THE AVENUE MAY 3, 2011
Have you ever wondered why someone doesn’t just do something about that big weedy lot on the edge of downtown, or the house up the street that’s been boarded up for years? You might ask your state legislator--though they probably won’t have a good answer.
All over the country, cities grapple with vacant and abandoned land and buildings. The issue is particularly problematic in places--think Detroit, Cleveland, and Buffalo--that have lost a large portion of their residents and jobs over the decades, but it’s also a growing challenge in parts of the South and West, where the bursting of the real estate bubble has driven up foreclosures and owner “walkaways” in cities and once-booming suburbs alike. Even relatively healthy cities have some neighborhoods where low demand yields high numbers of vacant properties.
Though seemingly a purely local issue, Alan Mallach and I describe in a new brief how weak and antiquated state laws--on tax foreclosure, land banking, code enforcement, and other areas--can have huge influence on what properties get redeveloped (or at least mowed) under what time horizons.
While many of these laws may seem trifling or arcane, they can be a huge burden for the municipalities governed by them, as they can hamstring local leaders’ ability to minimize distressed properties’ costs--their drag on property values and their ongoing need for basic maintenance--as well as their ability to repurpose them for tax generating development or other uses.
For example, excessively long periods during which tax delinquent owners can redeem their properties by paying the back taxes--as many as five years in some states--and other procedural obstacles to responsible reuse mean that vacant properties can spend years in limbo with unclear, unmarketable title, while others pass from hand to hand through a revolving door of neglect. Even when a property has been long since abandoned by its owners, state laws can make local governments’ ability to acquire and/or dispose of it time-consuming, complicated, and expensive.
As state leaders continue to dig under their figurative couch cushions for spare change and cut the fat, and then some, out of their budgets, they should also look for ways to help their local (and thus ultimately state) economies through legal and policy reforms that don’t need to cost a dime. In economics, remember, land is one of the key factors--along with labor, capital, and for some, entrepreneurship--in the production of wealth.
States should start treating it accordingly.