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Community Progress Weighs in on $350 Billion ARPA State and Local Recovery Fund

July 14, 2021

Center for Community Progress recently submitted a public comment letter in response to the Treasury Department’s Interim Final Rule (“IFR”) implementing the American Rescue Plan Act’s (“ARPA”) $350 billion State and Local Fiscal Recovery Fund (“SLFRF”). The public comment period is open through Friday, July 16, 2021, and public comments can be submitted through this Regulations.gov portal.

The main themes of our message to Treasury are:

Thanking Treasury for their flexible interpretation of ARPA and their emphasis on addressing racial inequity and historic disinvestment;
Acknowledging that the uses we are advocating for related to vacancy, rehabilitation, demolition, greening, and land banking are not ineligible under the current rule;
Urging Treasury to go further, by explicitly stating in updated guidance that rehab and demo of vacant structures, greening and maintenance of vacant land, and investments in land banks are permissible uses of ARPA dollars;
That these uses should not only be explicitly eligible in the affordable housing development context as a response to negative economic consequences of COVID-19, but also as activities that address public health, public safety, and strengthen communities;
That direct support to land banks should also be explicitly eligible ARPA spending, to encourage local/state leaders to fund the powerful work land banks are doing in over 250 American communities.

We encourage land banks, local, county, and state government leaders, and any stakeholders who care about vacancy and abandonment to submit comments in response to the IFR (through this Regulations.gov portal.) If you agree with our comments, you are welcome to reference, echo, adapt, and even borrow our text and/or citations in your own comments to Treasury. Although the more that you can cite your own specific community’s examples, and the more you can put the message in your own voice, the stronger the message will be received by Treasury.

You can view the full Community Progress letter here, but here are some excerpts from what we had to say to Treasury:

Community Progress Responses to Questions 1, 5, 8, and 9

The Center for Community Progress is the nation’s leading organization focusing on the impact of vacancy and abandonment. Given our organization’s proven expertise in addressing vacancy and abandonment in disinvested communities and our direct support to over 300 communities across the country responding to negative economic impacts since the Great Recession, Community Progress will limit our responses to the following four specific questions in the IFR:

Question 1: Are there other types of services or costs that Treasury should consider as eligible uses to respond to the public health impacts of COVID-19? Describe how these respond to the COVID-19 public health emergency.

Yes, Treasury should also explicitly allow for the rehabilitation and demolition of vacant structures, greening and maintenance for vacant land, and support for land bank operations, as eligible uses to respond to the public health impacts of COVID-19, for the reasons detailed below.

Question 5: Are there other types of services or costs that Treasury should consider as eligible uses to respond to the negative economic impacts of COVID-19? Describe how these respond to the COVID-19 public health emergency.

Yes, Treasury should also explicitly allow for the rehabilitation and demolition of vacant structures, greening and maintenance for vacant land, and support for land bank operations, as eligible uses to respond to the negative economic impacts of COVID-19, for the reasons detailed below.

Question 8: Are there other services or costs that Treasury should consider as eligible uses to respond to the disproportionate impacts of COVID-19 on low-income populations and communities? Describe how these respond to the COVID-19 public health emergency or its negative economic impacts, including its exacerbation of pre-existing challenges in these areas.

Yes, Treasury should also explicitly allow for the rehabilitation and demolition of vacant structures, greening and maintenance for vacant land, and support for land bank operations, as eligible uses to respond to both the public health and negative economic impacts of COVID-19, for the reasons detailed below.

Question 9: The Interim Final Rule includes eligible uses to support affordable housing and stronger neighborhoods in disproportionately-impacted communities. Discuss the advantages and disadvantages of explicitly including other uses to support affordable housing and stronger neighborhoods, including rehabilitation of blighted properties or demolition of abandoned or vacant properties. In what ways does, or does not, this potential use address public health or economic impacts of the pandemic? What considerations, if any, could support use of Fiscal Recovery Funds in ways that do not result in resident displacement or loss of affordable housing units?

Because the rehabilitation and demolition of blighted, vacant properties eliminates public safety risks, builds stronger, healthier communities, and creates new opportunities for housing, businesses, or green reuses to support long-term stability and community resiliency, these activities should be explicitly eligible SLFRF uses to respond to both the public health and negative economic impacts of COVID-19.

Analysis

As a threshold matter, we understand that specific activities not explicitly enumerated in the IFR are not ineligible per se, particularly when those activities are implicit within the context of a broader use that Treasury has deemed presumptively eligible. For example, because the IFR explicitly authorizes the development of affordable housing in Qualified Census Tracts (“QCT”), the rule does not limit a SLFRF recipient from accomplishing this affordable housing development through the rehabilitation or demolition of existing vacant or abandoned structures, or other site preparation activities necessary for new construction.

Explicitly including rehabilitation and demolition as presumptively eligible uses makes sense in this context, if for no other reason than to encourage SLFRF recipients to include these activities in their overall QCT affordable housing plans, giving state and local officials leading the decision-making process the assurance that such uses will not be challenged. Community Progress strongly supports adding the explicit inclusion of rehabilitation and demolition to support affordable housing and stronger neighborhoods in the Treasury guidance.

Even outside the context of increasing the supply of affordable housing in QCTs, however, the demolition and rehabilitation of vacant, abandoned, and deteriorated residential, commercial, and industrial properties strengthens neighborhoods, mitigates negative economic impacts on disproportionately impacted populations, and improves public health and public safety.[1] Widespread vacancy and abandonment have proven negative economic impacts on neighborhood health, including increased rates of crime,[2] decreased property values,[3] and higher municipal and county service costs such as police, fire, and code enforcement.[4] “Higher property values, lower crime rates, more jobs and increased economic activity have been strongly tied to blight reduction methods such as demolition, rehabilitation, new construction, and vacant lot improvement.”[5] Disinvested rural, suburban and urban communities across the U.S. were facing a glut of vacant and deteriorated residential, commercial, and industrial properties prior to the severe job losses and business closures caused by COVID-19.

For example, in the city of Flint, Michigan, more than 1,500 vacant, burned, and blighted homes sit waiting to be demolished. The estimated cost to remove these dangerous structures alone exceeds $17 million.[6] Their removal has remained a top priority by Flint residents according to community engagement efforts since 2013, but the City and its land bank lack the funding to address the scale of this need. COVID-19’s economic impacts will exacerbate communities’ vacancy challenges in the years ahead.

In severely disinvested cities and neighborhoods with vacancy and market challenges akin to Flint – especially small and mid-sized cities with populations less than 50,000, additional housing or commercial property supply may run counter to the immediate needs and long-term vision for the community. In those cases, demolition of a vacant structure may serve the purpose of creating new opportunities for expanding park space and tree canopies, reducing impermeable surfaces and installing green stormwater infrastructure, developing renewable energy projects, and expanding land-based businesses. Greening vacant lots has had numerous positive impacts in communities across the country, including reduction in crime, improvements in physical and mental health, and strengthening property values.[7] Thus, supporting both the greening and maintenance of vacant lots should also be considered explicitly eligible SLFRF activities.

In the IFR, Treasury recognizes the need for and encourages the use of SLFRF to address disparities in public health outcomes and build healthier environments,[8] including:

“housing services to support healthy living environments and neighborhoods conducive to mental and physical wellness;” and
“evidence-based community violence intervention programs to prevent violence and mitigate the increase of violence during the pandemic.”[9]

We support Treasury’s identification of these broad, flexible categories of uses to address public health, community wellbeing, and public safety, and ask Treasury to recognize that rehabilitation of blighted structures, demolition of unsafe, vacant, and abandoned properties, and greening and maintenance of vacant lots addresses not only negative economic consequences of the COVID-19 health crisis, but also addresses public health, promotes public safety, mitigates community violence, supports healthy living environments, and strengthens neighborhoods conducive to mental and physical wellness.

Many advocates and policymakers fear that a wave of post-COVID-19 foreclosures and evictions after moratoria and forbearance periods end will precipitate a new residential vacancy crisis.[10] In Ohio alone, stakeholders estimate at least 5,000 homes around the state have already become vacant since the start of the COVID-19 crisis, despite the ongoing foreclosure and eviction moratoria. The negative impacts of the public health and economic emergency on small businesses have already begun to manifest in commercial real estate vacancies.[11] Resources to address vacancy across residential, commercial, and industrial sectors, including acquisition and rehabilitation, demolition, greening, and vacant lot maintenance will be critical to the health and strength of communities around the country moving forward.

Thus, Center for Community Progress urges Treasury to explicitly include rehabilitation and demolition of vacant, abandoned, or deteriorated structures, and the greening and maintenance of vacant lots, as eligible uses of ARPA SLFRF allocations, not only in the affordable housing development context in QCTs, but as activities that address public health and public safety challenges in all communities.

Support for existing land bank operations and the establishment of new land banks should also be explicitly included as eligible spending of SLFRF dollars. Land banks are a proven tool to steward recovery and long-term community resiliency. Land banks are public entities with unique governmental powers, most often created pursuant to state-enabling legislation, that support equitable development by acquiring and managing vacant real property for the advancement of community goals, with special attention to affordable housing and public neighborhood amenities. Because of their direct relationships to municipal, county, and state governments, land banks are key partners in leveraging public funds to strengthen communities. Land banks also have a proven track record of rapid, effective use of Federal and State funds to serve community priorities, meet public health, public safety, and economic needs, and support equitable, inclusive neighborhood improvement, including the Neighborhood Stabilization Program and the Hardest Hit Fund.

Citing:

[1] Dynamo Metrics and Cuyahoga Land Bank. 2019. “Cuyahoga Land Bank: 10-year Economic Impact Analysis.” http://cuyahogalandbank.org/documents/CuyahogaImpactReport20190626.pdf

Alm, James, Zackary Hawley, Jin Man Lee, and Joshua J. Miller. 2016. “Property Tax Delinquency and Its Spillover Effects on Nearby Properties.” Regional Science and Urban Economics 58 (Supplement C): 71–77. https://doi.org/10.1016/j.regsciurbeco.2016.02.006

Baumer, Eric P., Kevin T. Wolff, and Ashley N. Arnio. 2012. “A Multicity Neighborhood Analysis of Foreclosure and Crime.” Social Science Quarterly 93 (3): 577–601. https://doi.org/10.1111/j.1540-6237.2012.00888.x

Biswas, Arnab. 2012. “Housing Submarkets and the Impacts of Foreclosures on Property Prices.” Journal of Housing Economics 21 (3): 235–45. https://doi.org/10.1016/j.jhe.2012.05.002

Daneshvary, Nasser, Terrence M. Clauretie, and Ahmad Kader. 2011. “Short-Term Own-Price and Spillover Effects of Distressed Residential Properties: The Case of a Housing Crash.” The Journal of Real Estate Research; Sacramento 33 (2): 179–207. https://www.jstor.org/stable/24888370

Ellen, Ingrid Gould, Johanna Lacoe, and Claudia Ayanna Sharygin. 2013. “Do Foreclosures Cause Crime?” Journal of Urban Economics 74 (March): 59–70. https://doi.org/10.1016/j.jue.2012.09.003

Griswold, Nigel G. 2006. “The Impacts of Tax-Foreclosed Properties and Land Bank Programs on Residential Housing Values in Flint, Michigan.” Michigan State University. Department of Agricultural Economics.

Griswold, Nigel G., Benjamin Calnin, Michael Schramm, Luc Anselin, and Paul Boehnlein. 2014. “Estimating the Effect of Demolishing Distressed Structures in Cleveland, OH, 2009-2013.” Western Reserve Land Conservancy – Thriving Communities Institute. https://www.wrlandconservancy.org/pdf/FinalReportwithExecSummary.pdf

Griswold, Nigel G., and Patricia Norris. 2007. “Economic Impacts of Residential Property Abandonment and the Genesee County Land Bank in Flint, MI.” MSU Land Policy Institute, 2007–05. http://community-wealth.org/sites/clone.community-wealth.org/files/downloads/report-griswold-norris.pdf

Han, Hye-Sung. 2014. “The Impact of Abandoned Properties on Nearby Property Values.” Housing Policy Debate 24 (2): 311–34. https://doi.org/10.10 80/10511482.2013.832350

Harding, John P., Eric Rosenblatt, and Vincent W. Yao. 2009. “The Contagion Effect of Foreclosed Properties.” Journal of Urban Economics 66 (3): 164–78. https://doi.org/10.1016/j.jue.2009.07.003

Ihlanfeldt, Keith, and Tom Mayock. 2016. “The Variance in Foreclosure Spillovers across Neighborhood Types.” Public Finance Review 44 (1): 80–108. https://doi.org/10.1177/1091142114535835

Immergluck, Dan. 2015. “The Cost of Vacant and Blighted Properties in Atlanta: A Conservative Analysis of Service and Spillover Costs.” Center for Community Progress. http://wcadatadashboard.iac.gatech.edu/library/files/original/85b40d69f776e4050857ac106530692b.pdf

Immergluck, Dan, and Geoff Smith. 2006. “The Impact of Single-Family Mortgage Foreclosures on Neighborhood Crime.” Housing Studies 21 (6): 851–66. https://doi.org/10.1080/02673030600917743

Katz, Charles M., Danielle Wallace, and E. C. Hedberg. 2013. “A Longitudinal Assessment of the Impact of Foreclosure on Neighborhood Crime.” Journal of Research in Crime and Delinquency 50 (3): 359–89. https://doi.org/10.1177/0022427811431155

Lacoe, Johanna, and Ingrid Gould Ellen. 2015. “Mortgage Foreclosures and the Changing Mix of Crime in Micro-Neighborhoods.” Journal of Research in Crime and Delinquency 52 (5): 717–46. https://doi.org/10.1177/0022427815572633

Leonard, Tammy, and James C. Murdoch. 2009. “The Neighborhood Effects of Foreclosure.” Journal of Geographical Systems; Heidelberg 11 (4): 317–32. https://doi.org/http://dx.doi.org.proxy2.cl.msu.edu/10.1007/s10109-009-0088-6

Lin, Zhenguo, Eric Rosenblatt, and Vincent Yao. 2009. “Spillover Effects of Foreclosures on Neighborhood Property Values.” Journal of Real Estate Finance & Economics 38 (4): 387–407. https://doi.org/10.1007/s11146-007-9093-z

Mikelbank, Brian A. 2008. “Spatial Analysis of the Impact of Vacant, Abandoned, and Foreclosed Properties.” Federal Reserve Bank of Cleveland. https://www.clevelandfed.org/newsroom-and-events/publications/special-reports/sr-200811-spatial-analysis-of-impact-of-vacant-abandoned-foreclosed-properties.aspx

Rogers, William H., and William Winter. 2009. “The Impact of Foreclosures on Neighboring Housing Sales.” The Journal of Real Estate Research; Sacramento 31 (4): 455–79.

Schuetz, Jenny, Vicki Been, and Ingrid Gould Ellen. 2008. “Neighborhood Effects of Concentrated Mortgage Foreclosures.” Journal of Housing Economics 17 (4): 306–19. https://doi.org/10.1016/j.jhe.2008.09.004

Stucky, Thomas D., John R. Ottensmann, and Seth B. Payton. 2012. “The Effect of Foreclosures on Crime in Indianapolis, 2003–2008*.” Social Science Quarterly 93 (3): 602–24. https://doi.org/10.1111/j.1540-6237.2012.00890.x

Wallace, Danielle, E. C. Hedberg, and Charles M. Katz. 2012. “The Impact of Foreclosures on Neighborhood Disorder Before and During the Housing Crisis: Testing the Spiral of Decay.” Social Science Quarterly 93 (3): 625–47. https://doi.org/10.1111/j.1540-6237.2012.00886.x.

Whitaker, Stephan, and Thomas Fitzpatrick. 2013. “Deconstructing Distressed-Property Spillovers: The Effects of Vacant, Tax-Delinquent, and Foreclosed Properties in Housing Submarkets.” Journal of Housing Economics 22 (2): 79–91. https://doi.org/10.1016/j.jhe.2013.04.001

Williams, Sonya, George Galster, and Nandita Verma. 2014. “Home Foreclosures and Neighborhood Crime Dynamics.” Housing Studies 29 (3): 380–406. https://doi.org/10.1080/02673037.2013.803041

Community Progress Weighs in on $350 Billion ARPA State and Local Recovery Fund

The main themes of our message to Treasury are:

Community Progress Responses to Questions 1, 5, 8, and 9

Analysis

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