Elected Officials and Residential Real Estate and State Government and Development/Redevelopment and Legislation and Government & Economic Development and Government and Real Estate & Retail

Lawmaker seeks funding to tackle abandoned housing

November 24, 2012
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A New Albany lawmaker is planning a three-pronged attack on abandoned housing, which plagues Indianapolis and cities across the state.

“If we can find a way to solve blight and expand the property-tax base, everybody wins,” Republican state Rep. Ed Clere said.

Clere plans to introduce a bill that would give municipalities explicit powers to create land banks, which can sell surplus property for redevelopment. Clere said he also wants to include a revenue source to support land-bank operations and eliminate tax-foreclosure sales as a form of investor speculation.

Clere Clere

Clere’s bill is a high priority for Indianapolis Mayor Greg Ballard, whose city has roughly 15,000 abandoned and vacant houses and lots. It’s also a big issue for Evansville, Elkhart, South Bend and New Albany. Ballard’s abandoned-housing consultant, Gina Radice, is working closely with Clere, as is the Indiana Association for Community Economic Development.

In Indianapolis, the Department of Metropolitan Development already operates a land bank, which holds 1,200 surplus properties, thanks to a 2006 law that allows land banks to be set up by counties.

Yet the Indy Land Bank lacks funding and staff to strategically aid redevelopment, Radice said. As IBJ reported Nov. 3, the Indy Land Bank sold 154 properties in 2011 to the not-for-profit Homeless and Re-Entry Helpers, which served as a straw buyer for real estate investors. The deal prompted the land bank and County Treasurer Claudia Fuentes to halt bulk sales to not-for-profits.

The Homeless and Re-Entry Helpers deal frustrated Butler-Tarkington neighborhood activists, who’d been eyeing about a dozen of the same properties.

“We want them to be sold to owner-occupants,” said John Barth, an at-large city-county councilor and former president of the Butler-Tarkington Neighborhood Association. “The whole thing was like a surprise attack.”

Ballard said he wasn’t aware of the deal, but he doesn’t see a problem with its result. “Properties seem to be back on the tax rolls.”

Indiana’s current law on land banks encourages real estate investors to work through the back door of not-for-profits, Radice said. The pending bill would allow land banks to “exercise a full range of disposition options, all of which is completely transparent,” she said.

Most well-run land banks make a point of working with adjacent property owners, Radice added.

Clere’s biggest hurdle is finding revenue to support land banks that won’t draw opposition from county officials.

He sponsored a land-bank bill last session that was watered down to a study commission. Under that bill, taxes from a property sold by a land bank would be earmarked for three years to support the land bank’s future operations.

“Some folks may look at that as a loss of revenue and be opposed to it,” Clere said. “Without a funding mechanism, additional land-banking tools would be of limited usefulness.”

Speculators flock

Indiana tax sales attract investors, but not the kind who want real estate.

The investors are actually buying tax-lien certificates, which pay double-digit interest rates, Radice said.

If the property is abandoned, the owner has 120 days to redeem the certificate—and pay the lien-holder 10-percent to 15-percent interest. All other property owners have a full year to pay off the taxes.

Many of those properties end up in the tax sale more than once. Indiana’s tax-sale “limbo” ends up adding to the blight, said Clere, who is also a real estate broker. “Cities end up cutting the grass and having to deal with an attractive nuisance.”

Clere said he wants to see county tax sales end in a deed transfer, which would be a fundamental change for Indiana.

He said he’s trying to come up with a process that will preserve property owners’ rights.

“No one wants to take anyone’s property without a full and fair process that preserves an adequate time period for a property owner to make good on the taxes,” Clere said.

The bill could make tax sales the final step in the foreclosure process, rather than the beginning, he said.

Indianapolis’ 15,000 abandoned and vacant houses and lots would have been worth $83 million on the tax rolls, Radice estimates.

In addition to the 1,200 with Indy Land Bank, the count includes 5,800 that are considered county surplus, 2,000 that are slated for tear-down under a Ballard initiative, 1,700 environmentally hazardous “brownfields,” and several thousand more that the Department of Code Enforcement found vacant.

Many of those houses and lots are on the south side, where newly elected state Rep. Justin Moed spent months campaigning door-to-door. The Democrat who lives in the Garfield Park neighborhood said he’s met many homeowners who want to take control of the abandoned property next door but have no idea where to start.

“A lot of people in the general public are completely baffled by this whole process,” he said.

City-County Councilor Jeff Miller, who represents a south-side district, said he’s heard similar complaints. He’s serving on the board of the not-for-profit Land Bank of Indianapolis, which Radice and city officials formed a year ago to supplement the city’s existing land banking efforts.

The not-for-profit hasn’t started operating yet, but it could use grant money to hire staff and create a website that would guide interested property buyers, Miller said. Radice said the not-for-profit formed with the expectation that changes to state law may take several years.

The Indy Land Bank was formed under Mayor Bart Peterson in 2007 and started operating in 2008. Barth said the city has yet to demonstrate a strategic approach to abandoned housing.

“We’re just not there yet,” he said.•

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