HUD: Vacant and Abandoned Properties: Turning Liabilities Into Assets
The Office of Policy Development and Research (PD&R), within the U.S. Department of Housing and Urban Development (HUD), released a policy update titled Vacant and Abandoned Properties: Turning Liabilities Into Assets.
Vacant and Abandoned Properties: Turning Liabilities Into Assets
Highlights
- 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.
Derelict 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
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
Please click here to view the update in its entirety.
About Safeguard
Safeguard Properties is the largest mortgage field services company in the U.S. Founded in 1990 by Robert Klein and based in Valley View, Ohio, the company inspects and maintains defaulted and foreclosed properties for mortgage servicers, lenders, and other financial institutions. Safeguard employs approximately 1,700 people, in addition to a network of thousands of contractors nationally. Website: www.safeguardproperties.com.
