This article originally appeared in the Federal Reserve Bank of Philadelphia’s Cascade, Fall 2010
By Terry Gillen
Executive Director, Philadelphia Redevelopment Authority
A recent story in the Philadelphia Inquirer highlighted how Philadelphia’s tax foreclosure process contributes to the city’s vacant property problems. The reporter described a home in West Philadelphia that was located in the middle of a block of row houses. It was the only vacant building among otherwise well-cared-for homes. The owners had divorced and moved away, abandoning the property. Now 15 years later, the roof, floors, and rear wall are in danger of collapse, jeopardizing the adjoining occupied homes. Even though more than $10,500 is owed in back taxes, the city has yet to foreclose on the property.
To address difficult situations like the one described above, the Philadelphia Redevelopment Authority (RDA) is leading a citywide effort to transform Philadelphia’s land management system, and it’s focusing on vacant land. Last fall, Philadelphia Mayor Michael Nutter set up a Vacant Land Task Force with the goal of getting the leading stakeholders on the vacant land issue to develop a common vision and work plan.
The Current Vacant Land Management System
Today, the RDA estimates that there are 40,000 vacant parcels in Philadelphia. Of these parcels, 30,000 are privately owned.1
- More than 60 percent of the privately owned vacant parcels are more than 10 years’ tax delinquent, and many of these properties have more taxes owed on them than they are worth, eliminating the owner’s incentive to maintain or sell the property.2 The city has no plans to acquire most of these properties through the tax foreclosure process because of high transaction costs and concerns about ongoing liability.
- Through the tax foreclosure process, tax delinquent vacant land is transferred from derelict owners to new responsible owners. Since the tax foreclosure process is considered a revenue collection tool, properties are selected to be sold based on an assessment of their marketability at a sheriff’s sale auction. This auction is a prime feeding ground for speculators.
- The city’s Department of Licenses and Inspections does not have the tools or resources to hold property owners accountable for the maintenance of their properties. Therefore, landowners are not accountable for the blighting influence of their landholdings on surrounding property, and, as a result, nearby homeowners suffer unfairly.
The more than 10,000 parcels that are owned by the public fall under the control of several city entities, each with different goals. Management systems for these parcels are disjointed and lack adequate incentives.
- The RDA owns 2,800 parcels that were acquired by eminent domain for redevelopment efforts.
- The city of Philadelphia (Department of Public Property) owns 5,700 parcels that were acquired by tax foreclosure and are surplus to the needs of the city. The city is under no obligation to ensure redevelopment; this land is currently viewed as an asset to be liquidated at the highest price.
- The Philadelphia Housing Development Corporation (PHDC) owns 700 parcels that were acquired by purchase or donation. The PHDC sells its property for fair market value and tries to ensure that buyers have plans and resources in place to support redevelopment.
- The Philadelphia Housing Authority (PHA) also owns approximately 1,100 parcels that are surplus to its operational needs. The PHA needs HUD approval to sell or convey this property to others.
Past Reform Efforts
The city’s vacant land management systems have been examined numerous times, and many suggestions have been made to improve these systems. In 1995, the City Planning Commission published a broad analysis of the vacant land problem and offered numerous solutions. In 1998, a committee was organized under the joint leadership of City Council and the mayor’s office that again suggested several opportunities for change, including the aggressive use of tax foreclosure to clear the titles to vacant properties. Starting in 2001, the Neighborhood Transformation Initiative (NTI) tried to implement some of the previously proposed reforms. In 2006, NTI attempted to reorganize the city’s housing agencies by separating the RDA’s land staff from the city’s land staff. However, this separation created further disjointed operations for the two largest landholding agencies. Overall, the landholding systems of the city remain much as they have been for the past 30 years.
2010: Opportunity for Change
Mayor Nutter designated the RDA to lead the vacant land reform effort. In the past, various other city agencies have overseen the management of vacant land, but none of them dealt with the acquisition and disposition of land on a daily basis, as the RDA has. The RDA has a deep level of experience and understanding of the complexities of vacant land management. More important, the RDA has already made some significant progress in this area:
- In 2008, the RDA had almost no computer mapping abilities, whereas today it has state-of-the art mapping capacity. This has enabled the RDA to engage in planning efforts that were previously impossible. The city’s successful application to HUD for $44 million in federal stimulus funds last year could not have been completed without the RDA’s mapping technology.
- The RDA spent one year developing a complete inventory of its landholdings and, in June 2009, posted that inventory on its website.
- In 2009, the RDA completed a successful pilot program using real estate brokers to sell land. This pilot program sold nine parcels, raised $400,000 for the RDA, and stimulated more than $1.5 million in construction activity. The RDA is in the process of expanding the program.
- The RDA is working with national and statewide networks of local governments that are exploring ways to improve vacant land management systems. As part of this effort, the RDA staff and city officials, including Mayor Nutter, have participated in several training sessions at the Kennedy School at Harvard, which are funded by the Ford Foundation.
For the past three years, there has been a growing national effort to share best practices in vacant property reclamation sponsored by the Ford Foundation, Smart Growth America, and the National Vacant Properties Campaign. Two national conferences and a roundtable discussion hosted by the Brookings Institution have helped to identify some of the most effective programs across the country. Recently, these efforts have come together in a new national Center for Community Progress.
This center is working to improve local vacant property management systems in Pennsylvania, including the city of Philadelphia. The Housing Alliance of Pennsylvania has been coordinating vacant land reform strategies by municipalities across the state and convening working sessions to focus on legislative reforms. Finally, and most important, Philadelphia’s budget crisis means that the city cannot afford to let any possible source of revenue generation or economic activity sit idle.
The No Vacancy Project
Philadelphia’s No Vacancy Project was created to bring together the appropriate internal and external stakeholders to explore ideas for vacant land reform. For the first time, all city agencies that interact with the vacant land system or the tax lien system are at the table working together. Members include the Department of Licenses and Inspections, the Office of Housing and Community Development, the Planning Commission, the Revenue Department, the Public Property Department, members of Philadelphia City Council, and outside entities, such as the Pennsylvania Horticultural Society and representatives from Temple University and the University of Pennsylvania. The group is engaged in the following tasks:
- A working group is overseeing an effort to quantify the impact of reforming the current system (and conversely, the cost of not reforming the system) as a way to focus public support on the project.
- This past winter, the city began a targeted outreach campaign involving meetings with elected officials and other stakeholders.
- Also this past winter, a working committee began to conduct legal research on what system changes can be made under current law and what changes will require state or local legislation. This work is being funded in part by the Philadelphia Association of Community Development Corporations (PACDC), with additional staff support from the Housing Alliance of Pennsylvania.
- The RDA and the PACDC are also reaching out to a broader group of external stakeholders, including community development corporations and neighborhood groups.
- In June, after receiving significant input from the RDA and members of the Housing Alliance, a land bank bill was considered in the Pennsylvania General Assembly. The bill passed the House in June and is awaiting action in the Senate. As a result, the city has begun to consider what this might mean for Philadelphia. Philadelphia’s approach to land banking will build on best practices in other areas, including Genesee County, MI.3 The RDA will also attempt to build on existing Philadelphia institutions, such as the Vacant Property Review Committee.
- Finally, a working committee is considering ways to protect the residents of occupied buildings. The new vacant land system must include adequate protections for low-income residents who cannot afford to pay their taxes, and the process must include safeguards that ensure that these residents are treated in a respectful way.
Here are some lessons that the RDA has learned:
- Marketing works — even in a down market. Every time the RDA lists properties for sale or works with brokers to sell parcels, it finds some demand for land — even in a soft economy. The RDA recognizes that most city parcels are not considered desirable. Identifying and marketing the parcels that have value are its next challenges.
- Take one step at a time. Philadelphia has a large, complicated land management system; therefore, change will not come quickly. The only road to success is by working through each problem.
- Support from the top is critical. It would not have been possible to get city agencies to tackle this issue if the mayor did not support this effort.