Wednesday, February 3, 2010

Vacant or Blighted - Part II

Near northeast resident Tom Madison displays before-and-after photos of a dozen vacant properties fixed after imposition of the higher tax.

In 2009, the D.C. Council eliminated the vacant property tax, which had provided an incentive to renovate, rent, or sell vacant properties and put them back into productive use. This was a result of the interaction of several factors: (1) backlash after the D.C. Council voted to double the tax from $5 to $10; (2) more consistent enforcement of the law by the DCRA; (3) the occasional innocent owner unfairly getting hit with the higher tax; and (4) the recession and its impact on developers with properties awaiting financing and smaller owners that lacked funds to undertake renovation plans.

On January 27, the DC Council's Committee on Public Services and Consumer Affairs and Committee on Finance and Revenue held a hearing to discuss how the government should address vacant and blighted properties in the future.

Two bills are currently pending before the Council. B18-546, introduced by Councilmember Muriel Bowser, would keep the vacant property registration system, eliminate exemptions (which now apply only to the need to pay a nominal registration fee), provide for an upward sliding scale for registration fee depending on amount of time property is vacant (likely beginning at about $500 and increasing to a maximum of $5,000 per year), simplify the citation issuance process, and require property insurance for vacant properties. The bill is helpful, but not ideal.

B18-448, introduced by Councilmember Jack Evans, would eliminate the remaining vacant property registration system altogether and focus only on blighted determination. It would discard all of the good work of the DCRA over the past few years to compile an accurate list of vacant properties, as well as residents and community associations that have worked hand-in-hand with DCRA. Even without a vacant property tax, this list allows DCRA to closely monitor these properties for violations (litter/dumping, overgrown grass, unsecured, illegal billboards, as well as criminal activity) and determine whether they are "blighted."

Rather than a consisting of a handful of neighborhood activists, development-types, and DCRA officials, the hearing was standing room only.  Testimony lasted over six hours with quite a few fireworks as passions were high on both sides.

Tom Madison, representing the Capitol Hill North Neighborhood Association, came prepared with a dozen before-and-after photos of properties in his near northeast neighborhood that had been renovated and are now occupied as a direct result of imposition of the higher tax.  Madison was immediately followed by David Shames, a lender, who began his testimony, "you can't tax a property into good condition, can you?" and challenged those who say vacant properties have an adverse impact on the surrounding community.  As Shames did so, his neighbor on the panel, Madison, waved his photographs in the air.  [Video of Hearing]

For those who wonder if there is a significant difference between what properties are included in the definition of "vacant" and the definition of "blighted," consider the statistics below, provided in DCRA Director Linda Argo's prepared testimony:


Vacant Properties
“Blighted” Properties
Percentage of Vacant Properties that are “Blighted”









That's 2,346 absentee owners, many (or most) who do not even live in the District of Columbia, who received a massive tax break this year when their property tax went down from $10 per $100 value to just 85 cents.  [Note: These statistics likely include only vacant buildings, not vacant lots].  You can view a map of the vacant and blighted properties in your Ward, as identified by DCRA, below (click for full size maps).

The Council should adopt a vacant/blighted property system along these lines:
  1. Retain the vacant property registration system;
  2. Restore a higher tax applicable to vacant property (possibly at the prior $5 level);
  3. Provide for graduated increases in the tax the longer the property remains vacant (i.e. increasing progressively as high as $10 if a property is vacant for 10 or more years);
  4. Apply the vacant property tax to both vacant lots (unimproved land) and vacant houses and commercial buildings (improved land);
  5. Provide for limited, objective exceptions, such as (a) when a property is in probate, (b) within one year of purchase (to not discourage buying and renovating properties subject to the tax), (c) when the owner is serving in the military, and (d) when the owner is in long-term care due to age or a medical condition. Frequently abused exceptions, such those that permitted owners to evade the tax by placing a “for sale” sign on the property (while demanding above-market prices and refusing / ignoring offers), or by obtaining permits for nominal work, should not be incorporated into the new law;
  6. Continue to address “blighted” properties through DCRA’s aggressive use of currently available fines (i.e. for dumping, overgrown grass, or unsecured property) and the condemnation process (for unsafe and insanitary properties); and
  7. Provide an expedited appeal and refund system for property owners who are inadvertently charged the higher rate.
If the Council deems a vacant property tax undesirable in the current recession, particularly with respect to substantial projects that await financing, then it might consider the measures above along with a one-year moratorium on the tax for 2010 applicable to specific development zones that could be extended by the Council if absolutely necessary.

Here are seven reasons why the vacant property tax should be restored.


Anonymous said...

The missing piece from all of these various solutions is finding a way to work with the lenders that either own the property or will eventually own the property. Engaging the MBA into the discussion will help lenders set policy that meet the needs of not only DC but all the areas of the country affected by this.

Anonymous said...

Your chart leaves out Ward 4, so perhaps your figure is low. And I would say the numbers are too low. The townhouses on either side of me are vacant but they don't show on the map.

Cary Silverman said...

I've added Ward 4 back in -- it seems to have been inadvertently cut probably due to issues with cutting and pasting tables into the blog.

The vacant property numbers do seem low. However, these are the numbers in Director Argo's testimony to the Council. The number of blighted properties is my count of the stars indicating such properties on the DCRA maps distributed to the Council.

It could be that the numbers are understated because DCRA is omitting certain properties as exempt or because they are vacant lots, rather than houses. I'm also not sure whether vacant properties owned by the DC government appear in the figures.

Finally, the vacant properties on either side of your house might not be included if the owner did not property register them with DCRA. You can report such properties to DCRA by going to the link on the bottom right panel of the blog. Of course, if the Evans bill is enacted, this registration system will cease to exist.

Anonymous said...

I watched parts of the hearing on Channel 13. I thought it was astounding that several property owners showed up to testify and admitted that they do indeed have vacant, blighted properties that have been sitting there for years, boarded up, accumulating trash, and making the neighborhood look like crap. Yet those vacant property owners complained about how bad the city was to make them register their property and force them to maintain it.

I especially loved the folks from Shiloh Baptist Church say they support blighted property tax rates, so long as there's an exemption for all Shiloh Baptist Church properties that are vacant. It was especially galling to hear the church leadership talk about their community redevelopment plans for their vacant buildings, since we've been hearing the EXACT SAME talk for the past 20 years.

The best way for neighborhoods to deal with their vacant/blighted properties is to reach out and work with the city to identify such properties and stay on top of the city to properly register and tax those properties. DCRA has gotten way better than it used to be, but they can't know of every property in the city. Send them reports of vacant buildings and then stay on top of them with updates.

Unless neighbors take the initiative for policing their own neighborhood for vacant and blighted properties, nothing will change.

Of course, if Jack Evans and his developer fundraising buddies get their way, the simple registration of a vacant building will go the way of the dinosaurs.

Hayes Nuss said...

Do you know what the rules are for empty lots? I've been unable to get an authoritative statement from the city. We are interested in purchasing an empty lot adjacent to our house to use as a yard and parking but are worried that we'll get hit with the vacant property tax.

Cary Silverman said...

Hayes Nuss,

My understanding is that currently vacant lots are considered neither Class 1 (residential) nor Class 3 (blighted). They therefore are taxed as class 2 (commercial). The rate is $1.65 for Class 2 as opposed to $0.85 for Class 1. There is currently no vacant property tax applicable to lots -- although under the previous law, a vacant lot was subject to the $5 tax, absent some exception. The blighted property law does not apply to vacant lots, even if blighted. OTR, rather than DCRA, is in charge of tracking vacant lots. They are not subject to registration requirements with DCRA. At least, that's my understanding.

Anonymous said...

Tried to post this before:

If the lot is next to yours, you could always combine the lots for tax purposes (you may also need to record it as a single lot). Then there's no issue--it's all taxes as your property, which has an occupied house on it. When you sell, you can always subdivide the property again.


Anonymous said...


If you purchase a vacant lot and it's titled in the same names as your residential property, it would be taxed at the Class 1 rate, pursuant to the emergency legislation recently enacted by the Council. Double check with OTR, just to be sure.

Cary Silverman said...

I believe anon 4:55 is right. My earlier post didn't account for the lot being adjacent to a residential property and under the same ownership. In that case, it may be taxed at the residential rate. Also suggest trying to get verification from OTR.

Anonymous said...

Yep, 4:55 is also correct. See here:,a,1342,q,644822.asp

Check 42.3131-16(D):
"Unimproved real property that abuts Class 1 Property shall be classified as Class 1 Property if the real property and the Class 1 Property have common ownership."

- ah

Anonymous said...

BTW, it looks like the Board for the Condemnation of Insanitary Buildings is having its first set of hearings on blighted properties on Thursday (2/10), I assume weather permitting.

As a neighbor of one on the list, I hope they actually have some spine this time and stick him with the 10% rate.


Brittany said...

Do either of these bills pertain to vacant land as blight property, or do they just address vacant homes?

Cary Silverman said...

Brittany, neither bill addresses empty vacant lots. Prior to 2009, DC law imposed the high tax ($5) on both vacant lots and "improved" properties (houses and other buildings). When the law was amended to apply only to "blighted" properties, the its coverage was limited to improved properties and not vacant lots.

Anonymous said...

Agree with much of what you suggest, but perhaps should NOT apply to residential and other commercial buildings.
Only to retail/mainstreet buildings. otherwise, look what happens:

They should still apply to industrial/residential buildings regulations around keeping the building in a good condition.

Cary Silverman said...

Anon 6/30 -- if the vacant property tax is applied equally to both vacant improved properties (housing and retail) and vacant lots, it will eliminate any mis-incentive to demolish properties to avoid the tax. Previously, the tax was applied in this manner. I'm not sure, however, if the restored vacant property tax addresses both vacant properties and lots. If a moratorium of some sort is needed for certain types of stalled projects in the current economy, I wouldn't be opposed to it, so long as it must be renewed annually.

#1HillAgent said...

As Of October 1st, 2010, a new, well-written set of rules have been put into effect. While not addressing all of the concerns mentioned above, it did allow for a certain streamline process for declaring a property 'Vacant' and determining if it is 'Blighted', while still allowing the occasional hardship appeal.

It doesn't cover vacant lots, though. Should it? There seems to be arguments for both sides.