The Baltimore City Council introduced a bill this month that aims to reduce vacant properties in the city by punishing owners with a Vacant Building Notice (VBN) in order to pressure them to sell to someone willing to fix it up. This flawed policy is more likely to increase vacant properties as we continue to lose population.

The council’s bill would tax the roughly 13,000 city properties that currently have a VBN at the rate of $6.74 per $100 of assessed value the first year and $8.99 every year thereafter. Because a VBN is not removed until after renovations are complete and a certificate of occupancy is issued, the higher property tax bill is paid by the developer, thereby making housing less affordable. Developing in the city is already expensive and cumbersome, with slim profit margins. A higher tax rate doesn’t encourage buyers, it deters them.

The city does not have a supply problem, that is, too many vacant houses; rather, we have a demand problem. The city’s population goes down, on average, by 500 people every month. Policies to promote population growth would increase housing demand and have developers and rehabbers jumping at the chance to fix up vacant houses.

The “Baltimore Together” economic plan put forth by Mayor Brandon Scott’s economic development agency, the Baltimore Development Corporation, declares “Baltimore City is the only major East Coast city that has continued to lose population.” The plan says that “a key step is to develop a plan to reduce real property taxes and codify it in the Baltimore City Charter through a referendum.” It is well known that Baltimore City’s $2.248 property tax is more than double Baltimore County’s $1.10, Howard County’s $1.014 and Anne Arundel’s 98 cents. The city’s high tax rate is a financial incentive for more people to leave Baltimore City. Many others concur, including current and former state, federal and local elected officials, planners, economists, analysts and even the Open Society Institute, which said, “A credible promise of tax reduction would bring new residents and investors to Baltimore City.” I suggest the City Council put its energy into lowering everybody’s property tax rate to stimulate population growth.

Baltimore’s Small Developers Collective, a group of real estate professionals buying and renovating properties throughout Baltimore City, includes many members of minority groups. Most small developers have limited capital, borrowing on their credit cards and from partners to fund property purchases and renovations. Raising vacant building taxes discourages these small housing providers from taking the plunge. Let’s not increase taxes on this diverse population that actually solves our vacant house problem. Let’s encourage entrepreneurship and generational wealth building.

Legislators have told me that Washington, D.C., solved its vacant property problem using this same strategy of taxing vacant buildings at four times the normal property tax rate. I dispute this assumption. History shows D.C. lost population from 1950 to 2000 at similar rates and patterns as Baltimore City. D.C.’s population began increasing in 2000, right after the passage of the Tax Parity Act that forced D.C. to make its tax rates competitive with surrounding jurisdictions. D.C. first attempted its strategy of punitive rates on vacants in 2003, then increased those rates in 2010 and 2017. While D.C. had flagged 3,000 properties as being blighted and vacant, only 189 were actually taxed at the blighted rate, according to a 2021 Washington Post article, which reported that D.C.’s auditor found the D.C. government incompetent and ineffective in implementing the onerous property tax rates on vacants; thus the program was ineffective. Washington, D.C.’s residential property tax rate is only 85 cents today, well below Baltimore City’s $2.248. D.C.’s success has more to do with setting competitive, fair and equitable tax rates for everyone than imposing a punitive tax on blighted property.

This year, the mayor and City Council could have lowered the property tax rate by 9.1 cents, and another 7.4 cents in 2023, and received the same property tax revenue dollars it did the year before. Instead, the mayor and City Council kept the tax rate high and spent the extra money. Taking serious and concerted action to lower everybody’s property tax rates will do more to bring Baltimore Together.

Rather than pass new laws and create more bureaucracy, the city should use tools currently available. A VBN requires the owner to raze or rehabilitate the building within 30 days and carries a fine of up to $500 per day. In over 40 years of selling and managing city real estate, I don’t recall any instance where this fine was imposed. The City Council’s bill would not take effect until July 1, 2026, almost 2 years from now, while the fines can start today. Rather than creating ineffective new laws, wouldn’t lowering everybody’s property tax rate and imposing VBN fines currently on the books be a more effective way to achieve desired goals?

Ben Frederick III is a Baltimore City Realtor specializing in apartment buildings and investment properties. He can be reached at Ben@BenFrederick.com.