A recent article discusses possible changes in Minneapolis to their VBR program and its fee. One primary change would be moving the annual $7,087 fee to a monthly fee.
“…inspection citations would start at $250 and continue to double in value, capping at $2,000 if the building remains vacant. This change means a vacant building in Minneapolis could cost an owner potentially up to $24,000 a year.”
I find it interesting that Minneapolis, having the highest registration fee in the country, still seems to need what one councilman stated as a “proverbial bump in the butt” to push owners into doing something with the property.
I hear similar sentiments and motives when communities consider escalating fee schedules with lower dollar amounts. My response is typically that we do not have data indicating the effectiveness of this approach.
Perhaps from this example in Minneapolis we can extrapolate that this approach does not serve the intended purpose.
If a $7,000 “stick” doesn’t motivate owners of properties what guarantee is there that a $24,000 “stick” will?
I hope I am wrong, but I am curious if a true analysis was done on the vacant housing and commercial property inventory and if any conversations are being had with owners that have registered the property with the City. While I am sure there are properties that have been registered and the owner is “mothballing” due to whatever financial consideration they have (even including the holding costs of registration fee and taxes etc.) I would believe them to be few and far between.
I would imagine the majority are properties not registered, with many in a deplorable condition. Which of course are the most visible and most frustrating.
I believe one of the issues here is the lack of understanding of what a registry is and what it isn’t. The registry is a means to the end, with the end goal being a maintained property, preferably occupied.
High fees should not be on the registration, but instead high penalties when there is a lack of property maintenance.
High fees or penalties in general can have negative consequences. High registration fees might deter compliance as owners hope to avoid paying the fee and continue “hiding”. High fees or violation penalties may push the owner to walk away.
Sometimes the only way is to micro-manage and deal with each property individually. With a scarcity of resources, that is why it is critical to have the focus in the right area and not be distracted by other properties that don’t fit this criteria.
I have read countless articles and had countless conversation on this topic and I often see one common denominator. The fact that real estate is an asset is forgotten. Generally speaking, owners of real estate want that asset to appreciate and produce a financial return etc. Extremely prevalent when banks are involved. Typically the blanket statement is given “banks don’t care about the community, they let their properties go to hell etc.,”.What is forgotten is that these properties serve as the collateral on their outstanding loans. Independent whether they “care” or not, they have a strong financial interest in maintaining (if not increasing) the value of these properties.
Whether it’s a bank, an LLC or an individual owner generally they want their asset to make money or at least not lose them money.
I think this point is overlooked or outright forgotten.
Sometimes a big stick is need for the “proverbial bump in the butt” but sometimes an opposite approach is needed.
For a variety of reasons I don’t believe that local governments have the needed flexibility, or utilize it if they do.
One suggestion, would be to engage the owners (ones that have registered) and discuss their motivation and objective. Leveraging the high registration fee in Minneapolis is a great place to start.
Simple questions, such as how are you okay paying $7,000 a year (plus taxes, maintenance costs etc,.) and why haven’t you occupied/sold/donated it yet?
What can we do to push you that would be a net benefit for both parties i.e. city has upfront cost/loss that is recouped by property in productive use generating additional tax revenue and improved property values.
What would a raise in fees do to you? Would you be pushed to sell (risking an even worse owner) or bring in a previously undesirable tenant? Would it cause you to walk away and let the LLC dissolve?
Then perhaps, the municipality would need to question themselves whether it is worth it.
If the results could be shared it could benefit the numerous communities contemplating escalating fees.
Article can be viewed by clicking here.