Everything Must Go
Ambitious new city redevelopment scheme would renovate 1,500 houses in its first year, but for whom?
Published: November 17, 2010
Sometime in the next few weeks, if all goes as planned, a web site will appear listing all the vacant properties Baltimore City has for sale. It'll be "just like if you went to RE/MAX dot com," according to Ryan O'Doherty, Mayor Stephanie Rawlings-Blake's spokesperson. Or maybe better than RE/MAX. Along with photographs, prices, and maps, there will be estimated rehab costs and links to special financing. Selected small developers will be able to tap a $1 million revolving loan fund to finance renovations. City cops, teachers, and firefighters desiring to move into the formerly abandoned derelicts will be eligible for low-cost, city-backed $5,000 loans.
The city says it expects 1,500 of these properties to be renovated in the first year.
Called "Vacants to Value," the program, which Rawlings-Blake announced on Nov. 3, is the latest in a string of city government efforts to get its vacant properties into the hands of citizens and back onto the tax rolls. There was 2002's much-hyped Project 5000, under which Gov. Martin O'Malley (then mayor) pledged to take government ownership of at least 5,000 properties in two years, and exceeded that goal. There was Project SCOPE-Selling City-Owned Property Efficiently-the brainchild of the nonprofit Baltimore Efficiency and Economy Foundation and the Greater Baltimore Board of Realtors, which was supposed to get many more abandoned shells renovated in up-and-coming neighborhoods.
These and other development programs were near the center of O'Malley's agenda as mayor, but one measure of their success is told by a single statistic: 16,000. That is the number of abandoned buildings in Baltimore today, according to the city's Housing Department. It is 2,000 more vacants than a researcher estimated in 2000.
"I understand that the mayor recognizes this as a major issue facing her administration," says David Rudow, a lawyer with Adelberg Rudow Dorf and Hendler, LLC and co-chair of the SCOPE Task Force at the Baltimore Efficiency and Economy Foundation. With 16,000 houses still vacant after a decade of housing and redevelopment frenzy, "you have to step back and say, is what we're doing working? The obvious answer is no. . . . You have to try something new."
In its eight years so far, SCOPE has resulted in 130 completed renovations, Rudow says. In order to accomplish more than 10 times that many in the next year or two, Vacants to Value will try many new things-beginning with a $900 fine for absentee owners of slum properties. "The thinking is the owners, the speculators, are going to do a cost-benefit analysis," O'Doherty says. "They're gonna get these citations, and they have two choices-invest to get it up to code, or they can get rid of it, and it will go to someone who can."
According to a presentation about the program, the city expects to issue $1.5 million in fines the first year (that's 1,667 citations) and collect $750,000 of that amount.
The Vacants to Value initiative is, in a way, a restart of a city property disposition system that had stalled when the real estate bubble popped. There were no new SCOPE properties listed for about 12 months during 2007-`08, Rudow says, while the city stopped publishing requests for proposals from would-be developers of large tracts of land. Another city program, called the "rolling bid" system, slowed to a crawl as well.
Directed by Rawlings-Blake, Housing Commissioner Paul Graziano has reorganized several offices within his sprawling bureaucracy, firing about 20 people while hiring new people for newly created positions, O'Doherty says, such as "a director of marketing and community outreach" in charge of marketing these properties "just like a real estate agent would." The model is very different from SCOPE, which outsourced the marketing job to realtors and paid them about three times the usual sales commission.
Rudow says he is impressed by the city's new marketing person, Teresa Stephens, but he's leery of the strategy. "They say they are hiring real estate marketing professionals. Five people is a half million [dollars] a year with overhead," Rudow says. "I'd rather see them use brokers-a broker gets paid if and when he sells a property."
The new program will also auction many properties without setting a minimum bid price, according to City Council President Bernard C. "Jack" Young, who, with city Comptroller Joan Pratt, voted against the plan at the Nov. 2 Board of Estimates meeting. "If we have something of value, we need to receive fair value for it," Pratt said then, according to The Baltimore Sun's account.
Rudow says the auction process could complicate matters another way as well. The nonprofit Community Law Center checked SCOPE property buyers' backgrounds for signs of fraud and other bad behavior to try to prevent the common investor practice of sitting on slum properties without renovating them. "Auction sales can't be vetted," Rudow says.
O'Doherty says the old way of pricing derelict shells with appraisals was cumbersome. "So what happened was, we would spend a lot of money to figure out the value of something that wasn't worth much," he says. "Instead of focusing on the outcome . . . it was all about how much can we get for this property."
Vacants to Value is thinking bigger, and giving up some control is a part of that. The other part is integrating the various elements of the plan so that they don't work at cross-purposes. "All of the components are talking to each other, and play off each other, and it's all under one roof," O'Doherty says. "New people have been brought on board . . . it's just a big change."
Unlike SCOPE, which often required would-be buyers to show they could borrow more than $200,000 just to renovate a house, the new program seems geared toward rebuilding houses for working people, pricing the completed renovations at closer to $150,000 than the $300,000 and more at which many SCOPE properties were priced.
Like SCOPE, Vacants to Value is targeted at specific neighborhoods. SCOPE focused on Reservoir Hill, but Vacants to Value appears to be concentrated on the east-side neighborhoods around the expanding Johns Hopkins Medicine complex, according to a map included in the presentation
"I think there's wisdom in the location [near] EBDI [East Baltimore Development Initiative]," says Sandra Newman, a professor at the Institute for Policy Studies at Johns Hopkins University and an expert on housing issues, "because it's the biggest urban redevelopment project in the U.S. They're trying to create a market there."
But will there really be a market for 1,500 newly renovated houses in Baltimore City-in 2011?
O'Doherty acknowledges that the city has done no marketing study to underpin its rehab goals. "I think what you're bringing up is the fundamental challenge for the city," he says. "And that is, supply and demand."
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