Walk around Petworth and you'll see houses being renovated on block after block, dumpsters parked on the street with duct-taped "no parking" signs on the trees. Inside you'll hear tools and men's voices as walls go up, floors are redone, new landscaping put in.
Renovating a house, whether to flip and make money on the sale or to refurbish and live in, is a natural course of action for any community. As time goes by, all houses need to be refurbed, and in the hot housing market of Petworth, a renovated house will get a much, much higher sale price than one that hasn't been touched in 50 years.
What happens when the original home owners sells the house or passes away, and a developer obtains the property... and then does nothing with it for years? The house begins to fall apart, it goes from a vibrant home with people to an empty, vacant property, to eventually a blighted property that attracts unwanted and often illegal activity. Walk around Petworth, and you'll see many examples of houses that are sitting untouched and empty, slowly falling apart with trash-strewn yards and a construction permit on the window -- with no signs of construction.
It's that permit in the window, and the callous developer who doesn't care about the community, that's the problem. DC taxes properties differently depending upon their status. Vacant properties are taxed higher than lived in, and blighted properties, even higher. That additional taxes are meant to penalize people who purchase or own a home and leave it empty and uncared for. But get a $1,500 construction permit, and the developer can leave the property untouched at the lowest tax rate -- and can renew it year after year. The city doesn't go after them.
The developer sits and waits for the market to continue to increase in value until he or she can sell the house at even a higher sale price. In an area where the average sale price is in the mid $300s and the average flipped price is in the mid $600s, it's more like greed than savvy investment. And it's bad for the community.
This has been a hot topic with the Kennedy Street Development Association (KSDA), who have been aggressively pursuing absent home owners (developers) who are sitting on properties. And it's been a major concern for ANC 4D Commissioner David Sheon. David has become a champion of fighting developers who leave empty, rotting houses on streets to the detriment of the community. Working with KSDA, he recently published a 10-point plan for dealing with vacant and blighted properties, and sent it to the Mayor and DC Council. (Read the PDF.)
Commissioner Sheon and the issue of vacant properties was the topic of a WAMU article and radio story on Friday, October 9th, as David took reporter Matthew Schwartz through his SMD looking at properties in the area. The article, Why Does DC Have So Many Vacant Houses, When Real Estate Is So Pricey? takes you through the issue around some specific houses in Petworth. It's worth reading and worth listening to the audio version on the WAMU webpage (the radio story is slightly different than the written article, and you can listen to Commissioner Sheon, CM Silverman and others).
One of the problems that Sheon, KSDA and the community has to face is developers like Charles Martin (a developer featured in the WAMU article). As a developer, Mr. Martin is known to buy properties and leave them sitting with construction permits until the housing prices in the area rise.
Martin says in the article that it's about making a profit and not about being a good neighbor or what's best for the community, but what's best for him as a developer. According to the WAMU article, Martin said “The city should welcome long-term investors... It may be bad for the neighborhood because their property may not be getting turned around as fast as the neighborhood would like to see it. But the purpose of capital is to generate the highest possible return.”
Regarding the ability for developers to use a construction permit to avoid higher taxes and let a property sit, Martin said that since it's how the law in DC works, that's fine with him. He said that he'd leave the law in place if he were on the Council. As he said to the WAMU reporter, “It’s the law in the District. Now if the city council wants to do something about it, the city council can change the law.”
It isn't the renovations that people like Mr. Martin do that make communities attractive to new residents and therefore increase home prices (benefiting flippers like Martin), it's the work that people like Commissioner Sheon, KSDA and others who live here do to improve the community. Mr. Martin just waits to takes advantage of the good work that people do. He claims in the WAMU article that it's all about "capital," and that if a community suffers while his untouched property sits rotting, that's too bad.
Thing is, he's right. In a capitalist economy, developers who own a house have the right to let it rot and wait for the neighborhood to keep improving around them. But from the community's viewpoint, the DC government needs to do more to safeguard against those who let properties fester and become not just eye-sores, but magnets for crime, and are a detriment to a community. As Commissioner Sheon points out, fixing the loophole in the taxes is one way of doing that.
Councilmember Silverman is interested in making changes. From the WAMU article:
That said, Sheon "makes a good point, which is we want to make sure that we guard against bad actors — people who really have no intention of putting that property back on the market but who take out a building permit simply to stop the clock.”
Silverman has reviewed Sheon’s ten-point plan, and is working with the head of the Department of Consumer and Regulatory Affairs — which handles vacant properties — to make some of Sheon’s ideas a reality.
“One of the proposals that we were very interested in, which will also help us guard against the bad actors, is his second proposal in his list, which is to shift the burden of proving a property is vacant from the city to the owner him or herself. We think that makes a ton of sense.”
Silverman plans to send language to the Council this fall requiring homeowners to prove their property isn’t vacant — rather than the current rules requiring city workers to prove that it is.
KSDA and Commissioner David Sheon are working to fix the problem of blight and absentee owners. You can help by contacting Councilmembers Todd and Silverman on the DC Council and Mayor Bowser's office and sharing your thoughts about vacant, blighted properties in your neighborhood. Feel free to also comment below -- I know many in DC government read the blog.