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:
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:
- Retain the vacant property registration system;
- Restore a higher tax applicable to vacant property (possibly at the prior $5 level);
- 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);
- Apply the vacant property tax to both vacant lots (unimproved land) and vacant houses and commercial buildings (improved land);
- 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;
- 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
- Provide an expedited appeal and refund system for property owners who are inadvertently charged the higher rate.
Here are seven reasons why the vacant property tax should be restored.