This month, the Baltimore City Council introduced a bill aimed at reducing the number of vacant properties in the city by imposing Vacant Building Notices (VBNs) on owners and putting pressure on them to sell to someone who will fix them up. . As the population continues to decline, this flawed policy is likely to increase vacant housing.
The City Council’s bill would tax the roughly 13,000 city-owned properties that currently have VBNs at a rate of $6.74 per $100 of assessed value in the first year and $8.99 annually thereafter. Because VBNs are not removed until renovations are complete and a certificate of occupancy is issued, higher property taxes are paid by the developer, resulting in lower home prices. Development in urban areas is already expensive, labor-intensive and has low profit margins. Raising tax rates does not encourage buyers, it discourages them.
The city doesn’t have a supply problem with too many vacant properties. Rather, it’s a question of demand. The city’s population is shrinking by an average of 500 people every month. Policies that encourage population growth will increase demand for housing, and developers and rehabilitators will jump at the chance to rehabilitate vacant properties.
“Baltimore is the only major East Coast city whose population continues to decline,” according to the “Baltimore Together” economic plan launched by Mayor Brandon Scott’s economic development agency, the Baltimore Development Corporation. It is declared. “An important step is to develop a plan to reduce property taxes and codify it into the Baltimore City Charter through a referendum,” the plan states. It is well known that Baltimore City’s property tax of $2.248 is more than double that of Baltimore County’s $1.10, Howard County’s $1.014, and Anne Arundel’s 98 cents. The city’s high tax rates provide an economic incentive for more people to leave Baltimore City. Many, including current and former state, federal and local elected officials, planners, economists, analysts, and even the Open Society Institute, agree: “With a credible promise of lower taxes, “It will attract new residents and investors to the city.” I suggest that the City Council focus its energy on lowering everyone’s property tax rate to stimulate population growth.
The Baltimore Small Developers Collective is a group of real estate professionals, many from minority groups, who purchase and renovate properties throughout Baltimore City. Most small developers have limited capital and rely on credit cards or borrowing from partners to finance property purchases and renovations. Raising vacant property taxes would discourage these small housing providers from taking drastic action. Let’s stop raising taxes on this diverse group of people who are actually solving the vacant housing problem. Encourage entrepreneurship and generational wealth building.
Lawmakers told me that Washington, D.C., used the same strategy to solve its vacant property problem: taxing vacant buildings at four times the regular property tax rate. I challenge this assumption. History shows that from 1950 to 2000, D.C. experienced a population decline at a rate and pattern similar to Baltimore City. DC’s population began to grow in 2000. This was shortly after the passing of the Tax Parity Act, which forced DC to make its tax rates competitive with surrounding jurisdictions. D.C. first tried a punitive tax rate strategy on vacant properties in 2003, then raised its rates in 2010 and 2017. According to the Washington Post in 2021, D.C. flagged 3,000 properties as blighted and vacant, but only 189 properties were actually taxed at blighted rates. The article reported that the Washington, D.C., auditor has found the D.C. government incompetent and incompetent in implementing onerous property taxes on vacant properties. Therefore, the program was ineffective. The residential property tax rate in Washington, D.C., is currently just 85 cents, well below the $2.248 rate in Baltimore City. D.C.’s success has less to do with imposing punitive taxes on blighted properties than with setting tax rates that are competitive, fair, and just for everyone.
This year, the mayor and City Council could have lowered the property tax rate by 9.1 cents and another 7.4 cents in 2023, generating the same property tax revenue as last year. Instead, the mayor and city council kept taxes high and spent the extra money. Taking serious and concerted action to lower everyone’s property taxes will do more to unite Baltimore.
Rather than enact new laws and increase bureaucracy, cities should use the tools currently available. VBN requires owners to demolish or repair buildings within 30 days, subject to fines of up to $500 per day. In more than 40 years of selling and managing real estate in the city, I can’t remember ever being fined like this. The City Council bill won’t go into effect until July 1, 2026, nearly two years from now, but the fines could start today. Reducing property tax rates for all citizens and imposing penalties on VBNs currently on the books is a more effective way to achieve the desired goals than enacting new laws that are ineffective. Isn’t there?
Ben Frederick III is a Baltimore City real estate agent specializing in apartments and investment properties. He can be reached at Ben@BenFrederick.com.
