You missed linking to WYPR's Midday where the proposal was highlighted. You can hear an archived version at: http://www.wypr.org/midday.html

I agree that there could be certain unintended consequences and that these should be planned for as much as possible. This is always the way in politics.

But, in general, this does really seem to be an obviously excellent idea with LOTS more upside than downside. It could help to lower overall property rates for real homeowners in the city, it could lead to infrastructure improvements, and it could help with crime. I think it's an outstanding idea and I really hope they pass it.

Oddly enough, as I was driving in to work this morning I was thinking how the vacant homes could somehow be used to drive down property tax rates. This is a great idea, but with many kinks to be worked out. I think this could drive up home sales for those who are wary of paying the ridiculously high city tax rates, which in turn could lead to the rehab of vacant properties to rent/sell. If this plan could get a head of steam going and actually be put in to the books it would save myself and thousands of homeowners money. Selfish? Yes. But I'm tired of these vacant properties that could be drawing more revenue for the City.

Paul, I linked to the post that linked to Midday. So it's just one link removed. :-)

Dan is right that some landlords could try to evade the higher tax by renting to bad tenants (or even good tenants who can't afford to live in a decent property), but the city can put a stop on this by enforcing existing laws on the books- such as requiring the landlord to register a property as a rental with City Housing, obtain an occupancy permit, and pass city inspections.

To really be effective it needs something more: A companion measure to streamline the abandonment process and address the continuing assessments and obligations of the owners from years past.

Give the property owner a minimal or no repercussion way out -to avoid the 10fold increase in carrying costs until the neighborhood qualifies for some program- and they'll take it.

When I was approached by Midday to take the counter argument to this proposal my initial thought was that it was a good idea and a position I would not be able to argue. As I started to research the topic, including how Baltimore already handles its inventory of city owned vacant homes, what has already happened in DC, and logically thought through some of the unintended consequences, my position changed.

Most of the vacant and blighted properties in this city are not economically viable and are for lack of a better word worthless. Specifically speaking, the cost to restore the property to a livable condition would exceed the amount of money you could sell it for, or result in a mortgage payment higher than you could rent it for. Increasing property taxes on such properties would not encourage rehabbing them and occupying them. It would only encourage losing the property at tax sale to the city and thus compound an existing problem.

The city government already owns 25% of all residential abandoned property-9,000 units in total. Buying one of these properties from the city is a regulatory, bureaucratic, multiple agency hoop jumping nightmare. Such a proposal will only encourage the transfer of abandoned property from private ownership to public ownership. It will not encourage turning the properties into viable, occupied housing.

Unless the law is crafted with the utmost care you run the risk of sending some properties into foreclosure that owners are making a good faith effort to renovate, as happened in DC: http://www.washingtontimes.com/news/2009/mar/02/dc-rehabbers-decry-10-tax-rate/print/

Finally, if your goal is to lower property taxes for the rest of us why not start by going after the 5 million dollars a year Legg Mason rightfully owes but is gifted out of on their new tower, or saving 190 million dollars a year (30% of total property tax revenues) by ending a government employee benefit that 82% of the private sector doesn't get themselves: pensions.

Nobody likes vacant, blighted properties. It is in everyone's interest to reduce them. This is not the way, and by encouraging the transfer of ownership to a government with a terrible track record of disposing of what they already own, will make the problem worse. Advance to minute marker 46 of the radio interview to hear the host Dan Rodricks say to the proponent "and to expect people to improve their properties simply because their tax rates go up, I don't think that's a realistic expectation Matt."

What about the more than 10,000 vacant properties owned by the Mayor and City Council?

What if the city gave the owners the choice of either pay the higher tax or dismantle the property and donate the usable material to non-profits for rehabbing in the same neighborhoods? After building is gone they must also restore the vacant lot to self-sustaining gardens with native plants ... Just another green idea, not the cash-kind though ; ) sorry .. but i do wonder what the best solution is for everyone in terms of making Baltimore a happier & safer place .. It seems like we have more than enough boarded-up houses that don't serve anyones best interest.

I cannot believe the City and state don't have graduated tax rates for various types of property already. Knowing that the ratio of homeowners to non-owned properties is a key to crime and neighborhood stability, why not have incentives for ownership and disincentives for rentals, especially considering how many vacant and abandoned buildings there are in the City? Every rent check is a bit of capital and potential wealth leaving the City.

The rates should be lowest for owner-occupants, and then step up by a factor of 1.5-2 for rentals, abandoned residential, occupied commercial, and abandoned commercial. In other cities I've lived in, the graduated rate works well. It spreads the tax burden by use: homeowners, non-residents, commercial properties, and investors who own abandoned commercial property.

This has to be paired with a revival of the dollar-house program, for exactly the reasons Josh cites. The tax is a disincentive to own vacant property, but there is no complimentary incentive to buy a house in shambles and make it livable. Additionally, with the current rate structure, buying one of these homes becomes cost prohibitive, even if you only finance $100,000 in rebuild costs.

It's interesting to note that two of the people mentioned in the oft-used Washington Times article lost properties in a DC tax sale...before the higher vacant property tax went into effect in DC.

We are in favor of the higher tax rate for derelict property owners, and we are also in favor of the dollar house program. In order for the dollar house program to have a significant impact on neighborhoods, it needs to include a residency requirement. Otherwise, neighborhood stabilization will not occur.

Slumlords in Baltimore City have gotten away unscathed for far too long -- it's time for the city to enforce the current laws and strengthen them (as with the higher tax rate for derelict homes) as needed.

Please contact your elected officials in Annapolis and let them know you expect this issue to be addressed in 2010, and let them know they need to send home the message that the residents of Baltimore City deserve better.

The Baltimore Socialist answer for any and all problems: a new tax. Short on cash? Hey, how about a new tax. No money for police? I know what to do. We will raise taxes. Need pot holes patched? Well, tax! tax! tax!
I mean how many years of schooling does it take to learn how to say new tax, new tax, new tax?
I have an even better idea. Since the amount of CO2 is increasing, and according to the Socialist Law of Zero Sum Gain the amount of O2 thereby has to be decreasing. And since people who weigh more than 200 lbs tend to consume and produce more O2 and CO2 ,respectively, the City Council and Mayor should tax people over 200 lbs at a higher rate than those who weigh less than 200 lbs. I love it. Tax! Tax! And Mo' Tax!
I'm considering throwing a higher taxes party. We are saved! The Gov. is going to increase yet another tax, and we know all to well how this has worked so beautifully in the past. It will cause scanlous landlords to redeem themselves and somehow become responsible. We are saved! We are saved! We are saved!

DC Council's 10% tax on vacant real properties for FY 2009 was an unmitigated disaster. In fact, DC Council voted to repeal the 10% tax in the summer of 2009. Repealing the tax proved to be too little too late, because DC's 2009 property tax auction revenues were $8 million dollars short of projected revenue. The 10% tax destroyed buyer confidence, leaving 40 percent of tax liens unsold.

http://www.washingtonexaminer.com/local/D_C_-property-tax-auction-banks-_8M-less-than-expected-8650671-79095752.html

Aaron, why is every rent check "a bit of capital and potential wealth leaving the City"? Not all property owners are absentee.

B. Smith,

Many of the "socialists" who support my proposal are conservative Republicans who understand that slumlords place a greater burden on city services than do city homeowners and thus should pay their fair share of taxes. For example, many of these slumlords pay $68 a year in property taxes (at a $3,000 assessed value). How much do you think it costs the police and fire department to respond to 911 calls at those properties? Here's a hint... it's more than $68.

Proposing a higher tax on a group of people who are a burden to the city is not a "socialist" idea. If you weren't so knee-jerk in your response, you would realize that my proposal would benefit most Baltimore city taxpayers (i.e. those that don't own vacant and blighted properties). Don't you want your taxes to be lowered? You wouldn't happen to be an owner of a vacant and blighted property would you?

The better solution would be a minimum property tax on all properties -- say $1,200 per year ($100 per month) -- to cover city services. Currently, vacant properties owners in the city are almost uniformly assessed at $3,000, which results in a tax bill of $70 per year. This has been the state rate for vacant properties for over 20 years.

Jason,

I agree with your rationale for a minimum property tax; however, a minimum property tax would not penalize owners of vacant and blighted properties in stable neighborhoods such as Federal Hill, Canton, Reservoir Hill and Patterson Park as these owners already pay over $1,200 in property taxes. The houses that are assessed at $3,000 are located in less than desirable neighborhoods such as Oliver, Sandtown-Winchester, and Middle East.

I have to wholeheartedly disagree with Josh and his proposal to eliminate tax incentives for businesses downtown in order to lower property taxes. Without significant tax incentives large scale inner city projects such as the inner-harbor would never have been built. In fact, not a single building was built in the inner-harbor WITHOUT tax incentives, this includes the pavilions, charles center, the first Legg Mason building, etc.

The great thing about tax incentives is that they eventually run out. The city is not going anywhere, and neither is a thirty story building, so to not apply incentives for people to build large-scale structures downtown is just a way to insure that your downtown does not grow. Eventually, the incentives run out and the city gains a substantial amount of money on a building that was built ten years ago and is now financially viable to pay the tax (whereas during construction that may not have been the case).

This is what happened in the inner-harbor and undoubtedly what the city is hoping will happen to harbor east.

I think Josh's issue is he is being short-sighted about the issue of taxation and needs to realize that without incentive there is no growth, and with no job growth the city and the region would be losing people at a much higher rate.

Taxing vacant houses which are actively tearing at the fabric of Baltimore's many diverse neighborhoods makes sense for the city; attacking the developments that are helping Baltimore slowly crawl out of urban blight is just plain old suicide for the city.

Matt,

Under the proposal passed by the City Council, if on June 1st you buy a vacant housing bubble property in Canton assessed for $200k in order to rehab it, you would be hit with a $20k bill on July 1st for something that is completely beyond your control. If it took you longer than a year to finish it, you would be hit with another $20k bill. If anything, the proposal would discourage anyone from investing in what you refer to as "desirable" neighborhoods.

Jason

Jason,

This $20K issue that you speak of can be avoided if the legislation includes a provision that allows the new homeowner a six to nine month window to rehab the property before the vacant tax rate kicks in. It can even allow the homeowner to file for a hardship extension if he cannot finish the renovation due to circumstances beyond his control.

Matt,

You need to reconcile your logic/deductive reasoning/terminology. Vacant/abandoned by definition=no tenant=no slum lord. They are two separate issues. That said, you and many others agree that the homes you are talking about are in economically depressed, non-viable areas. You a trying to solve a complex socioeconomic problem with a simple duct tape solution and turning a blind eye to the unintended consequences, namely you will only serve to transfer abandoned houses from private ownership to public ownership. You can use the carrot or you can use the stick. You are using the stick and the stick never encourages growth.

About the owners who lost their properties in DC prior to the new 10% rate taking effect, that is true, they lost their properties at just the 5% rate when other DC residences are assessed at only 1%. Translation, a punitively high rate was already in effect, just not as punitively high as you would like it to be.

As for Joe the corporate welfare advocate. If you want an upwardly mobile society, and a society of equal opportunity, then you cannot exempt the "big guy" from paying his fair share of taxes because in doing so you disproportionately burden the "little guy." You are advocating a regressive tax structure. It is Walmart politics. Such policy is how the big get bigger, everyone else struggles to survive and you end up with 10% unemployment with no end in sight while corporate titans give out record bonuses paid for by the taxpayer.

How much job growth could be spurred by giving 5 million dollar tax breaks apportioned out to small businesses? Small business is where real growth comes from because they actually have room to grow and hire. Very little job growth comes from old, mature businesses like Legg.

Finally, everyone is bickering over relative nickels and dimes compared to the 190 million dollars a year (an amount equal to 30% of the total property taxes collected) the city spends paying former employees who don't even work for it anymore, a luxury 82% of the private sector does without.

While I appreciate an opposing viewpoint on the matter, and I all of the effort Josh has spent providing the such must be mentally taxing because he apparently does not like to think about anything beyond the immediate near-term effect of policies...

The tax breaks given on the inner-harbor have long since expired, and yet the city still has an inner-harbor. The big businesses in the harbor are still paying taxes, and the property value on those properties has sky-rocketed since the charles center first broke ground over 25 years ago.

Baltimore also gained a 50% gain in population within a half mile radius of Light and Pratt street and a hundred of small-business have sprung up to support the new population. In fact, that development, which all started with "corporate-welfare" is currently earning the city more revenue than any other comparable area in the city.

The harbor was said to be uninhabitable in the 1960's and was still showing damage from the great Baltimore fire over 50 years prior. Now, it is the most desirable location in Baltimore, less than 50 years after the entire city had written it off as a polluted, burnt out ruin. Now if only the city could come into a large swath of land like that again...

In case you don't get the reference, I'm insinuating that the large swaths of "Non-viable" areas that you refer to that have been burned out since the MLK riots of 1968 are indeed viable, and city ownership of entire blocks will allow for a large, inner-harbor style renovations.

Johns Hopkins in currently transforming entire blocks that they gained through emanate domain into a 1 million square foot biomedical research park in east Baltimore. Those blocks have been "non-viable" for years until they were consolidated into a single ownership and sold as a unit. Now the city can enjoy thousands of new jobs and local businesses can start up to serve the new clientele.

In closing, please don't see things how they are and make irrational decisions about what is viable and what is not. Things change, and that is the only constant in life.

Josh is sorely mistaken if he thinks that a vacant house can't be owned by a slumlord. Slumlords aren't just bad landlords -- they're all-around bad property owners, whether they have tenants or not. Many of the slumlords we feature on the blog own dozens of vacant houses, and also own houses people live in.

As for the property owners in DC who lost property before and after the DC tax, your argument doesn't apply -- especially in the case of two of the property owners, who were the subject of foreclosures here in Baltimore -- not in DC.

Take a step back, boil your two arguments down and examine them for what they are:

1. You think that increasing taxes on a certain type of property will encourage development on that type of property. After listening to both sides of the case for 46 minutes Rodricks' opinion was that it is not a "realistic expectation."
2. Sidetracking to the corporate welfare tangent: you think big business should pay less taxes than everyone else which raises them on everyone else.

Finally, to compare the waterfront geographic center of the city that is right in between two major freeways to outlying perimeter areas surrounded by nothing but crime and bad surface roads is comparing apples to rocks. Your argument does tip your hand that your own expectation is not for the individual owners to improve these properties but to have them come under city ownership and control en mass and then hope they do something large scale with them. A debatable proposition but at least we can concede individual private owners will not be doing the improvements because their taxes go up. Why not just streamline the process, be a little more forthright with your intentions, and push for more aggressive eminent domain laws? Eliminate the subterfuge.

Big business should not pay less taxes than anyone else, but big businesses need incentive to move into areas that do not currently have the clientele/infrastructure that they believe their business model needs to be sustainable. That is why tax incentives are used in almost all major developments in Baltimore city to move large businesses downtown and -- make sure you read this part because it's the part you apparently skip over -- after a certain time period is reached those tax incentives expire and the city collects full revenue on the properties.

I honestly can't explain it any more plainly than that. It's a tried and true way of building up a city and is used by much larger municipalities than Baltimore to help grow the job market and spur development in new downtown areas.

Finally, I don't plan on posting again about speculation of what is a "viable" area and what is not, because it is just that -- speculation. History is an amazing thing and I suggest you study it, because some of the areas that are not the "center of the city -- right in between two major freeways " have transformed from "non-viable areas" to spectacular neighborhoods (see Butchers Hill, Patterson Park, Washington Village, and the list goes on...).

One thing I learned while working with my community association is that no matter how well of a plan you put together there will always be negative people who will argue against change of any kind. I realized a few years back that it is not worth my time to argue against them, but rather to point out the facts as they exist and move on. I believe I have posted enough to educate about taxes and the misuse of the term "non-viable" and it's time for me to focus my effort on implementation instead. So thank you for this wonderful discussion, but I will be contacting my elected representatives and discussing implementation rather than spend time arguing a point that most people appear able to grasp.

I am a full time real estate investor in Baltimore City...There are many good insights on this thread, but there are also many ignorant statements not based on economic fact. Fist of all, I agree that on the face of the argument, the idea of taxing the owner of a vacant property sounds very logical. Increase the taxes to force action; whether selling to someone who wants to fix up the property, or forcing him to rehab the property and rent it out to reduce his tax burden. However, as several have mentioned, this will not create the desired affect. Basic free market principles work the best here... A "shell" that is assessed at 30k with a tax rate 4 times higher is hardly going to force any action. That is a tiny amount of money that won't cause more than a moments hesitation from the property owner who is opening their new tax bill. The real problem is that this property is located in an area that does not justify spending 50k to do a full rehab. If I spend 50k to fix up a house that has potential to be resold in a 40k neighborhood, does this make sense? All you will do is add to city owned home inventory in the area. The problem of vacant homes solves itself in areas such as Hamden, Canton, Federal Hill, even such neighborhoods as Belair Edison. It is basic capitalism: I will spend 50k fixing up a home that can be resold at 100k. But I can not do this in a neighborhood such as Sandtown in the current economy. Someone commented earlier about the "carrot and stick" approach... I completely agree with the point. By using a "stick" here you will only create problems. In neighborhoods with higher property values, there are no vacant properties. The only neighborhoods with board up problems have poor resale value, so why isn't the city offering subsidies to fix these properties up instead? This would solve the problem MUCH better than penalizing an investor who is waiting for the economy to change to rehab a property. The real problem here is Bureaucrats trying to solve a problem by taxing a situation that they do not even understand. They clearly have no financial background/education to propose such a bill.

For several years now, I've been saying that uninhabitable homes should be taxed at the average rate of comparably sized inhabited homes in the same neighborhood. After reading the comments by Mr. Gonter, I agree the idea of a delay after the purchase of such a property to allow for time to rehab the house is a good idea.

No more buying up slums and leaving them rundown and empty in hopes of the neighborhood taking off. If you own it, you either fix it up or pay taxes as if you did.