Vacant Property Ordinances: Help or Harm?

Vacant homes. Drive through certain neighborhoods in either Minneapolis or St. Paul, and you’ll see quite a few of them. No one likes to live next door to a vacant house.  A high vacancy rate is not good for any neighborhood. And the cities don’t like it. As a result, they have enacted regulations around vacancies, in hopes of fighting squatters, crime and vandalism. The ordinances are mostly aimed at absentee owners, such as big banks responsible for foreclosure, who have no “skin” in the neighborhood and a hands-off approach to issues like lawns and snow and ice removal.

An abandoned building, St. Paul

An abandoned building, St. Paul

Different cities have different fees (and different standards) associated with the vacant home process. Minneapolis requires a typically complex smorgasboard of fees, depending on the situation. Richfield requires a fee of $600 dollars. Hopkins starts at $500 in the first year, and escalates in subsequent seasons. St. Paul levies a fee of $1100/annually, with a veritable buffet of required add-on fees for inspections.

The purpose of these fees is simple — there are substantial costs to cities in monitoring vacant buildings, and fees seek to place the burden of those costs on the ownership of the property, rather than on the general taxpayers in the community.

The challenge, of course, is how to leverage these laws to deal with actual problems. If a house is not occupied, but maintained, is it really the city’s issue? Real estate agents in multiple communities have expressed concerns about vacant property ordinances because in some jurisdictions the rules kick in after as few as 30 days of vacancy, and place unneeded regulation and additional fees on houses that may simply be on the market for an extended period, as is currently common. When cities start enforcing these regulations, they often do it broadly, even though the core issue for the city as a cost is not a vacant building, but a dilapidated building. Many occupied buildings, particularly in Minneapolis and St. Paul, are in horrible shape and would never pass the inspections required of vacant buildings — but vacant buildings that are well-maintained are caught by the rule, aggravating owners who are being responsible (but who are unable to sell the property, for whatever reason).

Several cities with especially strict rules about vacancy, such as St. Paul, have similarly strict rules about converting properties to rental units (and thus possibly reoccupying them without sale or foreclosure).

While there is certainly public interest in enforcing these rules and encouraging homes to be reoccupied, these rules can also make it more expensive and difficult to sell a property, and thus serve to discourage the reoccupancy of a property. At what point do cities, in creating infrastructure to enforce these ordinances, create a system that encourages heavy-handed enforcement? Should standards of disrepair and code violation be enforced against occupied buildings that go beyond the “tall weeds” that are easily ticketed? Do these rules help or harm real estate markets and communities?

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One Response to Vacant Property Ordinances: Help or Harm?

  1. Ian Bicking August 13, 2012 at 8:32 am #

    I'm unclear how these laws make it hard to sell a property. Perhaps by stripping value from the property, it adds economic hardship – and sometimes a seller is reluctant to sell at a loss even as their reluctance increases the amount of that loss. Or, a buyer will be reluctant to buy unless they have a plan to occupy the property in a timely manner – though this detracts little from the ordinances, as a buyer without a plan to occupy brings no benefits to the neighborhood.

    Having bought a property that was vacant for two years, I can't find much fault with the fines – it just meant less money in the foreclosing bank's pocket and more money in the city's pocket; what *I* paid was simply the market value for the property. That said, I've also seen someone who bought a neighboring vacant property get caught up in this due to her poor management of the rehab process (a $6k fine I think). That possibility might scare other people off of buying, but honestly I think if you have the foresight to consider future fines you can also figure out how to avoid them.

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