect” on the value of nearby properties. The city could also benefit from at least $24 million in additional income tax revenue and over $12 million in additional water and sewer revenue if 15,000 vacant properties were occupied.

  

  The infamous "black butterfly" is clearly 
  visible on this city map of vacants

The number would be even higher if  one adds in the over 9,000 vacant land parcels where rowhouses once stood. The Abell report also mentions indirect costs:

The true cost of disinvestment and decline in the physical attributes of a city is far more than direct spending on maintenance and lost tax revenue, but these are the measurable aspects of vacancy. The broader costs to communities in terms of lost residents, public health impacts, and heightened crime are less measurable but very real. In Baltimore, these costs are also highly inequitable as they are largely borne by majority Black neighborhoods and Black homeowners. The economic value to the city of solving this problem is vast.

The State has been supportive in the efforts of reducing vacants as well. Even Governor Hogan, who had a rocky relationship with Baltimore City, sent a lot of money for Baltimore rowhouse blight removal under the name Project CORE (Creating Opportunities for Renewal and Enterprise). By mid 2021 CORE had spent some $123 million and eliminated 5,000 blighted units, mostly through demolition. In fact, there was so much demolition that some parts of West Baltimore today look more like green pastures (minus the cows) than an inner city neighborhood. Even before Mayor Scott the city tried various ways of generating funds for blight removal. Mayor Pugh tried a Neighborhood Reinvestment Fund which is still in place and reported a vacancy reduction of 40% in targeted clusters. 

In spite of all that, the number of vacant rowhouses remain stubbornly high and the revitalization of the most disinvested neighborhoods elusive. The number of vacant rowhouses today is given as 13,000, less than a tenth of which are reportedly owned by the City.  Overall, 7.2% of all residential properties were vacant and abandoned in 2022, 7.9% in 2010 and 8.2% in 2015nearly constant for over a decade, despite significant efforts to rehabilitate or demolish. .Equally constant is the magic number of 5000 units the politicians aim to remove with their programs; all the way to Governor Moore's new program.

City map of investment target areas (DHCD Dashboard)

The latest State initiative 

Now Governor Moore, his housing Secretary Day and Mayor Scott are ramping up a new effort with a combined $3bn State and City funds over 15 years that once again aims to bring 5000 unit into a productive future, including renaming Project CORE into the the Baltimore Vacants Reinvestment Initiative.  

“Right now, Baltimore has roughly 13,000 vacant and abandoned homes or structures and has more than 20,000 vacant lots. If we want to drive investment and we want to drive growth, we need to address the vacancy problem in Baltimore.” (Governor Moore)

The Baltimore SUN summarized the numbers: "Wes Moore set a goal of transitioning at least 5,000 vacant properties into homeownership or other positive outcomes during the next five years. Legislation passed in April pledges $50 million per year to the initiative, while state housing Secretary Jacob Day said Sunday that the state will fund an additional $27 million per year through a Baltimore regional neighborhoods initiative." 

The Mayor's neighborhoods TIF plan

Scott's overall housing plan has a few specific innovations, one of them a non contiguous tax increment financing district (TIF) that would leverage future tax revenues to finance immediate investments in neighborhoods. Two bills creating such as district and issuing bonds have been introduced. The idea is to generate $150 million over 15 years from TIF bonds. According to city hall, this is the first such TIF nationwide. State and TIF funds together will eventually add up to the $3 bn figure that has been batted around. 

At times it  seems as if anybody but the residents of Baltimore own the city. To date TIFs were mostly issued on behalf of corporations or developers who also routinely get large tax credits or concessions by swaying the Mayor, the entire City Council or the Board of Estimates, or all three. And then there are out of town private equity funds.

Higher taxes for vacants to suppress speculation

The Baltimore vacant house problem has a flavor that is not well known. The bad taste comes from speculative investors buying up cheap real estate and then flipping it to unsuspecting foreign buyers or just sitting on it doing nothing. Either way, the buildings don't get really improved. Many see this as a key reason why there are so many vacants, including those with aborted construction.

5 steps of intervention
(ReBuild Metro)

This year the Baltimore City Council finally took up the issue of slumlords and do-nothing speculators by proposing to tax vacant property at higher rates than occupied and used property. A bill was recently introduced and has the mayor's support and is co-sponsored by the entire council.

Foreign or out of town investors who buy Baltimore houses at tax sales or on the real estate market only to either "flip" them again, sometimes on the same day at a much higher price to unsuspecting far away clients or just hold on to them without doing anything are, indeed, doing nothing to turn the city around even if investment in general should be welcome. The bill to punish slumlords who sit on vacant property without investing with the expectation of some future windfall in the context of all the other activities aiming to reduce the high number of vacant Baltimore rowhouses is certainly a useful tool.

The far away investments are also troublesome because they are often based on deception or outright fraud. Buyers have been promised income from rents of tenants that don't exist because the houses have stood vacant for so long they are uninhabitable. Sometimes buyers receive proceeds form actual rents yet have still no idea that the house they bought is by no means prime real estate, not near the water but in the middle of West Baltimore, possible on a block where it is the only occupied one. 

Investors hoping some day they lemons would be valuable lemonade share one idea with locals: The idea that Baltimore cannot remain forever a laggard in urban development, population growth and prosperity and that one day its excellent location will prevail and the real estate mantra of "location, location, location" will finally come true. But their inaction makes this vision ever more distant. 

Long-term thinking isn't usually a speculator's strategy and so many of those rowhouse hoarders  stopped operation and subsequently leaving their buyers of useless homes hanging with nothing or, at best, partially started some renovations.

In Baltimore’s Harlem Park neighborhood, for example, just 53 of the 464 homes sold since 2017—12 percent—were purchased by owner occupants. In 2022, one of every five homes sold in the neighborhood (19.2 percent) was purchased by an out-of-state business, and nearly half were bought by in-state corporations with multiple-property portfolios.
“You just saw this backfill of corporate ownership come into this neighborhood, and it’s going to take years to come back from that,” Allenby says. Where real estate investors once focused on flipping houses for a quick buck, they now see rental properties as a long-term moneymaker. “These houses are just gone, likely in perpetuity, from a homeownership perspective.” (Source)

On the scale it is occurring this behavior has a chilling effect on Baltimore's recovery. The Baltimore Banner devoted two stories on the phenomenon. 

How a small group of investors turned distressed Baltimore neighborhoods into profit centers.

The Abell study notes that about 25% of vacants are owned by corporations. While a reversal is urgently needed and higher taxes on vacant buildings can discourage speculation, it will not remedy the core problem that causes owners to walk away from their properties and let them sit vacant in the first place. The root problem is that the cost of renovation is higher than the value the house will have on the market, putting it "under water", a condition in which selling the house would not recover the investments made in it. In spite of the dreaded term of "gentrification",  discouraging speculation must be coupled with raising the value of all houses in a community until they are worth owning by systematically removing vacants block by block. This will also benefit existing homeowners and generate generational wealth. 

The solution?

There is no silver bullet to overcome the thicket of low market values from decades of racism, disinvestment, lack of services, liens for unpaid bills, and general neglect. The road to hell is paved with good intentions, and following this maxime unintended consequences line the path to revitalization. So do bad feelings. Communities lost faith, have no trust, fear gentrification and generally think that they are not heard and that whatever investments are not for them. 

Real time dashbord of Baltimore Housing (VBN stands for vacant 
building notice, the City's term for vacants)

Neither the City land-banking all the vacants nor complete reliance o private investment will solve the vacancy problem. Nor will large and stubborn investment in the vast areas of highest need (as the Enterprise Foundation tried) nor trickle investment as performed by many non-profits and community development corporations alone will work. 

The most successful undertakings seem to come from initiatives that Sean Closkey has spearheaded, first with Telesis and now with ReBuild Metro in Barclay and  Johnston Square. His comprehensive and neighborhood based approach can be summarized as being limited in scale, intensely local, relentlessly systematic, adjacent to strength, and equitably with the community. The ReBuild organization described the approach in detail in a 2023 report.

In summary: If the city can manage to get those new TIFs off the ground, if the State maintains its support funding, if the taxes on vacant properties succeed, and if the funds are used wisely, systematically and not in a scattershot manner, there could still be a chance to eventually revive the vast areas of disinvestment in West, Northwest and East Baltimore. 

Klaus Philipsen, FAIA

I have written many times about the problems and the potential solutions to the problem. 

• Can the State save blighted communities in the City with $700 million? (2016) Here
• Can demolition of vacants add value? here
• One way to have fewer vacant rowhouses here 
• Homesteading instead of flipping -The myth and reality of the Dollar House here