Skip to main content

The problem of distressed properties complex and easy solutions elusive

By Howard B. Owens

There are an estimated 53 vacant and abandoned homes in the City of Batavia, which creates a drain on city resources, brings down property values for neighbors and are black holes in local economic growth.

It's a problem.

How we go about solving that problem was the subject of a 45-minute talk Monday evening by City Manager Jason Molino.

Forty-five minutes. It's that complicated of a problem.

The city can't legally seize the properties, except for the nine or so that are falling behind in property taxes, and with banks that hold mortgages leaving the properties in legal limbo, there's no way for the city to enforce code violations.

Fixing the problem will take a mixture of tactics: research to locate responsible title holders; trying to locate mortgage holders and convince them to move the title one way or another; convincing Albany legislators to change state law regarding abandoned properties; and creating programs locally to make upgrading abandoned homes more economically feasible. 

It's relatively easy to identify which homes in the city have been abandoned. They've stopped using city water.

The 53 homes believed to be abandoned have been vacant an average of three and a half years.

On average, they've generated five visits each year while vacant from code enforcement officers, and one police patrol response per year.

The code enforcement efforts cost taxpayers about $8,000 per year.

Often, the code enforcement citations result in no action because the previous owner who occupied the property can't be located. And though a bank or mortgage holder is continuing to pay taxes on the property, the bank hasn't taken title so it can't be held legally accountable for code violations.

Molino said there's no one answer, and no firm reason is really known, as to why banks don't take title on abandoned properties.

It could be that a large institution is dealing with so many mortgages, nobody is even aware a particular property is on its loan rolls or is abandoned. It could be the company is dealing with so many abandoned properties, some fall through the cracks. It could be that a bank is so bogged down by bureaucracy that it takes years to deal with the paperwork of an abandoned property. It could be the bank has no financial incentive, and some disincentives, to deal with the property.

"We really have to dig into that issue," Molino said. "That's one of the things we really need to look into in the coming months to really understand who are all the lending institutions and why are they not moving on title.  ...  We really need to get a good understanding of that, because everything hinges on moving title for these properties."

Once a property is back on the market -- either the bank puts it up for sale or auction or the city somehow obtains title -- it becomes subject to the market forces that determine value and the value of restoration.

Molino spent some time explaining supply and demand as it relates to the local housing market.

Since 1960, Batavia has lost 2,700 residents. At the same time, there has been a slight increase in housing stock. During the same time period, people have become more mobile, thinking nothing of driving 20 or 30 minutes to work or an hour and a half to outlet stores. As time as passed, Batavia's housing stock has also aged.

All of this affects the value of properties, the interest of people in living in a place like Batavia, and the affordability of remodeling and restoration.

While there are economic growth activities in and around the city that could lead to more jobs, a population boom isn't necessarily a given.

"Obviously, we'd love to have another 2,000 or 3,000 people come back in the city and increase the demand for housing stock," Molino said. "Realtors would love it. People would be demanding houses and prices would go up. Truth is, that's probably not practical."

Even if economic growth doesn't bring a few thousand more people to Batavia, economic growth is still vital to increasing the value of homes locally.

"If that median income number doesn't go up, then you're limiting your ability to do things, and we can't do a lot of what we want to do or achieve what we want to achieve," Molino said.

What we need, he says, is enough growth to fill the housing stock we have, and then make it economically viable for owner-occupants or speculators to buy and invest in those properties.

Molino used the example of a house currently valued at $50,000. With upgrades, its value might rise to $75,000, but a modernization and restoration project might cost $45,000. That means the owner would need to sink $95,000 into a property that wouldn't be worth more than $75,000 when ready for occupancy.

That's where "gap financing" tools come into play. There are various government programs available. A single program the city could create -- laws would need to be changed by Albany to make it possible -- would allow for abated taxes on the increase in assessed value.

If the assessment goes up by $25,000, the city would tax only on the original $50,000 for the first eight years after restoration, foregoing tax revenue on that $25,000.

That makes economic sense for the city, Molino said, when you consider that's only $230 annually on a property that may currently be costing the city more than $1,000 annually on code enforcement, law enforcement, and lost fees for a property that is abandoned and vacant. Moreover, if a family lived in that home, it would generate from $10,000 to $20,000 in local buying power.

The state needs to pass legislation that would allow Batavia and other cities to create such a program.

Changesare also needed in the laws giving cities more power to deal with banks who let abandoned homes sit fallow, so to speak.

Some of these homes may not be worth saving, Molino acknowledged. While the city may not want to seek demolition of all abandoned homes, some may need to go. That will be a policy decision for the city to make as it learns more about the abandoned housing stock locally.

In the bigger picture, home values are also affected by things related to quality of life, and those, too, are issues the city is taking steps to address or needs to address as part of strategic planning, Molino said.

"When somebody wants to invest on a street," Molino said, "are they going to want to invest on a street on a street that has potholes? Are they going to want to invest on a street that has sidewalks that are turned up? Are they going to want to invest on a street where the neighbors don't talk with each other? Are they going to want to invest on a street where they've got to pay another $1,500 in flood insurance? Who wants to invest there? They don't."

Among Molino's recommendations is creating a home expo, which would bring together representatives of all the various private, government and nonprofit agencies that offer assistance to owners of distressed properties. There's several programs available, but few people know what they all are. Giving residents that kind of information, Molino said, might spur activity that would lead to better housing stock.

Molino's presentation was video-recorded by Alecia Kaus and will be posted to the city's Web site at a later date.

Peter O'Brien

Are they going to want to invest in a city that lies to them? Are they going to want to invest in a city that keeps money they said we would be getting to offset our garbage costs? Are they going to want to invest in a city that wants to fine people $250 for putting a decent couch on the side of the road with a free sign on it? Are they going to want to invest in a location that offers no organized adult sports short of a full hockey league? Are they going to want to invest in a community that caters to the poor and infirm instead of the highly educated?

Molino you are a thief. You wrote a budget that stole my tax money that was going to pay for garbage to hire someone for a defunct government position. This city continues to push people out of its area with unneeded government expenditures for the police department, assistant city manager, and fire department.

As indicated by your actions, you think our tax money is yours to spend. Its not your personal account to get an assistant to do your job. Maybe if you weren't wasting time with McDonalds' ribbon cuttings you could have done the research for the flood plain. It boggles my mind how you could have 40 hours of work in week, let alone find work for another person for another 40 hours a week.

Now you want to steal abandon properties from their owners. You have no right to do so. Petitioning Emperor Cuomo the Pius II does not give you the right to take what you do not own.

STOP STEALING FROM THE PEOPLE!

Oct 29, 2014, 1:21pm Permalink
Peter O'Brien

Also feel lucky that I was injured. If I hadn't been I would be taking my money to another community, Just to keep it out of your greedy coffers.

I will be moving once my finances are settled again.

Oct 29, 2014, 1:01pm Permalink
John Roach

Peter, so you think not doing anything about abandoned property, ruining the value of other property and becoming a safety and health problem is the right thing to do.

You want to just leave them alone to get worse? Remember, they are abandoned.

Leaving Molino out of it, that idea sounds like a very special kind of stupid and short sighted.

Oct 29, 2014, 1:46pm Permalink
Thomas Mooney

The abandoned houses are bad but are they as bad as renting them out to occupants that are or feel they are entitled to free housing , I would rather see them vacant than have a guy like A. Young buy them and ruin more neighborhoods . The only people that are investing in properties are the ones who are getting government dollars .while building their portfolio. Also they do not live in Batavia but are vacant landlords , Pike road is where you can find them .

Oct 29, 2014, 2:56pm Permalink
Scott Ogle

Then the banks should forfeit. Ownership isn't absolute. I leave my broken-down beater unattended on your street for months, it's gonna get towed, licensed or not.

Oct 29, 2014, 8:09pm Permalink
Peter O'Brien

You can't tow a house easily. Also the house is on property owned by the owner of the house, not property owned by the government. Your comparison holds no water. Also when it is towed you don't lose ownership, its just moved.

Why should the banks do anything? Because you want them to?

Oct 29, 2014, 8:58pm Permalink
Scott Ogle

Same principle , what is derilict isn't reserved for the absentee in perpetuity . It's not a difficult concept . If the banks can't identify the debtor because they securitized the debt -- hard cheese . Investment carries risk.

Oct 29, 2014, 9:38pm Permalink
John Roach

So Peter still supports the idea that no matter how deteriorated or unsafe an abandoned property becomes and no matter the impact on others, the bank should be allowed to do nothing. Now there is an idea without merit.

Oct 29, 2014, 9:52pm Permalink
John Roach

If the property is abandoned by its buyer, then the bank has an obligation to keep the property in good repair and from endangering others. If they fail in that obligation to keep the property safe, we have the right to start action against the bank.

And the bank has the right, in court, to explain why they should be allowed to keep the property. This is also not some overnight action against the bank, they get their day in court also..

Good luck finding a new place to live to that allows its housing stock to be abandoned and unsafe and that does not try to do anything about it. Let us know how that works out for you.

Oct 30, 2014, 6:14am Permalink

Authentically Local