Municipalities—especially cities, following the out-migration of their residents to the suburbs in the mid-twentieth century—have been trying to find ways to address and mitigate the problem of abandoned and vacant buildings and lots. While some progress has been made with the establishment of land banks, funded mostly by bank foreclosure settlement monies from New York State Attorney General Eric Schneiderman, the divide between the tools needed to fix the problem and the tools currently in the proverbial toolbox is still considerable.
I don’t believe that cities can ever solve the abandoned and vacant property issue unless the state gives them the tools necessary to build a comprehensive program to reverse the trend of properties being abandoned and left to decay, and the means to rehabilitate these properties and make them habitable. State involvement is necessary because under the state constitution, only the state legislature can legislate the imposition of taxes, not the local government. An example of this was the recent special session (“Extraordinary Session” in legislative speak) where the state legislature voted to approve the county sales tax extenders. Without this action, counties would have lost their legal ability to collect sales tax, as the law was due to “sunset” this year.
In addition to restricting the power to impose taxes, the state places limits on other powers of local governments through laws like the General Municipal Law, the Local Finance Law, the Municipal Home Rule Law, the County Law, and the Town Law. Therefore, it is incumbent upon the state legislature to enact laws that will give cities the ability to use the hammer of real property taxation and the placing of liens on fire insurance proceeds to help them combat the negative effects vacant and abandoned buildings/lots have on their urban fabric.
Two proposals I have made to our state legislative representatives over the past fifteen years would address holes in both the Real Property Tax Law (RPTL) and the General Municipal Law that actually act as disincentives for property owners to take care of their properties and to secure and rebuild a property after a fire.
The RPTL has a major flaw that actually rewards property owners for letting their property go to seed. As all homeowners know, the better-kept properties and those with improvements, say new siding or an addition like a deck, pay more in taxes than a house that is in a deteriorated condition. Abandoned properties are even assessed at a much lower amount because they are vacant. This needs to change. The RPTL should not reward a property owner with a lower assessment, thus lower taxes, because that owner did not take care of their property. It should be the other way around – a blighted property should be billed at a higher rate than a similar property that is in good condition. In order to accomplish this, the RPTL needs to be amended to allow municipalities to impose a higher tax rate on abandoned/vacant buildings.
The reasoning behind the increased tax rate is twofold: First, to act as a financial incentive to get the property owner to invest in their property instead of rewarding them for abandoning their property. Second, to help defray the costs associated with blighted properties. These costs arise from an increase in crime in the vicinity of vacant houses and fire calls to vacant buildings. There are also personal costs as houses located within 150 feet of a vacant property lose over $7,000 of their value, according to “Revitalizing NY State,” a report from Attorney General Schneiderman. This, then, leads to lower assessments on properties near vacant buildings, thus lowering the city’s tax base even further. A vicious cycle, for sure.
The second proposal I made was way back in 2005 following a devastating fire in August of that year on Madison Place. I proposed legislation that would allow a municipality to place a lien against the proceeds of a fire insurance policy in the event the owner fails to remedy the damage to their property. This would act as a financial incentive to encourage the insured to stabilize and remedy the damage to their property. The proposal came about because, following the Madison Place fire, the owner of one of the buildings took the insurance proceeds and left the property as is – a shell of its former self. The owner took no action to secure, stabilize and remedy his destroyed building. His inaction to stabilize and secure the structure led to mold issues for the adjoining houses, thus placing an additional financial strain on the property owners who rebuilt their homes.
Assemblyman John McDonald looked into this proposal after he was elected. He worked with the New York State Conference of Mayors and Municipal Officials (NYCOM) to draft legislation amending the General Municipal Law (Sec. 22). The current law allows municipalities to place a lien on the proceeds from a fire insurance policy, but only for certain real property. The law excluded one and two family structures. The proposed amendment simply changes the definition of “real property” in the General Municipal Law to include one and two family homes that are not owner-occupied residences. And, I was pleasantly surprised to find out, the proposal I made twelve years ago not only had been introduced in the state legislature (bill numbers A2784-B and S3691-B), but it passed both houses in June of this year. It only needs Governor Cuomo’s signature to become law.
I would like to thank Assemblyman McDonald for taking the lead on this legislation and seeing it through to passage. It will add another tool in the toolbox to help municipalities slow the pace of properties becoming neglected and abandoned. However, many more tools are needed. Let’s start the next round of changes to state laws by adding a sledgehammer to the tool box. The sledgehammer would be the overhauling of the Real Property Tax Law so that it would no longer provide an unintended incentive to property owners who abandon their properties, but would instead give municipalities the authority to impose higher taxes on blighted properties. As I wrote a couple of weeks ago, it will take bold ideas to reverse the trend of abandoned properties in our urban centers. What could be bolder than to take a sledgehammer to our archaic RPTL and rebuild it as a tool to use to reverse the decay caused by abandoned and vacant buildings and lots?