Slumlording isn't always so simple

Right:  A house being rehabilitated in Detroit by DIY Network's Nicole Curtis.  Caption: Curtis also bought the charred remains and lot of the house next door to the house on Campbell Street. It was destroyed in a fire. It took two days with a Bobcat to clear the lot, Curtis said on Facebook. "We were here for a week and half outside before we ever made it inside," says Sykes. (Nicole Curtis/Facebook)

There is coverage about an activist's campaign in Baltimore to call attention to vacant, abandoned, and poorly maintained buildings in the city--focused mostly on residential properties.  See "Foes of Urban Blight Take Aim at Landlords" from the Wall Street Journal.

Not that I want to defend a slumlord (and I have accused people of being such from time to time when they deserve to be so labeled), but as discussed in the entry on "abandominiums" in Anacostia DC ("Deeper Thinking, Programming Needed for Weak Residential Markets") property abandonment is most often the result of it being more expensive to maintain a property than it yields in rental income or the problems in successfully renting and managing the property exceed the skills, time, and financial capacity of the owner.

This is an especial problem in weak real estate markets and submarkets, with more supply of potential housing than there is demand.

I have discussed from time to time the book Building neighborhood confidence: A humanistic strategy for urban housing by Rolf Goetze, which was published in the mid-1970s, to which I was introduced in 2003.  Goetze was the director of research for the Boston Redevelopment Authority, and the basic point that he makes--discussing all these issues in far greater detail than I--that in such situations the government can and should step in and help in rebuilding confidence in a neighborhood through a property improvement strategy, but that the point of the investment is to rebuild the confidence of property owners in the neighborhood and in investing on their own, that the point isn't to create dependence, but to provide the necessary support.

Note that a more current book on the same topic is Bringing Buildings Back by Alan Mallach.  See the past blog entry "Pushing the rehabilitation of vacant buildings/nuisance properties" for a more detailed discussion of this topic.

In cities like Baltimore or Detroit or Cleveland or St. Louis with tens of thousands of vacant buildings typically the city is so overwhelmed by the problem that it is unable to focus on the hard reality of addressing nuisance and vacant properties one site at a time.

This piece suggests creating neighborhood by neighborhood plans with detailed inventories of properties and thumbnail strategies and tactics for addressing the problems.

But the biggest problem is lack of demand and the reality that the cost of rehabilitating a property is far greater than the market value of residential properties in the area.

I have been thinking about this in terms of the tv show "Rehab Addict" on DIY/HGTV, which recently did a rehab of a duplex in Detroit ("Where others see blight, Detroit native Nicole Curtis sees a diamond in the rough" Detroit News).  According to Trulia, the value of the property is about $70,000.  And it probably cost around that much--except that tv shows end up getting donated services which cuts costs--to fix.

I am not saying don't fix the properties, just that yelling at someone that they are a slumlord ends up not helping very much.

And because "used houses" sell for so cheap, it's too expensive to build new single family housing for sale to owner-occupants, because the cost of new construction is greater than the cost to buy existing housing--and so properties won't appraise at the price necessary to get a conventional mortgage.

This is why to right the markets in such neighborhoods, public sector intervention is usually required.  At the same time, it's difficult for the public sector to choose winners and losers--saying that there are only so many resources to go around and that it's best to focus on neighborhoods with greater potential for improvement--so usually money is spread around to multiple neighborhoods but not at the level necessary to bring about critical mass improvement.

That being said, the neighborhood that Nicole Curtis picked does seem to be reasonably stable as opposed to many other Detroit neighborhoods, so that the project won't go for nought.