Lost: Vacant Property Tax

Have you seen the vacant property tax? After having a substantial positive effect across the city, it was last seen entering the Wilson Building, where it was eliminated to give a tax break to derelict property owners rather than to help revitalize DC neighborhoods.

In September, the DC Council killed this vital tool for addressing crime and moving unused properties back into productive use. It replaced the vacant property tax with a tax that applies to "blighted" properties. Six weeks into the new tax cycle, however, it is unclear how DCRA intends to implement and enforce the new law. Its website continues to cite the now repealed vacant property law, criteria, and list of vacant properties.

[UPDATE: Following my post, DCRA posted the new blighted property law.  It is available here.]  

I won't get into all the benefits of the tax, but suffice it to say that entire blocks of undeveloped property and vacant historic homes are back in productive use directly as a result. In the worse case scenario, these properties are used for drugs, prostitution, and facilitate other crime, become dumping grounds, and are known for turning into urban jungles. But even when the most responsible of owners properly maintain vacant properties, they still contribute to a lack of eyes on the street, a loss of vitality on the block, and an atmosphere that contributes to crime and neglect.

The original "Class 3" tax rate was at $5 per assessed $100 value (compared with 85 cents for occupied residential properties), but then, during the last election cycle, the DC Council got tough. It brought the vacant rate up to $10 per $100 value, while attempting to tighten the frequently abused exceptions. That led to push back. Some came from honest people who were swept up in the higher tax combined with greater enforcement by the Department of Consumer and Regulatory Affairs. A few owners who actually lived in their property found themselves hit with an excessive tax because it was misclassified, and then they needed to jump through hoops to have the error corrected. Slum property owners (as well as developers who had decided to put off work on their properties during the recession), however, saw it as an opportunity.

At first, it seemed a majority of the Council was posed to simply return the vacant property tax rate to $5. That's fine because the more significant issue has always been consistent and proper enforcement of the law, not whether the $5 rate was too low. Instead, the Council eliminated the vacant property tax entirely and applied a $10 rate only to something new -- "blighted" properties.

In theory, that sounds reasonable. It's the "blighted" properties, the nuisance properties, that are the ones that are unsecured, used for drugs and crime, overgrown with weeds, covered in trash, etc.

But DCRA already has fines it can impose when a property is unsecured, overgrown, or covered in trash... and it does so more often in recent years. In addition, if a property poses a danger to public safety, then the Board of Condemnation can condemn it and require the owners to make repairs or, if the owner does not do so in a reasonable period of time, the city can repair the property and bill the owner.

So then, what does a "blighted property" tax do?

Well, it eliminates most vacant properties from being subject to any higher tax at all. That doesn't reflect the additional cost that such properties place on its neighbors and encourages owners to speculate rather put properties into productive use.

The change in the law would also appear to discard all of the good work that DCRA, working with neighborhood organizations across the city, have done since 2006 when it was charged by law with maintaining a vacant property list. There are 2,221 properties on that list, 655 of which have been granted an exception from the higher tax.

One also has to wonder -- why, in the midst of a budget shortfall, when the DC Council is cutting programs and services, would opt to give vacant property owners a $10 million a year tax break? Interesting priorities.

According to the new law, the “Blighted Properties Abatement Reform Act of 2009," a "blighted property" is:

"a vacant improved real property which upon the determination of the Mayor constitutes a threat to the health, safety, or security of neighboring properties or persons. In determining whether an improved real property is blighted, the Mayor shall consider multiple conditions existing within a six month period from the following:
(A) The property has had the utilities, plumbing, heating, or sewage disconnected, destroyed, or rendered ineffective for at least six months so that the property is unfit for its intended use;
(B) The property has multiple building code violations posing a severe and immediate health or safety threat and the owner has failed to abate after notice by the Mayor;
(C) The property is boarded up or there is the presence of graffiti;
(D) Exterior doors, windows, skylights and similar openings are either broken or missing;
(E) The exterior is not maintained in good repair and not structurally sound so as to threaten the public health or safety;
(F) The property is a fire hazard and otherwise dangerous to the safety of persons on the property; or
(G) The property is not kept substantially free from accumulation of debris and excessive vegetative growth. For purposes of this subsection, “debris” shall mean
(i) Construction or demolition waste that is not stored in a rodent proof container and not removed after 14 days or longer;
(ii) Yard waste and branches that are not bundled and set out for waste collection, but not yard waste placed in a properly maintained compost pile;
(iii) Garbage and solid waste.”

[UPDATE: The version posted above was the legislation as introduced.  As DCRA's website now shows, the final law, as amended, varies significantly.  It is even more of a mess.  Stay tuned for an additional posting that attempts to explain the new law.  The information below, however, continues to be accurate.]

First, it would seem that vacant lots (unimproved), no matter how severely "blighted," are not subject to the higher tax at all. Ironically, it would also appear that an absentee owner of a vacant historic house can avoid the vacant property tax by allowing the house to eventually collapse.  No house, no vacant property tax.

Second, how is DCRA to enforce this law?

And what will DCRA do with its current vacant property list? I have urged DCRA not to throw the list in the trash heap, but to use it as a starting point for the "blighted property" tax list. It should only remove properties from the list upon a showing from the owner that the vacant property is not "blighted" within the terms of the statute.

So far, it is unclear how DCRA and the Office of Tax and Revenue will implement the new law, which applies to the tax year that began on October 1, 2009.