Small and weak real estate markets need focused tools to spark revival of vacant properties
There is an interesting article in NextCity, "Reactivating Abandoned Buildings through Local Ownership in Smaller Cities." It discusses rehabilitation, "adaptive reuse," of what preservationists call "white elephant" buildings--big buildings that often had been industrial, that need to be adapted to be able to be "useful" in the context of current market circumstances.
The article starts off discussing a project in Upstate New York in Newburgh, by a community land bank, using various funding sources including federal housing program monies.
While interesting, it's seemingly not particularly noteworthy.
This is the typical process of revitalization, especially in weak real estate markets.
Because "the market isn't working," in order to revitalize:
1. you need extraordinary kinds of organizations, usually nonprofits, and
2. a wide variety of funding sources, not usually traditional real estate financing sources,
to pull it off.
However, the story is noteworthy for other reasons.
First, it's important to repeat that the market doesn't always work. In the market society that is the United States, too frequently we don't acknowledge that the "market" doesn't function the same way in every place and that it is often necessary for government and nonprofits to step in to produce desired outcomes in those places when "the market" isn't working.
Second, it calls attention to the importance of special funding sources. It's why historic preservation tax credits are a good thing. Too bad the Federal Tax Reform act has made tax credits less valuable and more difficult to use.
It's why low income housing tax credits are a good thing. Too bad the Federal Tax Reform act has made tax credits less valuable and more difficult to use.
It's why state historic preservation tax credits are a good thing. But in many states, legislators see such programs as unduly involved in "the market" (like North Carolina) or going disproportionately to communities that for historical reasons, have more of these types of properties needing renovation (like Baltimore) so that limits are put on using them.
Even though the research finds that the return on investment to communities and states is much greater than the cost of the credit. For the federal credit, it's slightly more than break even as slightly more dollars come back in new federal tax revenues than the cost of the credit.
But the credit also spurs almost a 6x investment of private funds, generates thousands of jobs, and fosters significant community improvement.
So why is it so hard to keep such programs operating?
Um, because there isn't a differentiated understanding and acceptance of the fact that the market doesn't always work and different vehicles are needed to stoke economic activity in such circumstances.
Third, the Newburgh program helped spawn a state initiative to provide a new funding source for rehabilitation projects. It sparked a program launched by New York State, called Neighbors for Neighborhoods, which provides (a modicum of) funding for projects by "New York residents to renovate abandoned properties in their neighborhoods for affordable rental housing," targeting "small center cities" across the state.
And that's a program that is deserving of being replicated in more states across the country.
And being augmented even within New York State, as the initial funding amount--$4 million--is pretty paltry vis a vis the need.
The Center for Community Progress is one national organization that works on this issue of recapturing vacant properties and getting them back to productive use.
Sometimes that means a change in use, because the demand isn't there.
-- Creative Placemaking on Vacant Properties: Lessons Learned from Four Cities, Center for Community Progress