Why do some cities have so many vacant properties?

 
Tarik Abdelazim, our associate director for National Technical Assistance, wrote this blog post (cross-posted from Breathing Lights) to begin to unpack the causes of vacancy and abandonment for residents of the Capital Region of New York. Although focused on cities in New York, the general trends described below are familiar in many cities around the country.

With the Breathing Lights initiative drawing attention to the challenges presented by vacant, abandoned, and tax-delinquent properties, many Capital region residents are asking, “Why are there so many vacant properties?”

While the triggers of vacancy and abandonment are unique to each community, there are some common factors that can be seen across different geographies.

First, market dynamics play a key role in the health and vitality of neighborhoods, and housing—like all consumer products—hues to the simple logic of supply and demand. In upstate New York urban centers, like other rust belt areas, there are just not enough people to fill the oversupply of housing.

Over the last forty years, people have fled former manufacturing centers in significant numbers. The massive wave of deindustrialization saw folks chase jobs from the rust belt to the sun belt. Additionally, decades of sprawl and white flight saw many compact urban centers lose middle and upper class families to the suburbs (not only leaving behind an oversupply of housing, but a shrinking property tax base, making it that much harder for cities to maintain an aging public infrastructure, such as roads, parks, and sewer and water systems).

Taken together, these economic and demographic trends have created major imbalances in the supply and demand of housing in our rust belt cities. Consider a few examples from upstate New York of this “hollowing out of the core” phenomenon:

• City of Schenectady saw a population decline of 28% from 1950 (91,785) to 2010 (66,135). Meanwhile, Schenectady County’s population jumped 8.6% during the same period (from 142,497 to 154,727).
• City of Troy’s population plummeted 31% from 1950 (72,311) to 2010 (50,129). Incredibly, Rensselaer County’s population shot up 20% during the same period (from 132,607 to 159,429).
• City of Utica’s population loss was even more dramatic, falling 38% from 1950 (100,489) to 2010 (62,235). Again, the trend in Oneida County was just the opposite, climbing 5.4% during this same period (from 222,855 to 234,878).
• While the population of Onondaga County has been relatively stable (approximately 470,000) the last 40 years, from 1970 to 2010, the City of Syracuse lost 26% of its population over the same period.
• Monroe County’s population increased 4.5% from 1970 to 2010, while its principal urban center, Rochester, saw a population decline of 29% during this time.

Second, it is important to acknowledge that not all neighborhoods are treated equally. Over multiple decades, institutional racism in housing and community development policies at all levels of government and within the private sector have seriously disadvantaged communities of color.

From redlining practices that denied African Americans equitable access to credit and traditional mortgages, blocking the road to homeownership, to the more recent spate of predatory lending that disproportionately impacted black and Latino homeowners, unjust race-based policies have resulted in some neighborhoods faring far worse than others. It is no accident that many disinvested neighborhoods across the country share similar characteristics: low homeownership rates, substandard rental housing, concentrated poverty, predominantly minority population, and high levels of vacancy and abandonment.

Now, think about this as an investor. Would you invest $80,000 to rehab a home in a neighborhood riddled with boarded-up properties and with homes selling for $30,000 or less?

In the absence of new and responsible private investment, these destabilized neighborhoods often fall prey to out-of-area speculators and local slumlords, locking the neighborhood into a downward spiral. At this point, the chances to restore market confidence and attract private investment without significant and recurring public investment become increasingly slim. Unfortunately, public budgets from Congress to our city halls are all moving in the wrong direction, with fewer and fewer resources allocated to help rebuild our distressed neighborhoods.

Finally, the legal systems that can help prevent or minimize the harms of vacancy and abandonment—code enforcement systems, property tax enforcement and foreclosure systems, and mortgage foreclosure systems—can often be ineffective or inefficient, making it difficult to stop and ultimately reverse the decline of neighborhoods burdened by an oversupply of housing, weak housing markets, and race-based policies. In fact, the weaker the housing market, the more the deficiencies in these key legal systems can actually contribute to the problem.

For example, local governments in New York rely heavily on the criminal prosecution of property owners that violate housing and building codes. However, out-of-state owners or limited liability corporations (LLCs) can easily evade the reach of the courts, making it difficult to hold these owners accountable. And as most local and county governments in New York auction off properties that are tax delinquent, substandard properties in distressed neighborhoods are often scooped up by these same speculators or irresponsible landlords for pennies on the dollar, perpetuating this cycle of decline.

Despite these challenges, New York has been taking impressive steps the last few years to address some of the systemic causes of vacancy and abandonment.

• There are now 18 land banks in New York, which are powerful tools that can serve as an alternative to the speculative auction to help convert vacant and tax-delinquent properties to productive use in a more predictable manner based on community goals (see here for a November 2016 report by the NY Attorney General’s Office on the work to date of New York land banks).
• State legislation was passed this year to address “zombie properties,” holding banks more accountable during the mortgage foreclosure process, streamlining the process, and adding additional protections to homeowners in default (see here for a summary of the legislation by the Empire Justice Center).
• The Attorney General’s Office continues to carve out funds from bank settlements to support land bank interventions, local code enforcement programs, and foreclosure prevention efforts.

 
While these are helpful and commendable efforts, the underlying problems of an oversupply of housing, weak housing markets, declining populations, and ineffective legal systems will continue to present real challenges to upstate communities, and if we’re honest, it will be poor and minority neighborhoods within these communities that face the steepest challenges.