2024 Fall Issue of Urban Land - 28

developments
developments
Innovative Financing
Tool Addresses Blight
to Boost Affordable
Housing
Noncontinguous TIF
bonds address scattered
site redevelopment
Developers and casual visitors
to Baltimore notice the
eyesores that once-attractive
houses-now empty and damaged-have
become. The
mismatch between discarded
homes and the shortage of
houses in the city, particularly
for low-income households,
frustrates housing advocates,
city officials, and builders, as
well as residents. Baltimore
isn't the only place facing such
a challenge, though.
" Baltimore has been plagued
for 40 years by vacant houses
and has struggled to figure
out how to revitalize the
neighborhoods . . . blighted
by these abandoned houses, "
says Owen McEvoy, of counsel
with Nelson Mullins law firm
in the city and former deputy
secretary of the Maryland
Department of Housing and
Community Development.
" Scattered site redevelopment,
which is required because
vacant houses are intermittently
located among occupied
homes, is the hardest of all
redevelopments. "
The city of Baltimore has
approximately 13,000 abandoned
houses and 20,000
vacant lots that create health,
safety, and financial hazards for
nearby properties. Although it
might seem simple to fix and
flip these homes, the math
doesn't easily compute.
" The problem is that if you
can fix or replace these homes
for about $300,000, you
can't sell them for more than
$250,000, " says Joe Meyerhoff,
an affordable housing finance
specialist based in Baltimore.
" The issue is how to close that
appraisal gap at scale, which
is an enormous financial problem. "
Municipal
bond funding is
hard to accomplish for a handful
of houses, says Christopher
Sheehan, Annapolis-based
managing director, public
finance for Mesirow, a private
financial services company
headquartered in Chicago.
Although funding is available
through a TIF (tax increment
financing) devoted to largescale
projects for a street or a
parcel of land, fixing individual
abandoned homes falls outside
the traditional uses of a TIF, he
says.
" It's difficult to get a bank
to lend on blighted homes
individually because of that
appraisal gap between the
cost to fix them and the projected
sales price, " Sheehan
says.
Building or remodeling
Homelessness is fundamentally a housing
production issue, and the most affordable
home is often an existing one. Tools like
NCTBs streamline the acquisition and
rehabilitation of vacant properties, providing
a cost-effective way to deliver more
deeply affordable units and . . . stabilize
communities. These homes are ideal for
individuals and families who are housing
insecure, at risk of homelessness, and have
limited needs for supportive services. "
- WILLIAM ZEH HERBIG, AICP, SENIOR DIRECTOR,
ULI HOMELESS-TO-HOUSED INITIATIVE
10,000 homes at $300,000
per property would be a $3
billion endeavor. Multifamily
units typically cost $350,000
per door to build, Meyerhoff
says, a cost of $3.5 billion to
produce 10,000 units.
" It's easy to see [that this
expense] would outstrip the
resources of any jurisdiction,
so I looked for a solution that's
scalable without depending
solely on city or state financing, "
Meyerhoff says.
Even if a state or local
government can provide
$500,000 to redevelop abandoned
homes, doing so would
fix only 10 or 20 homes, not
10,000, McEvoy says.
Meyerhoff's solution: noncontiguous
TIF bonds (NCTBs).
A TIF creates a special tax
district that uses taxes generated
by increased value after
development to pay off the
28
URBAN LAND
FALL 2 024
2024 Fall Issue of Urban Land

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