Baltimore’s peers have lessons for Charm City’s $1 home program

Late last October, the Baltimore City Council approved a unanimous resolution that called on the city administration to restart a dollar home program that last ran in the 1970s. While the administration ponders whether to divert the $100 million set aside to demolish vacant homes, we thought that exploring the experiences of other cities might be instructive.

The city’s Department of Housing and Community Development (HCD) critiqued the proposal, saying that the city in 2017 is far different than it was decades ago. It now suffers from further population loss, an increase in vacant homes, and absence of federal funding. I am more supportive of the program. However, more than a month later, advocates are still waiting for HCD and the mayor’s office to announce the new initiative.

Baltimore is not the only city to implement a dollar home program in the past, or to consider launching one now. In fact, the US Department of Housing and Urban Development (HUD) continues to administer a dollar home program open to local governments and non-profit organizations.

Like Baltimore, many of its peers that have tried dollar homes in the past or are looking at the programs anew today are confronting a seemingly insurmountable glut of vacant housing. Let’s take a look at six: Kansas City, Missouri; Gary, Indiana; Buffalo, New York; Trenton, New Jersey; Milwaukee, Wisconsin; and Louisville, Kentucky. What lessons do they have to offer Baltimore?

Thousands apply for the dollar home sale in Kansas City

Kansas City's population: 481,000 people. Unlike Baltimore, Kansas City’s population is trending upwards, although still below its peak of 507,000 in 1970.
Program name: Dollar Home Sale program
Program start: February 2016, applications closed in April 2016
How many $1 homes offered: 135
Criteria: Applicants were required to prove they had access to $8,500 (but could recoup this in rebates from a demolition fund)
Other costs: $25 fee for applying; Kansas City told potential homeowners they would need to spend $30,000 to $40,000 to make the homes livable
Total potential costs: Up to $48,526 per city estimates
How many approved applicants: 31
Other details: The initiative started after officials announced plans to spend $10 million to demolish about 800 vacant homes, and community members pressured the city not to destroy them. Besides proving they had access to $8,5000, applicants had to commit to correcting external code violations within 120 days, to restoring the property to fully habitable within one year, and live in the home for at least three years.

Bottom line: Although thousands initially applied, as of last November, 31 people were successfully participating in the program.

Financial requirements dampen enthusiasm in Gary

Gary's population: 76,000 people in 2016, down from 178,000 in 1960
Program name: Dollar House Program
Program start: 2013
How many $1 homes offered: 14
Criteria: Applicants have to fix exterior code violations within six months and make the property livable within one year. To purchase a property, prospective buyers needed to have lived in the city for six months prior, have at least $1,000 in savings, and not already own a home.
Other costs: Non-refundable $25 application fee
Total potential costs: $20-30,000 in renovations
How many approved applicants: 25
Other details: The former steel city of Gary, Indiana had an estimated 10,000 abandoned homes as of 2013 and decided to use the dollar house program to tackle its abandoned properties. The city would retain the deed to the property for the first five years that the buyers lived in it, but during that period they would not owe any property taxes. After the five-year period ended, the new owner would receive the deed to the property. Despite receiving more than 400 applications, most couldn't afford the renovation costs. Five of the 25 approved applicants ended up purchasing homes, while the remaining vacant buildings were demolished.

Bottom line: The program is still going, even though the city has not yet reached its goal of selling 50 homes annually. This year they offered 17 homes and sold eight in September. Unlike past years, this time the city partnered with a local bank to offer renovation loans.

Buffalo’s dollar home program is ongoing four decades later

Buffalo's population: 256,000 in 2016, down from 580,000 in 1950
Program name: Urban Homestead Program
Program start: 1977
How many $1 homes offered: Varies
Criteria: Participants must buy the home for their primary residence or, as a designated Community Housing Development Organization, purchase the property to provide housing for low- to moderate-income families. New owners must finish the renovation within 18 months and need to live in the home for at least three years. Applicants must also demonstrate a financially viable plan to rehabilitate the home and need to have access to at least $5,000.
Other costs: Rehabilitation costs
Total potential costs: Some people have spent up to $78,000 on renovations
How many approved applicants: N/A, but annually 10 or so buyers close on a dollar home ​​​​​
Other details: There are an estimated 4,500 vacant homes in the city as of 2014. However, the cost to demolish these homes is prohibitive — the city estimates it would cost about $15,000 per building.

Bottom line: The dollar home initiative is only one of several steps that the city has taken to try to spur an urban revival. Earlier this year, Buffalo became the first US city to eliminate all minimum parking requirements. These requirements can prevent the rehabilitation of vacant properties, as would-be buyers often have difficulty meeting off-street parking requirements when seeking to redevelop historic properties that predated them. Time will tell whether or not this makes the program more effective.

Strict requirements see no takers in Trenton

Trenton's population: 84,000 in 2016, down from 128,000 in 1950
Program name: Trenton Neighborhood Restoration Campaign
Program start: 2015
How many $1 homes offered: 3,556 total “derelict” homes, ranging from $1 to $10,000
Criteria: Eligible applicants included first-time home buyers or people looking to relocate to Trenton. Applicants needed to demonstrate adequate financial resources to restore the home, could only purchase one per family, and needed to commit to living in it for at least 10 years. New home owners would not incur property taxes on any capital improvements made to the property.
Other costs: Restoration, prices vary
Total potential costs: Varies
How many approved applicants: None
Other details: The program was designed to reduce the more than 6,000 vacant or abandoned homes in the city. One year after the launch of the initiative, the city had failed to sell a single property. Trenton discovered that most prospective buyers were unable to meet the strict financial requirements. In response, the city launched a partnership with a regional bank to help individuals access financing.

Bottom line: Although the initiative has not been a wild success, the city has continued to seek ways to rehabilitate its housing stock, including efforts to stabilize vacant properties by boarding windows and doors, conducting basic maintenance, and demolishing unsafe buildings. Time will tell whether partnering with a regional bank will help prospective buyers afford the cost of renovations, which have thus far proved too prohibitive.

Milwaukee sought developers for Sherman Park

Program name: Milwaukee Employment/Renovation Initiative (MERI)​​​​​​​
Program start: January 2017
How many $1 homes offered: 100
Criteria: The program was restricted to developers, who were required to buy at least five homes
Other costs: Renovation
Total potential costs: $50,001 but developers could recieve a $10,000 grant for each home renovated within 90 days, bringing the cost down to $40,001
How many approved applicants: 100
Other details: Milwaukee sold 100 foreclosed homes in the Sherman Park neighborhood, which received national attention following riots the previous August after a police officer shot and killed 23-year old Sylville Smith.​​​​​​​ In the wake of the riots, the city restricted the controversial program to developers, which upset many residents. The city attempted to assuage some concerns by requiring participating developers to employee at least one unemployed or underemployed individual for at least 500 hours on each property.​​​​​​​

Bottom line: ​​​​​The grant exists because the original plan was to spend $2 million to demolish homes, with the stipulation that the demolition cost per home could not exceed $10,000. Activists were able to convince the city to dedicate $1 million towards the $1 home initiative, while the city retained $1 million to demolish those homes that were not salvageable.​​​​​​​

Last look at vacant homes in Louisville

Program name: Last Look
Program start: October 2017
How many $1 homes offered: 30
Criteria: Louisville requires applicants to demonstrate access to minimum funds required to rehabilitate or demolish the property.​​​​​​​ New owners have six months to complete exterior repairs and 18 months to make it fully habitable. If going the demolition route, then the prospective owner must present an estimate from a licensed demolition contractor and demonstrate sufficient funds to demolish the building within the first 45 days of ownership.​​​​​​​
Other costs: N/A
Total potential costs: $30-130,000​​​​​​​
How many approved applicants: N/A
Other details: New owners can either fix or demolish the property, depending on when they buy the home. For the first 30 days that the city lists a home in the program, new owners can only purchase it to rehabilitate it. During the next 30 days, people can continue to buy to fix the property, but they can also purchase it to demolish it.

Bottom line: The Flex Rate Policy enables prospective owners with a renovation plan but without the budget to buy the home at a higher up front cost (i.e. the appraised value) to give them time to raise the additional funds needed to rehabilitate the property. Since it's a new program, it's difficult to evaluate its success.

Here are some lessons for Baltimore

People line up for dollar homes. However, in most cases the initial enthusiasm meets the tough realization that a $1 property would not be habitable from day one. The number of homes that a city can offload through the program does not appear to be huge either — at least not compared to their inventory. (Baltimore’s original initiative sold about 180 homes.)

Still, dollar home programs do capture imaginations and attract interest far and wide. Commenters on the last article I wrote about Baltimore showed interest from as a far as Florida, Arkansas, Connecticut, New York, and Pennsylvania. Most appeared to have skipped over the part of the article indicating that the program was not yet active.

If HCD and the Baltimore mayor’s office decide to pursue the dollar homes program, then they would be in good company of other cities that chose to repurpose funds earmarked for demolition. Like Louisville, they could even leave targeted demolition as an option. However, the lesson from Trenton and others is that setting requirements that are too strict on residency can greatly inhibit participation.

Since financial barriers to participation appear to be the hardest to overcome, Baltimore would do well to follow the lessons of peers that sought partnerships with local banks to ensure that access to financing would be available. Baltimore should also consider opening up the application process to existing homeowners, developers, and community-based non-profits. The wider the pool of potential applicants, the higher likelihood for success.

Despite HCD’s belief that the sorts of neighborhoods that would be desirable under a dollar homes program have long since been revived, a local blogger was quick to point out several years ago that Reservoir Hill, Pen Lucy, Barclay, Edmonson Village, Remington, and Mount Clare would be ideal places to restart the program.

Do you agree? Can you think of other places where dollar homes might work in Baltimore, or is the program flashy without enough substance?