Blight and Vacancy in Baltimore

OVERCOMING BARRIERS TO PROSPERITY, JOB CREATION & AFFORDABLE HOUSING WITH A LAND VALUE TAX SHIFT

Reduce or eliminate blight and vacancy in Baltimore and the theft of community-created wealth. Obtain equitable funding for new & improved public facilities and services. Enhance the affordability of housing & commercial spaces.

BARRIERS TO PROSPERITY, JOB CREATION & AFFORDABLE HOUSING IN BALTIMORE

Blight and vacancy in Baltimore are major barriers to growth and prosperity

The original sin of the United States is the theft of land from Native American communities. Surprisingly, something very similar to land theft continues today under our very noses.

Land Speculation & High Land Prices

Most communities create public goods and services (parks, roads, schools, transit, water & sewer systems, etc.) to facilitate development. But if these public goods and services are well-designed and well-implemented, they increase the value and price (and rents) of nearby land. This land value, created by the taxpayers, is appropriated by those who own the best-served land. Typically, the largest share of publicly-created land value resides on commercial land in the downtowns – and these sites are typically controlled by only a few individuals and corporate entities. When taxpayers want to take advantage of these public goods and services, either by opening a business or living nearby, we must pay a premium price or rent to locate in places that our tax dollars made valuable in the first place.

Thus, most of us pay for Infrastructure several times over:

We pay taxes and fees to the government to provide facilities and services. (Politicians assure us that, by paying these taxes, we’ll promote job creation and a better quality of life.)
Developers tell the politicians that they would like to develop near the new infrastructure, but land prices have become too high for this development to be profitable. Therefore, developers demand tax breaks. Politicians provide these tax abatements (allowing the landowners to collect their windfall) and assure us that these tax breaks are necessary to create the same jobs that they promised initially. (These tax breaks increase the tax burden for everybody else. See “Tax Broke.”)
Eventually, taxpayers want to take advantage of the new infrastructure that they have paid for by seeking to live or open a business nearby. But, when we offer our first month’s rent, the landlord smiles and says, “Well that would rent any other place in Baltimore, but here, you’re next to the wonderful new infrastructure. So you’ll have to pay a rent premium to locate here.”

We shouldn’t mind paying for something once. But paying THREE TIMES for infrastructure feels like a rip-off. It feels like theft!

De-Industrialization

For many years, Baltimore hosted a large number of factories, port facilities and transportation hubs. When these factories left for other locations and port activities declined, Baltimore lost thousands of good-paying jobs.

Some workers left and no new workers were coming to fill their homes. Those who stayed behind had to find other work. Often, that “other work” didn’t exist or paid much lower wages. Thus, the workers who remained fell behind on mortgage payments and rents.

Blight

Higher property taxes on buildings make it more expensive to maintain buildings. Some owners reduce or stop maintaining buildings. Blight ensues. Low taxes on vacant lots and boarded up buildings allow speculators to sit and wait for public development assistance that might never materialize. Blight and vacancy in Baltimore are barriers to growth in any city.

Racial Discrimination (including the legacy of redlining)

Our country and Baltimore share a history of racial discrimination in many areas, including employment and lending. In particular, mortgages to Black people were typically denied (or provided at higher interest rates). As a result, increasing unemployment had disproportionately large impacts in Black communities. As many businesses and affluent residents left Baltimore for the suburbs:

Baltimore increased its taxes on those who remained. This made the suburbs and other cities (with lower taxes) even more attractive and created a destructive cycle of population losses and tax increases.
Tax assessments on properties in minority neighborhoods are a higher share of market value than assessments on properties in white neighborhoods.

Here’s an insightful review of the book, The Color Of Law, which focuses on these issues in great depth.

Insufficient and Poor Quality Public Facilities and Services

Compounding over-assessment of minority neighborhoods is the withdrawal of basic services. Street maintenance, sanitation and even street light services are withheld and diverted to whiter, more affluent and more influential constituencies and neighborhoods.

Gentrification

In some instances the public sector has attempted to assist distressed neighborhoods by improving schools, public safety or transportation. If the government is successful in any of these endeavors, they will cause land prices (and rents) to rise, displacing the residents who were the intended beneficiaries. Tax dollars spent to help the poor end up enriching landowners, who tend not to be poor (even in distressed neighborhoods). This “no good deed goes unpunished” scenario convinces some people that it is useless to try to improve conditions in distressed neighborhoods.

Fortunately, the tax shift can help remedy this situation by returning community-created land values back to the community. This reduces land speculation, thereby keeping land prices (and rents) lower. And, the land values returned to the community can be used to subsidize housing costs and/or to operate, maintain and improve the community facilities and services that created this value in the first place.

An affordable housing trust fund could be a tool to make this a reality. Thus, a tax shift can help make communities better for existing residents.

Also, because there are so many vacant properties in Baltimore, it should be possible for new residents and businesses to establish themselves in Baltimore without displacing existing residents and businesses.

OVERCOMING BARRIERS TO PROSPERITY, JOB CREATION & AFFORDABLE HOUSING WITH A LAND VALUE TAX SHIFT

There are solutions to reducing blight and vacancy in Baltimore City!

Enhancing the affordability of housing & commercial spaces

Reduce or Eliminate the Theft of Community-Created Wealth

Equitable funding for new & improved public facilities and services

Baltimore residents and businesses are paying too much in taxes. Additionally, the property tax penalizes owners who construct, improve and maintain buildings while rewarding owners who allow buildings to deteriorate.

Baltimore Thrive hopes that you will help us remedy high taxes and upside-down incentives by supporting a Land Value Tax Shift. The Tax Shift will reduce taxes on homes and other buildings, making them cheaper to construct, improve and maintain.

As mentioned, owners of vacant lots and boarded-up buildings pay much less tax than more responsible neighbors – even though the cost to construct and maintain streets, sidewalks and other infrastructure is about the same in front of similar-sized lots regardless of whether they are vacant or developed. Speculators hoard land, waiting for its value (created by others) to go up. When this happens, they collect a windfall by selling the land, renting it out or refinancing it at a higher price than what they paid. Land speculation is a parasitic activity. It creates nothing of value. But, by creating an artificial scarcity of developable sites, speculation inflates land prices, reducing housing affordability and jobs while inducing urban sprawl.

Pursuant to the Tax Shift, reducing the tax rate applied to building values makes buildings cheaper to construct, improve and maintain. Surprisingly, increasing the return of publicly-created land value back to the community (“land value return”) helps keep land more affordable as well — by reducing the profits from speculation. The price of land reflects the benefits that purchasers expect to receive from owning it. Increasing land value return reduces expected benefits, thereby reducing land prices. Whereas the tax applied to building values is a “cost of production,” land value return is a “cost of ownership.”

The net result is lower taxes for residents and businesses and higher taxes for absentee land speculators. The Tax Shift creates more affordable housing and more jobs without any new spending or any loss in revenue!

This policy has worked well in about 15 Pennsylvania communities. In cities that implemented the Tax Shift, homeowner taxes were reduced while building permits increased and the number of vacant lots and boarded-up buildings declined when compared to nearby communities that did not implement the Tax Shift. Measurable and documented successes were achieved in Pittsburgh and Harrisburg as well as in smaller communities like McKeesport, Clairton and Duquesne.

As mentioned, land values reflect the value of publicly-provided goods and services. The highest land values are found in the commercial areas of downtown, largely because they are at the center of transportation networks and receive the most generous development allowances pursuant to zoning. The Tax Shift, by emphasizing land value return, makes the property tax more equitable because taxpayers pay in proportion to the public benefits that they receive.

For more information, see links below:

• What Can Pennsylvania Tell Us?

• Want Affordable Housing? Look to the Land!

• “Land Value Return” & Building A More Equitable Economy

Learn more about Baltimore Thrive’s efforts here and about our team here.