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Financial Incentives Can Spur Interest in Abandoned Homes
Providing incentives for people to buy or rehabilitate properties in conditions they might not consider otherwise is among the many approaches that the nation’s mayors can pursue to restore deteriorating parts of their cities, according to a new publication, “Mayors’ Resource Guide on Vacant and Abandoned Properties,” by the U.S. Conference of Mayors Housing Task Force, the National Vacant Properties Campaign and the Fannie Mae Foundation.
“While abandoned properties are a problem, they also represent an opportunity for neighborhood revitalization and community redevelopment,” according to the publication. “By reusing abandoned properties strategically, cities and towns can improve neighborhoods, build new markets and enhance their quality of life.”
The publication notes that abandoned properties have become most common in Rustbelt cities such as Detroit and Buffalo, N.Y., but also plague small towns like Lima, Ohio and Waterloo, Iowa, and can even pose problems in such central cities of the Sunbelt as Houston or Las Vegas when older neighborhoods are left behind.
Preventing abandonment in the first place is the best strategy for grappling with the problem, the publication notes.
“The cost of keeping a property in use is often far less than the cost of restoring it to productive use,” the report says. “Moreover, the cost to the community of an abandoned property begins almost the moment that it is abandoned. While not all abandonment can be prevented, effective local actions — helping owners maintain their properties and using code enforcement, nuisance abatement and receivership when owners are unwilling to do so voluntarily — can significantly reduce the number of lost properties.”
When using incentives to help revitalize housing in downtrodden areas, the report notes that the incentives “should be targeted, calibrated to the strength of the neighborhood’s market and carefully aimed at those investments — particularly rehabilitation of vacant properties — that enhance neighborhoods and increase the value of surrounding properties, but where the cost of the improvement potentially exceeds current market value.”
The tax incentives can come in many different forms, ranging from tax abatements to credits to below-market interest rate loans. However, “it is critical not just to offer incentives but also to motivate buyers to buy and rehabilitate properties that they would not have bought and rehabilitated without the incentives.”
Cited as an example of a program that works, Richmond, Va.’s Urban Pioneer Incentive Program in the city’s Jackson-Ward neighborhood offers $35,000 matching loans to families who rehabilitate houses as owner-occupants. If the family is still in the house after seven years, the loan is forgiven.
“The city must create an environment in which those individuals will see the opportunity to rehabilitate these properties as a desirable personal choice,” the publication emphasizes.
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