Wednesday, October 21, 2009

The "Big Picture" of Cincinnati's Demolition Policy: Part 2

In an act of perfect timing I received the October 30 notice of the Nuisance hearing list yesterday. This list includes 21 properties (sometimes there are more, rarely less) that the city deems worthy of a nuisance determination and demolition. These hearings are typically held monthly.

The properties are city wide, Some in Fairmount, OTR, Price Hill, in Walnut Hills. These properties are a variety of architectural styles and in review of the photos from the auditors office only 1 property of the 21 was newer and "Non contributing" meaning it was too new to have contributing historical value to its neighborhood. 1 other property, that would be considered historic had a serious fire and is an essential total loss.

1563 Tremont, the grey Italianate townhome pictured here, is typical of the homes on this list. Sold in 2002 for 71,000.00, before fairmount became a Section 8 dumping ground, it became a rental and went through a succession of owners and tenants. The first orders appear to be in 2004 and are the usual 'deferred maintenance" issues that occur with a rental property.

It was dumped back on the bank in 2007 and sold to TC Funding for $4500. TC Funding is a regular buyer of distressed properties in Cincinnati. According to the auditors records Nine properties at the moment in Hamilton County, a cross check shows all 9 properties have "issues" and most have delinquent taxes. In fact TC Funding currently owes 7,970.99 in taxes to the county, the vast majority delinquent. This is normal for these types of property owners. They buy the property from the bank, do not pay taxes and rent the property out for as long as they can, for ungodly high rents to people who can't qualify for section 8 or do not have good credit until it winds up sold for taxes.

Low overhead. Keep it rented and "milk' the property for all its worth. Of course, maintenance costs money and the less you do the better the profit margins. "Investor types" like TC Funding love Ohio because it is one of only a handful of states that do not require that ALL delinquent property taxes be paid BEFORE a deed can be recorded! "Investor types' and 'slumlords' tend to stay away from states that require delinquent taxes be paid to record a deed, it also makes it easier to "shift" ownership in a 10 dollar transactions to another "Paper LLC" thereby avoiding building inspection hearings. It is interesting to note, because of this practice, several states have now enacted legislation that makes it illegal to buy a foreclosed property IF the owner has orders against any other property.

Not all properties fall in this type of owner, but the vast majority on the list do, some had "probate issues, one was a 'seized property' and some have already had the delinquent taxes sold. Over 90 percent of the properties on this list need repairs like gutters or downspouts , maybe need securing, some for failure to get a VBML. Not real 'structural issues' that you would think of when talking about demolishing a property, These are not emergency demolitions required because of a structural problem that endangers homes around it. These are 'nuisance demolitions' , basically generated by over worked inspectors who are "fed up"dealing with a property owner, or they have the neighbor on their case and they actually get 'lucky' and can track down an owner to serve them with legal notice of a hearing.

Some are actually on the market and for sale like this home at 928 Nassau, no doubt an architect designed brick and rusticated stone Romanesque Mansion in Walnut Hills on the market for 28K. often it is the fact that a property has orders or an VBML (vacant building maintenance license) that will keep a person from buying, especially if a similar house down the street is off the radar and happens to not have a complaint. No city red tape to deal with. If all the properties on this list are "affirmed" as a "public nuisance" we are looking at the addition of 21 properties to the Cincinnati demolition list. It is rare for a property to be "saved' at this point. Even though someone with time and money could restore almost any of these homes.

To put it the magnitude of this senseless demolition in perspective. Not including all the manhours by city inspectors, the reviews by managers, research by staff and legal to find owners of record. It typically cost thousands just to abate and demo a small house. Ultimately the city will spend on average between 10,000 to 15,000 each, much more on the larger ones, or between 210,000 and 300,000 to demolish just this list of houses.

REAL DOLLARS NOT SPARE CHANGE: According to the Hamilton Auditors Office and per the 2008 assessment, the "market improved' value of the 21 properties on this list was an incredible $1,081,510.00 Dollars! In researching this piece, actually more, as two properties had errors on the description and don't show up on the auditors site and one property is part of a multi property site and I had to 'prorate' the value of just one building.

So the City of Cincinnati wants to demo 21 properties worth, according to the county, well over a million dollars, spend between 210,000.00 to 300,000.00 dollars of taxpayer monies doing it and the end result will be 21 vacant lots (parcels) worth a typical valuation of around 2000.00 each or a mere 42,000.00 for the group!

Overall the loss of 1,039,510.00 of taxable valuation to the county at a cost of between 210,000 to 300,000.00 by the city. It should be noted that typically the city never recovered the demolition costs as they don't bother to actually file a demolition recovery lien because the city doesn't want to file the lien for fear they will get "stuck" with a vacant lot.

However the end result is the current property owner, who never maintained the house will not maintain the vacant lot, which has zero value to them now. Neighbors or neighborhood Associations then complain to the city about an overgrown lot or illegal dumping with the end result 21 vacant lots that will be overgrown in the summer and will ultimately require our city tax dollars to cut and keep clean. Some councilmen have suggested that the city actually file those liens and the city obtain the lots and give them to adjacent property owners or neighborhood groups (who would actually pay some taxes on them) but that proposal has fallen on deaf ears at Building inspections and city legal. Ultimately in 3-5 years the city winds up with these lots and they can sit for years , being maintained by the city, before someone would buy them at a surplus property sale.

As Over- the- Rhine struggles to stop "Emergency Demolitions" , normal "nuisance demolitions' of the two properties on this list will likely put OTR at the 'tipping point' of 5o percent loss.

Bear in mind this is ONE MONTH list of Nuisance properties! If you extrapolate for the year we are adding at least 250 properties PER YEAR to our DEMO list and if they are all demoed ( at an ultimate cost eventually of 2-3 Million dollars), the county will lose over 12 Million Dollars of taxable property in a year. Gone forever from the tax roles as it could be years, or never, before the vacant ground is ever redeveloped. Over a decade? that is 120 MILLION dollars of market value property destroyed by a city government in a misguided effort to stop blight?To see what that looks like? Look at Detroit Michigan, literally bankrupt by a failed urban renewal model of "blight= bulldozer". Clear it and new development will come. It hasn't come to Detroit and almost every major city and urban planner has abandoned what has become known as the "Detroit Model' of urban renewal.


The loss to our neighborhoods is huge. Every time a foreclosure trades hands and heads down the "slumlord path" property values go down for the entire neighborhood. Vacant lots do NOTHING to increase adjacent property values. While its true a vacant house dampens property value, if that property is restored it will increase values in the area. Often these properties are commercial mixed used properties that in addition to providing housing, they provide business (or could provide businesses to a neighborhood) and much needed jobs.

The net result to you and I the taxpayers? Increased taxes even though property values decline.. At some point property taxes rates will need to increase. Usually caused by increase in Levy's because the shrinking market value of the existing tax base (caused by all these demolitions) can no longer support the project. Less property at market value to tax= less taxes collected. Taxes for things like schools, the zoo, hospitals.As the demolition trend continues expect to see more levy requests.

At some point those of us left with homes will be required to pick up the slack. Higher property taxes will lead to a Cincinnati that is less competitive for new business, Cincinnati without viable Urban Neighborhoods, desired by younger workers who are not interested in 2 hour commutes who would rather bike, bus, or hop on a streetcar to work or shop.

Most importantly we look less like a Historic City and more like a "warzone" with block after block of vacant overgrown lots, less businesses move in and before we know it we ARE Detroit. Unchecked, the current policies of this city would result in the destruction of 3000 properties in the next decade and because many are multifamily or mixed use the loss of potentially 5000 units of housing! This becomes more that a "house here or there" it is the 'wiping clean' of entire neighborhoods. All the houses shown in the photos in this article, will be GONE FOREVER, unless we stop this misguided city policy.

By comparison, if the city actually filed liens for the basics that happen early in the decline of a property, liens for board ups, high weeds and such and went to court early in the process to obtain these homes. They could be placed into a city land bank or with local neighborhood, church or redevelopment groups that could fix them. Other cities take this approach with great success, being proactive is lost on our city government who complains about the lack of tax revenues and the need for 'belt tightening'.

A Cincinnati Land Bank along with passage of State level laws that requires delinquent taxes must be paid to record a deed would stop the 'slumlord shuffle' between LLC'c to avoid hearings in the first place and makes Cincinnati less attractive to speculators and more attractive to restorers who would see less slum property in their neighborhood to start with. We could get a handle on this problem which has been exacerbated by the foreclosure crisis. Passage of laws that would prevent purchasing a foreclosure if a property owner has open orders against a property. Or the passage of a law that makes it illegal to buy at tax sale a property if the buyer has delinquent taxes on other properties. All would slow the decline of problem properties.

Part 3 : Taxpayer outrage, solutions and a change of course.

SPECIAL NOTE: Being an election year discuss this issue with local candidates for council, make sure they know you have read this article an you are concerned about the direction this city is going and the need for serious change in the way we deal with problem property, out of state investors and the timely collection of property tax dollars.


D R E W said...

where did part 1 go? i had linked to it via cinplify because i thought more people would be interested.

Paul Wilham said...

I think blogger "ate my homework"!

Looking into what happened I have files off site so I will see about recovery and repost of part 1