The Government Should Destroy Many of the 250,000 Empty Homes It Owns

What's to come?
March 20 2012 11:31 AM

What To Do With Vacant Houses

The government owns more than 250,000 empty homes. It should destroy many of them, not rent them out.

A house in disrepair.
What should the government do with all the vacant houses left over from foreclosures?

Photograph by David McNew/Getty Images.

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The economy is getting better, right? Not exactly. The ongoing repercussions of the foreclosure crisis continue to haunt cities and towns across the country. At last count, 9.9 million homes have been foreclosed upon since 2008, contributing to a total of more than 10 million vacant homes in the United States. Among those, more than 210,000 are owned by Uncle Sam, stemming from owner defaults on their mortgages.

Last month, the Federal Home Finance Agency announced an ambitious plan to solve this vacant home problem: rent them out. Unfortunately, the FHFA and the real estate industry, which worked with the agency on the plan, are ignoring how this program will affect neighborhood stability in shrinking cities.

Throughout the United States, vacancy is on the rise. My own research has shown one-quarter of all U.S. neighborhoods have fewer occupied homes now than they did in 2006. The problem is particularly acute in formerly booming parts of the Sunbelt, which stretches across the South and Southwest. These empty homes are a real blight on their neighborhoods: Neglected pools attract mosquitoes and disease, untended yards welcome criminals, and uncertainty and fear stymie what would be ordinary investment by surrounding property owners.

So turning vacant homes into rental housing doesn’t sound so bad. FHFA is right to get these homes into some sort of reuse, but rental housing is only part of the answer. Putting all these vacant homes on the rental block will drive down prices in already depressed markets. Low rents will make it hard for these investors to do the kind of basic maintenance necessary to properly care for housing, potentially leading to further decline in housing quality and rental rates. Basic principles of supply and demand point to a very different solution for neighborhoods with high vacancy rates: to help stabilize prices by reducing supply—yes, by demolishing vacant homes or finding creative new, nonresidential uses for them.

A little context is useful here. FHFA’s plan is not the first in the federal government’s efforts to address the foreclosure crisis and rising housing vacancy and abandonment rates. As a nation, our responses to massive foreclosures have been numerous and largely ineffective. Loan modifications, flexible lending policies for banks, and aggressive counseling for borrowers have cost taxpayers nearly $7 billion but have done little to stop the avalanche of empty homes burying local real estate markets across the country and throughout metropolitan areas. In suburbs, in rural areas, and in inner cities nationwide, vacant houses are proliferating at a staggering rate. Trying to keep people in their homes is not working. So we ought to start thinking differently about dealing with this growing national catastrophe by finding new uses for these empty homes.

Toward the end of George W. Bush’s second term, he signed into law the Housing and Economic Recovery Act of 2008. This act established the Neighborhood Stabilization Program, which was designed explicitly to infuse local and regional governments with the funding to address foreclosures. After three rounds of the NSP, the federal intervention has not made a dent in the problem. Despite an almost maniacal mandate for preventing foreclosure and rehabilitating homes for continued residential use, the program did little to address the long-term, systemic change occurring when neighborhoods emptied out.

While preventing foreclosure is the right thing to do for the federal government, it has not succeeded in stemming the decline sweeping through our neighborhoods. Instead, I argue that with FHFA taking the lead, new, nonresidential uses should be identified for the government’s stock of vacant homes. It means turning houses into offices, storage facilities, and artist studios. And in those cases when there’s no demand for such alternative uses, FHFA should demolish these excess structures and sell the underlying land for parks, community gardens, or—if thought of strategically—as part of larger wildlife corridors or active forest lands.

In addition, Congress ought to put in place a new round of NSP funding that reinforces the same aim: provide financial and logistical support to help cities and towns to find new uses for their inventories of empty homes; provide support for local and regional efforts to reconfigure those zoning rules which prevent adaptive reuse and food production in urban areas; provide incentives for banks to put their vast real estate holdings into new uses; and do more to promote the use of land banks to help cities and towns plan for vacant and abandoned property as part of green infrastructure networks—not simply one parcel at a time.

For more than 15 years, advocates of smart growth have insisted that metropolitan areas can be planned for and designed to be more resilient to the effects of new housing, new shopping centers, and more people. Today, the opposite problems face many cities and towns. We can achieve resilience through smart shrinkage policies that help right-size communities to be both smaller and better.

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