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Why Does D.C. Have So Many Vacant Houses, When Real Estate Is So Pricey?

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This house on Illinois Ave. NW has been vacant since its owner passed away. A planned sale to developer Sir Charles Martin got caught up in probate issues, with different parties asserting interest and no clear title.
WAMU/Matthew Schwartz
This house on Illinois Ave. NW has been vacant since its owner passed away. A planned sale to developer Sir Charles Martin got caught up in probate issues, with different parties asserting interest and no clear title.

Vacant properties are a sore spot in otherwise thriving communities. They bring down property values and act as a magnet for vandalism and crime. ANC Commissioner David Sheon is working to reduce vacant properties in the District — but what he calls a "loophole" in the law is making that difficult.

“There is roughly a vacant building on every block," Sheon says as he walks in his north Petworth neighborhood, pointing out the spots of dereliction. "Our city has a lot of wounds."

Sheon was elected as neighborhood commissioner last year, winning by just 11 votes out of 600 cast. It was while campaigning for the position — and knocking on doors that no one would answer — that he realized how many vacant homes there were.

Now, he's waging a campaign against vacant houses.

On a beautiful Saturday morning, Sheon takes a reporter on a walking tour of the empty homes in his neighborhood. One, on 9th Street NW near Gallatin St., looks okay from the front — but the backyard is a trash heap. Weeds stand more than six feet high, entirely covering an abandoned truck parked on the lawn. Mattresses, a rusted out shopping cart and garbage dot the yard.

The next-door neighbors have said they're willing to mow the yard, but legally they can't because it's private property, Sheon says.

Leon Simms, Jr., lives next door to the vacant house, and doesn't know what to do. "There’s rats, rodents, bugs, all kinds of stuff back there," he says. "And it affects everyone. It affects our neighborhood. I wish somebody would do something.”

Loophole in the law?

This row house in Petworth has been vacant for more than six years. A construction permit on the window exempts it from D.C.'s vacant property tax. (WAMU/Matthew Schwartz)

Sheon is trying to do something. He says vacant properties lead to increased crime, safe havens for drug deals. He’s gotten into heated arguments with developers, letting them know that neighbors have complained, and if they don’t fix up their properties, he’ll inform the city.

A house on the 900 block of Farragut St. is one of the properties the neighbors complained about. It looks out of place on this street of beautifully manicured row houses. It’s in disrepair, the wood rotting, cracked steps leading up to an empty porch. The inside is devoid of furniture.

A sticker posted on the front window says "Construction Exempt Fiscal Year 2015." Sheon explains what the sticker means: "It's exempt from vacant building tax."

That tax is the city’s main tool to crack down on vacant properties. Normal residential property tax in DC is 85 cents per $100 dollars of assessed value. The vacant property tax is nearly six times that much. Get on the city’s blighted property list, and it’s nearly 12 times as much.

It’s real money, and it’s meant as motivation for developers to bring a vacant house back to life. If you pull a construction permit, the city will lift the tax, since you’re working on the house. But it turns out, there’s a loophole.

Jason Weaver has lived next door to the empty row house for nearly six years — and the house has been vacant that whole time, he says. Not only that, but the owner has done "very little" construction on the property, despite the construction permit. "The current owner, I’ve seen him show up very infrequently and I’ve seen him do very little," Weaver says.

A developer can pull a construction permit, avoid the vacant tax, and not do any work. He can renew the permit for years. I left messages for the owner, but didn’t hear back.

Sheon explains: “He took out the building permit last year and he extended it another year without lifting a hammer once as far as we can tell on the property. That action of putting in a building permit, which I think in his case he paid about $1,500 for the building permit, saved him about $15,000 in taxes.”

Why would a developer hold onto a property? Sheon has a theory.

“The owners are incentivized to sit on the properties because property values in Petworth are going up. They have been for a long time, and they continue to go up," Sheon says. "And the longer that a developer sits on the property and leaves it vacant, the more money they’re going to make down the road.”

'It's the law in the District'

But some developers argue that the loophole is actually a good thing for the city. Sir Charles Martin of Upper Marlboro, Md., has been active in D.C. real estate for over a decade — including transactions in Sheon’s neighborhood. ("There are a lot of Charles Martins in the real estate business, and I added the ‘sir’ to distinguish me from the others," he explains.)

In 2002, Realtor Magazine honored him as one of “30 under 30.” He says he’s done more than a hundred million dollars worth of transactions in and around the District — and he passionately defends the practice of buying a property and holding onto it until surrounding property values rise.

“The city should welcome long-term investors," Martin says. "It may be bad for the neighborhood because their property may not be getting turned around as fast as the neighborhood would like to see it. But the purpose of capital is to generate the highest possible return.”

And that so-called loophole letting a developer avoid the tax?

“It’s the law in the District. Now if the city council wants to do something about it, the city council can change the law.”

Legislative fixes coming

In fact, the D.C. Council is considering some changes to the vacant property rules. Sheon has provided them with ten “action items” to fix the problems he sees. Number three on his proposed list is getting rid of the building permit loophole. "The city would make more money and these houses would turn over much faster," he says.

At-Large Council member Elissa Silverman isn’t especially concerned with the lost revenue, she told WAMU 88.5, because bringing in more money was never really the point of the vacant property tax. The tax, she says, was really just about motivating developers to get to work.

That said, Sheon "makes a good point, which is we want to make sure that we guard against bad actors — people who really have no intention of putting that property back on the market but who take out a building permit simply to stop the clock.”

Silverman has reviewed Sheon’s ten-point plan, and is working with the head of the Department of Consumer and Regulatory Affairs — which handles vacant properties — to make some of Sheon’s ideas a reality.

“One of the proposals that we were very interested in, which will also help us guard against the bad actors, is his second proposal in his list, which is to shift the burden of proving a property is vacant from the city to the owner him or herself. We think that makes a ton of sense.”

Silverman plans to send language to the Council this fall requiring homeowners to prove their property isn’t vacant — rather than the current rules requiring city workers to prove that it is.

As for eliminating the construction exemption? Silverman says DCRA isn’t too keen on the idea, because the exemption works really well to get the good actors moving.

Respecting capital

For his part, Sir Charles Martin bristles at the idea that developers who sit on building permits are bad actors taking advantage of a poorly drafted law. If he sat on the D.C. Council, he wouldn't change the law, he says.

"I respect capital," Martin explains. "Look, capital changes neighborhoods and you can’t regulate capital to drive it away. If you say, We’re going to disrespect your capital — we’re going to tell you what you can do with your money, how you do with your money, when you do with your money, guess what: People are going to go to other neighborhoods. So the District has to make a decision. Do we want capital pouring into the city? Or do we want to drive capital away from the city?”

It might take a while, he says, but in the long term that capital could reduce vacant homes and, someday, make neighborhoods more beautiful.

But that’s little comfort for people like Leon Simms Jr., who lives next to the backyard trash heap on 9th St. — next to a house that often serves as an illicit neighborhood hangout.

“Every evening there’s a party in the vacant house with the men that just socialize on the block, don’t even live on the block," he says. "Ain’t too much we can do about it. They come every evening and stay all day, all night, cars up and down the street, parked, double parked, can’t even get a parking space.

"We don’t want no problems with them by speaking out against them – ‘cause you don’t know how people are, you don’t know what they’ll do," Simms says. "We're just in a situation where we don’t know what to do about it.”

Sheon hopes he can do something about it — one door at a time.

Music: "Homeward Bound" performed by Thanksgiving Orchestra & John Hancock Plymouth from Thanksgiving Day Music

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