The Indianapolis Star has a very lengthy investigative story today titled Blight Inc. about the abandoned housing problem in Indianapolis that only got worse over the past eight years under Mayor Greg Ballard despite the fact he received tens of millions of dollars in federal funding to address the problem. The only thing he did with the money was enrich his campaign contributors and provide such poor supervision to the persons he put in charge of the Land Bank that took possession of abandoned homes that they used the program to line their own pockets, committing crimes that landed them and a couple of developers in prison. None of that, though, was the focus of the Star's report. Instead, it focused on the tax sale system, which it complains allows investors, including out-of-state investors, to swoop up hundreds of homes at a time on the cheap and do no better job managing the properties than their prior owners.
The Star report puts the number of abandoned homes at 6,800, a number I think is too low by one-half at least. Most of the abandoned homes it studied are owned not by banks or individuals but out-of-state investment companies. A San Diego-based company, Mt. Helix, owns hundreds of abandoned homes in Indianapolis. The Star's analysis of data found that these investors walked away from more than 6,000 homes, representing at least $28 million in uncollected taxes. The Star complains that the City is spending millions every year cleaning up trashed properties, issuing code violations, subsidizing development and responding to emergency calls to unsecured properties.
The conclusion of the Star investigative story is that the tax sale system has a perverse impact on the system, providing a perverse incentive for bad behavior. The story complains that county treasurers and other supporters of the current system have resisted changes in the law. Following the 2008 housing blow-up, investors flocked into Indianapolis, investing as little as a few hundred bucks in some cases to purchase homes at tax sales. Mt. Felix' CEO, Joe Nelson, blames the hundreds of repair and demolition orders and code enforcement citations his properties have faced on prior owners and the work of shoddy contractors. The contractors tell a different story, complaining that Mt. Helix never paid their bills. The Indianapolis Housing Agency is trying to recoup $230,000 in federal subsidies the company received and says there is an ongoing federal investigation of the company.
The Star report also found that Mt. Helix had partnered with a nonprofit formed by an IPS principal to redevelop homes the nonprofit acquired from the Indianapolis Land Bank. Ed Brown, the IPS principal, formed the Martindale-Brightwood nonprofit after his own real estate investments forced him into bankruptcy. His nonprofit acquired 6 houses from the Land Bank for $8,500, which it sold to Mt. Helix for $33,000 two years ago. The Star found those homes in a state of disrepair. As a result of the Land Bank scandal, the City now bars nonprofits from flipping houses. The Land Bank is now known as Reknew Indy. Again, the Star report says nothing ill of Greg Ballard, who made the issue of dealing with abandoned housing a major issue when he first ran for mayor. Taking care of downtown, like all of his UniGov predecessors, was job one.
Based on personal observation from occasionally representing individual owners of problem properties, there are other problems at play here that aren't discussed by the Star. The first thing I've noticed is that these problem properties are often way over-assessed. If they are not owner-occupied, then the property taxes are double the amount of owner-occupied properties. Code enforcement or the Health & Hospital Corporation inspectors will come along and issue citations sometimes for trivial issues with the property. Within a year, those property owners are facing fines up to $7,500, which become a lien added to their already high property tax bill. The property owners then are unable to pay the property tax bill, let alone make the fixes to the property, which in some cases would cost tens of thousands in repair work for a property that's probably worth no more than $10,000 on a good day but will be assessed for property taxes as if its worth $75,000. When I ask property owners why they didn't appeal the taxes, they said often respond that they have. It's not unusual for property tax appeals to languish for four years before they are adjudicated. The best advice to give the property is often to just walk away from the house and let the City deal with it. Sad, but true.
Its the blind leading the blind, and it has to stop. We go from trendy solutions that have no possibility of success to insider programs that only benefit a few to horrible enforcement remedies that only make things worse. Mayor Ballard swore to us he would take down thousands of vacant properties, but he lied. And we just can’t get control of the situation. I continue to believe we need emergency health department authority to demolish long standing vacant properties, without lengthy paperwork, appeals and such, with a demolition “czar” responsible for actual, quantifiable monthly results. Ask the IU Business School for a Marshall Plan paper to streamline the process, which might revoke the rights of prior purchasers, step on a few toes and seem heavy handed, but which are necessary. I agree that the true number of properties in Marion County requiring immediate demolition probably is closer to 15,000. They bring crime, rats, and gang activity, and they ruin local property values. I don’t know why we can’t take control of our city and bring them down. The county landfill ought to accept demolition refuse for a zero price instead of gouging us for $30 a pickup truck full. And they ought to let these demo contacts out to small business locals and actually get the job done. City compliance inspectors are the city’s curse. They abuse the local owners as well as the out of towners. But properties with local owners ought to be off the horizon for a while. I believe very strongly that we ought to be in a demolition decade in Indianapolis. Somebody needs to make an executive decision on a property by property basis. Up or down. If its down then somebody ought to tear it down pronto. We ought to be doing a couple hundred of these a week. Ballard was never about this. And Hogsett hasn’t done anything yet that didn’t involve a dozen lawyers. Is our city going to rot away? Or does it only exist to make a few lawyers and developers rich at everybody else’s expense. These rich guys all go home to Carmel and the north side. They don’t have to live here. I could show them a few hundred properties off the east Michigan and New York street corridors that are literally falling down right now, and have been for 20 years. This property assessor is as bad as the last, and that office(s) ought to be taken over by the State of Indiana with a completely new staff and mandate.
ReplyDeleteEvery time you attend these sales the participants talk among themselves. Everybody hates the process. The number one most popular solution is to sell these land bank properties to individuals for $1 if they will agree to live in them as their primary residence and fix them up a bit. Properties should only be sold to people who are current property owners in Indianapolis. No out of town purchasers. No out of State purchasers. No corporate or LLC purchasers. We need homeowners in these properties, not more out of state managed rental property. The pool of eligible purchasers should be determined in advance by application in much the same way that a conceal carry gun permits are investigated, with some actual attempt to verify that they aren’t front men, and purchasers who fail to owner occupy or fix their properties should be contractually obligated to return them to the city. Enough Section 8 already. These out of town companies frequently only do what is necessary to pass them into the Section 8 program. They collect inflated rents. And after the tenants trash them, they let them go again. The Section 8 program is not throwing the bad apples out. They’re a bad partner and we need a solution for their specific issues.
ReplyDeleteI didn’t mean to say only existing homeowners should be eligible to purchase land bank properties because that would exclude excellent people who want homes of their own but haven’t been able to muster up the down payments. I meant to say only existing local residents who want to be homeowners ought to be eligible, because it is a huge, huge problem that these properties are cycling thru out of state management companies that really don’t care. They really don’t. And they can’t be reached. You get compliance inspectors that are citing local landlords for minor problems in good properties when surrounding properties are literally falling down with trash strewn all over. But they don’t know who really owns them. And they try to pass stupid laws requiring local guys to register, when the out of state guys just ignore them. Why is it that historic neighborhoods cite good property owners over paint choices and failure to get approval for small repairs when the horrendous, ugly Section 8 properties do whatever they want? We have a lazy government. And a stupid government. Protecting property rights of corporations and agencies. Not individuals. By choice. The city council wastes their days playing catch up to whatever boondoggle project the mayor is scamming. And real issues remain ignored. A lot of lip service paid to fixing neighborhoods. But in the end, millions spent on a Meridian Kessler park that the rich drive past on the way home. And letting rich Carmel developers build crappy apartment blocks that are part Section 8, and in 20 years will be all Section 8.
ReplyDeleteThis is by design. New Urbanists are really just developers looking to steal land.
ReplyDelete" New Urbanists are really just developers looking to steal land."
ReplyDeleteWhat a great and accurate definition.
I do like it that you get comments from people who know stuff. As I recall, Sean S revealed that he had outed some of these thieves not only to duh Star but also to the Ballard Administration with similar lassitude from both. Not enough administrators were jailed.
ReplyDeletePLEASE visit Renew Indianapolis for all city owned properties at http://www.renewindianapolis.org/
ReplyDeleteAccording to this site, the city owns over 23,000 properties. 25 properties per page, 933 pages.
More than half of the properties listed are structures. The other properties are lots with no structures.
Best count, at least 11,500 city owned abandoned houses. Not including bank/financial abandoned, private owned abandoned structures. Sad that the Star did not do their homework. There are solutions, but Ballard administration has failed to listen.
Ok. The article is unclear as to whether the troubled properties were sold at tax sale, surplus sale, or from the Land Bank (or its successor). Each is different, but the article seems to amalgamate them all.
ReplyDeleteThe city of Indianapolis is, in fact, the largest single owner of vacant properties. They could tear them down. But they accumulate them in their land bank. Its all about property taxes and fees. Accumulating them. Spending them. They don't make any money if they tear them down. It costs them. Demolition fees. Then lost tax revenue. So they hold them. And try to move them for top dollar to out of state management companies. The land bank could tear them down. They could remove blight. But they don't. This was one of several reasons Ballard couldn't follow thru on his promise to demolish thousands of derelict properties. Turns out the properties are actually owned by Indianapolis. On the books they generate fees and property taxes and add to the number of taxable parcels. In reality those numbers are fiction. But I think Indianapolis likes to own these parcels. I think they like them in their hip pocket for a rainy day. I just don't understand why they can't see the wisdom of tearing down the buildings and holding the land. Is it just the fiction that they are assessed at high values and add some phantom taxable income to the budget. Maybe Joe Hogsett can give us a real answer. Like Ballard, he ran on a platform of neighborhood rejuvenation. He promised to tear down these buildings. I'm waiting.
ReplyDelete8:58,
ReplyDeleteIndianapolis is amassing properties to turn them over, en masse, and for free to private developers.
Non-selling owners on a block will be "code enforced" into walking away.
With a big block of contiguous properties in hand, they'll give them to a developer in exchange for making a West Clay Village within the City limits.
There's nothing unique about our tax sale process. Out of towners buy homes at these sales in other cities without wholesale abandonment. No, the problem is actually much simpler to understand. In 1950, the population of Center Township was over 337,000. Today it is around 146,000. Here's a link. https://en.wikipedia.org/wiki/Center_Township,_Marion_County,_Indiana The real problem is that very few people want to live in Center Township, and a few hipsters has changed nothing. It's all pretend with these clowns.
ReplyDeleteAnon 10:16. Why steal what you can't give away?
ReplyDeleteAnon 11:04 That's delusional. There is no demand for such a development in Indianapolis. IIf there was, it would have in the 1960s, 1970s, 1980s, 1990s, 2000s or 2010s. It hasn't happened. It's not going to. Downtown Indy is already overbuilt and everybody in the industry knows it. The city doesn't. The people who live here don't. The industry does. Trust me on this.
ReplyDelete11:57:
ReplyDeleteThe city doesn't need a lot of things, but they get built, anyway, with a promise for the Star headline, a campaign contribution, a TIF, City funding, and tax dollars being scurried out of the project into the hands of the developers and architects.
Are you new to Indy?
It's not really the landlord that is to blame for the blight (although some do just sit on the properties waiting to unload them for a profit).
ReplyDeleteThe fact is, a landlord cannot fix up one of these homes and get a tenant in them fast enough to avoid the scrappers tearing it all out. And if they can get a tenant in, they more often than not are evicted in a few months, months in arrears on their rent and the home requiring thousands in cleanup/fix up to make it livable again. Other times, tenants will move out without notice, leave the house vacant and the scrappers will know it before the landlord does. Poof, the furnace and water heater are gone, as is the wiring. Most use plastic plumbing now, otherwise the copper pipes go, too.