Choosing How to Reuse a Vacant Property

IN THIS SECTION

• Market-Driven Vacant Property Reuse
• Non-Market-Driven Vacant Property Reuse and Affordable Housing
• Matching Reuse Goals to the Right Implementing Partner
• Balancing Short- and Long-Term Community Goals

The goal of reusing a vacant property is to find uses that are realistic and provide the greatest benefit to the property, its immediate surroundings, and the broader community. In practice, this means navigating the tension between the community needs and what a site and its context can realistically support. This is a balancing act that requires honest assessment of both market conditions and community goals.

Vacant property reuse options fall into two broad categories: market-driven uses, where private demand is sufficient to make a project financially viable; and non-market uses, which require public funding both to implement and, in many cases, to sustain over time. Some market-driven projects may need a public boost—such as through tax abatement, a loan guarantee, or similar assistance—to get off the ground, but they are ultimately designed to become self-sustaining.

Market-Driven Vacant Property Reuses

Market-driven reuse—for example, building new residential, commercial, or industrial on a vacant lot—succeeds only if genuine demand exists for that use in that location. While market opportunities do exist in most disinvested communities experiencing systemic vacancy, they are uneven. Many properties simply aren’t candidates for market-driven development because demand in their immediate area isn’t strong enough to support it. The goal is to find the right fit: what the property and its surroundings are best suited for, what is economically feasible, and what will deliver the greatest community benefit.

Where market conditions are strong enough, market-driven development is generally the preferred path. Only by attracting and retaining residents and businesses can a neighborhood build sustainable vitality over time. In rapidly appreciating areas, however, market-driven development must be balanced with affordability to ensure long-term residents and businesses aren’t displaced as conditions improve.

In many distressed communities, market prices remain below replacement cost, meaning it costs more to build or rehabilitate a property than it can be sold for. In these cases, some form of public, private, or subsidy may be necessary to make development viable, whether through direct assistance, tax abatement, or other tools. The long-term goal, however, should always be to strengthen the market so that the need for subsidy gradually diminishes over time.

If a property is suitable for a particular reuse, the central question becomes: Is there a market for it? Markets and buyers vary enormously—the buyers for a suburban single-family home look very different from those for a downtown loft. Identifying who is most likely to want a particular product in a particular location is essential to determining how to reuse a vacant property, especially if considering developing housing. Several data providers offer consumer market segmentation by age, income, and lifestyle that can help sharpen this analysis.

Non-Market Driven Vacant Property Reuse Options and Affordable Housing

Public, private, or philanthropic subsidy is needed if the cost of reuse, the property’s value, or an end user’s ability to pay makes a project financially unviable on its own. Non-market reuses can take many forms: green reuses like gardens or mini-parks, public facilities like schools, or affordable housing. Given that in the decades since the Great Recession, home values in many communities have skyrocketed, the supply of affordable homes has become a primary concern nationwide. This section focuses specifically on the considerations that should guide those decisions.

Affordable housing provides millions of people who can’t afford market-rate housing with a decent home at rents or prices they can afford. In disinvested communities, however, affordable housing decisions are rarely straightforward, particularly where private market rents may already be comparable to or lower than those in Low Income Housing Tax Credit (LIHTC) developments. Four questions should guide any affordable housing decision:

Will it meet a need?

The starting point is to assess whether a genuine need exists and whether the proposed project will address it. Nationwide, the scale of the unmet need for affordable housing is significant. Over 8.5 million households faced worst-case housing needs in 2021—meaning very low-income renters at or below 50 percent Area Median Income (AMI) who receive no government housing assistance and are either paying more than half their income on rent, living in severely substandard conditions, or both. This represents an increase of 760,000 households from 2019 and surpasses the previous record set in 2011.

The need is most acute among extremely low-income (ELI) households—those earning 30 percent or less of AMI. Nearly half (49 percent) of all ELI renters faced worst-case housing needs in 2021, and ELI households made up 71 percent of all worst-case cases nationally. Yet this is precisely the population that affordable housing development rarely reaches. LIHTC developments are typically designed for households earning up to 60 percent of AMI and are rarely affordable to those earning below 40 percent without housing vouchers. Affordable homeownership programs generally target households earning between 60 and 100 percent of AMI. The result is a persistent gap between where the need is greatest and where public resources tend to flow.

It is important to note the differentiate the national trend from local markets, however. In many distressed cities, private market rents and sales prices are already low enough to be affordable to households earning 40 to 60 percent of AMI. In Cleveland, the median home sale price in 2024 was $127,000; in Detroit, $90,000. In markets like these, the need for new subsidized housing at that income range may be limited—and it may be more cost-effective to help existing landlords and owners repair and maintain their properties than to build new units at significantly higher cost.

This is not meant to imply that low-income renters in cities like Baltimore, Cleveland, and Detroit can easily find quality, affordable housing. The “cheapest” neighborhoods may not be desirable, given their lack of access to jobs or amenities 

Is it a cost-effective way of meeting the need?

If private-market housing is renting or selling at prices comparable to or below what new affordable housing would cost, and that housing is of reasonable quality, new construction may not be necessary. However, if existing units are in poor condition, the question is whether building new is truly the most effective use of limited resources, or whether investing in home repair programs and the rehabilitation of older housing would better serve residents.

How will it affect the neighborhood’s existing housing stock?

If a neighborhood has many vacant properties, private-market rents are low, and the quality of available units is poor, then building new, affordable units could have an unanticipated side effect: More vacant properties.

In a community where few new residents are moving in, the tenants for new LIHTC or other subsidized housing are likely to come from within that same neighborhood. Likely, they will move out of their existing substandard housing in favor of the new affordable homes and apartments. Their living conditions will meaningfully improve, but because the area as a whole suffers from low demand, there is a good chance the empty, substandard units they leave behind will not be filled—deteriorating further and on the path to demolition. Seeking to improve housing conditions for existing low-income tenants through strategic code enforcement, proactive licensing and registration initiatives, and home repair programs may be a more cost effective way to ensure safe conditions while protecting neighborhood housing stock.

How will it affect efforts to build a stronger market?

Depending on the neighborhood’s market, the nature of the site, and the design and scale of the development, new affordable housing can either support or undermine efforts to strengthen the local housing market. In neighborhoods with an oversupply of vacant or underutilized properties, adding new housing—even affordable housing—risks compounding the existing imbalance between supply and demand. When supply continues to outpace demand, persistent downward pressure on property values can persist and make it harder to attract necessary investment and activity to stabilize the market.

Research has shown that LIHTC developments can have positive impacts in lower-income neighborhoods, causing nearby home values to appreciate over the long run and even reduce poverty in high-poverty neighborhoods.

In the end, the question of whether to build affordable housing on a vacant lot is the same as with any reuse option: Will it improve the neighborhood? Removing or rehabilitating a problem building, or creating an attractive anchor in a difficult location, can meaningfully improve a neighborhood’s overall vitality.

Matching Reuse Goals to the Right Implementing Partner

Choosing the right reuse for a vacant property is inseparable from choosing the right implementing partner (i.e., the developer, nonprofit organization, or entity that will see the revitalization project through). If the goal is high-quality new housing, the land bank or municipality should seek a developer with a strong track record. If the goal is a community-serving green reuse like a garden, playground, or pocket park, a community development corporation (CDC) or neighborhood organization is likely a better fit. This diagram illustrates how prior use, site features, and area features combine to point toward a preferred reuse option and, from there, toward a preferred disposition process and preferred potential users.

The table below maps how specific reuse options align with different types of prospective buyers.

The choice of implementing partner and the method of disposition are closely linked. Properties should be conveyed to entities that have both the commitment and the capacity to carry out the intended reuse—and on terms that maximize the likelihood the project happens as envisioned. This often means choosing between the highest sale price and the use that delivers the greatest long-term benefit to the community. While the temptation to maximize short-term revenue is understandable, consider that the neighborhood will live with the outcome for generations.

When disposing of a publicly owned property, consider five questions:

1. What use should the property be put to?
2. What standards should govern that use?
3. Who should receive the property and what types of entities are most likely to deliver the desired outcome?
4. On what terms (price, conditions, timing) should the property be conveyed?
5. What disposition method (auction, RFP, negotiated sale) is most likely to get the property into the right hands?

Failing to think carefully through all five questions increases the risk of a poor outcome: the project doesn’t happen at all, or it happens in a way that falls short of the community’s goals.

Balancing Short- and Long-Term Community Goals

One of the most persistent tensions in local government is between short-term financial pressures and long-term goals. In the context of property reuse, this tension surfaces constantly:

• Should a community maximize revenue from a property sale today, or accept less now for a use that generates greater long-term benefit?
• Should a community sell tax liens to investors for an immediate return, or take title to properties to control their future use?
• Should a community approve a minimally acceptable reuse that requires no public, private, or philanthropic support, or pursue a more ambitious reuse that does?
• A related question, particularly relevant to green reuse, is whether a given use is intended as a permanent reuse or a temporary holding strategy—keeping a property productive until market conditions support something more substantial.

Most local government managers operate under intense short-term pressure, balancing next year’s budget, avoiding layoffs, and managing immediate community needs. Making the case for a long-term investment requires being able to show, concretely, that the future benefits meaningfully outweigh the short-term costs—while remaining honest about the uncertainty involved.

Consider a vacant corner lot in a struggling but still-viable neighborhood commercial strip lined with late 19th-century three-story buildings. A private developer offers to buy the property at market price, with no subsidy, and build a convenience store and gas station. An alternative proposal calls for a new three-story building that matches the street’s architectural character, but requires below-market land sale, five years of tax abatement, and a small capital subsidy.

Which is the better choice?

To make a direct financial comparison: the larger building, once on the tax rolls, will likely generate more property tax revenue, and at some point the cumulative return will exceed that of the convenience store. But that may be years away, too far in the future to weigh easily against immediate budget pressures.

The harder, indirect question is: How will each option affect property values and economic activity on the rest of the block? There’s a strong case that the architecturally compatible building produces significantly greater spillover benefits, but that isn’t a guarantee. Too many variables are outside the municipality’s control.

Even so, communities must ask these questions, given that today’s decisions will shape a property, a block, and a neighborhood for decades to come. Long-term effects may be difficult to quantify, but that is not a reason to ignore them.