BLOG

Cities Fight Vacant Home Dilemma

America's cities are facing a growing problem related to vacant homes. Some of our nation's oldest cities have areas that are suffering from blight, which is creating a drain on resources. How each city is economically impacted by this issue might vary. What is also different is how some are choosing to address the problem.

temp-post-image

Why Do Cities Have Increasing Numbers of Vacant Homes?

No one likes to think that part of their beloved city could turn into a vacant wasteland or suffer in any way, but this is becoming more of a reality each year. Some American cities, particularly those across the Rust Belt in the Midwest and Northeast are battling these issues.

As of 2015, Detroit had 85,000 vacant and abandoned structures. Philadelphia had 40,000 vacant parcels. Cleveland had 20,000, and Baltimore had 16,000 homes that were listed as vacant.

Neighborhoods that were once vibrant sections of cities now have higher volumes of vacant buildings and homes, which makes it more difficult for residents to work and live in these places. These issues have resulted from a variety of causes, such as the decline of American manufacturing, deteriorating transportation structure in cities, and the migration patterns of aging Baby Boomers.

When World War II ended, the federal government implemented policies that encouraged a demographic shift in cities. These included low-cost mortgage programs and the development of the interstate highway system. The "flight" from urban to suburban areas left behind less vibrant neighborhoods with a lower tax base.

Some of those city neighborhoods have deteriorated even further in recent years. Fortunately, U.S. cities have begun to institute various programs to revitalize these areas and address blight.

How Some U.S. Cities Are Choosing to Address Blight

Cities from Baltimore to Detroit to Philadelphia and beyond are increasingly implementing novel ways to reduce their number of vacant homes and reverse the impact of blight. Chicago began offering up empty lots to nearby residents and organizations that would improve them for just $1 each. Jacksonville, FL passed an ordinance that allows the city to demolish abandoned homes.

Detroit, one of this nation's hardest hit cities, has solved many of its problems by listing properties on the Detroit Land Bank Authority at drastically reduced prices. Since 2015, the number of vacant homes in Baltimore has now increased to 16,500, an increase of 500 homes since the last count. The city plans to demolish as many as 1,000 buildings in 2018. Both Dover, DE and Savannah, GA have received grants to help them clean up blight in certain areas of their cities.

temp-post-image

How These Programs Can Impact Financial Institutions

When blight becomes a problem in a city, other issues are also present such as crime, poverty, and a lack of economic development. The programs that cities are implementing to address vacant homes may require some financing components, but the long-term economic impact will be much greater for the area. As the vacant and abandoned structures are removed or rehabbed, economic activity will rebound.

These revitalization projects will produce new business for financial institutions in the coming years. A lender that wants or needs to create a more optimized loan portfolio can work with an asset management company to team up with note buyers in various asset classes.