Homebuyers and investors in Baltimore neighborhoods with old housing stock took out more than 21,000 rehabilitation permits last year.

Permits to fix up city homes soar

August 02, 2005|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

Hit the streets in Baltimore and the evidence isn't hard to find.

The number of residential rehabilitation permits has nearly doubled in the past five years, pushed upward by the quickly rising tide of housing values.

Rehabbers took out 21,658 permits in the fiscal year that ended June 30, according to estimates from the city housing department. That's an increase of about 25 percent over the previous year and almost twice the 11,500 permits in fiscal year 2000.

It's impossible to say how many homes are involved because top-to-bottom overhauls could involve four or five permits, while a big conversion of an office building into apartments is counted as a single rehab.

But experts said that many permits is impressive for a city of Baltimore's size - and sorely needed. The city has 16,000 abandoned homes and thousands more in need of improvement.

"Wow," said Alan Berube, a fellow at the Brookings Institution's Metropolitan Policy Program, on hearing the rehab figures. "It's a reflection of the revitalization of a lot of neighborhoods but also an indicator of the degree to which the housing stock declined over the last 40 to 50 years."

Increased demand for city homes, by both renters and buyers, accounts for most of the growth, city housing officials said. But they have also stepped up enforcement action against underground rehabbers in the past 18 months, which they say is generating about three permits a day for projects that had been undocumented, uninspected and untaxed.

More people appear to be trying to get around the city permitting process, but then more people are rehabbing in the city, period, said Michael Braverman, deputy commissioner for code enforcement for Baltimore Housing, a city agency. Last year the city raised the penalty for unpermitted work to $1,000 from $250.

Though the city housing department is confident about the number of permits issued, glitches in the data kept city officials from calculating their value. But that's clearly going up - permit fees help tell the tale.

Costs start at $10 for every $1,000 of work. The city collected roughly $3 million in such fees last fiscal year, up more than 40 percent from the year before, Braverman estimates.

"I think it's an enormous success story for the city," said Christopher Shea, deputy commissioner for development with the housing department.

Communities need to see substantial reinvestment in their housing stock every four or five decades to remain healthy, but the cycle has more than doubled in cities that have suffered from population loss, Shea said. The influx of private money in Baltimore - which lost 85,000 residents in the 1990s - is helping to stabilize neighborhoods, he said.

That money is pouring in from the region, the Washington area and much farther afield. Rehabbers include small-time folks with day jobs and big operations such as Redbrick Partners, a firm based in New York and Washington that is renovating and renting out dozens of city homes.

Owings Mills-based K Bank expects its renovation lending division will finance more than 300 rehabs this year, up from about 230 last year. The average loan is for just over $200,000, typically to investors intending to sell after the fix-up.

"Everybody has their eye on the prize - quick money," said Laura Randall, K Bank vice president of renovation lending. "One of the greatest things to come out of this is ... the neighborhoods like Reservoir Hill that have struggled for so many years, now they're finally seeing people."

Lots of them.

David Zichos, a principal of Baltimore Rehab Services LLC, which does work for homebuyers and investors, said about 85 percent of his business is in Reservoir Hill now. Many of the buyers are coming from Washing- ton, he said.

"It's the new Canton," he said.

The company used to focus its efforts on the suburbs but shifted to the city three or four years ago. Since then, the number of city homes it rehabs or renovates a year has tripled, he said. It will soon move its headquarters from Pikesville to St. Paul Street.

"There's such demand for properties," said Zichos, who figures the company will handle 60 units this year, all in the city.

Laura McNabney, who has rehabbed and rented out 20 homes in the city, is also seeing increased competition in the neighborhoods she works in - Hampden, Remington and the fringes of Charles Village.

"There are still deals to be had, but you have to roll over more rocks," she said.

When people do find property, they're investing more money in the fix-up than ever before, Zichos said. The average cost to fully rehab a Reservoir Hill home is $200,000, and that's on top of the purchase price, he said.

But it's paying off. In a trend echoing the conversion of old downtown offices into apartments, his firm is now turning huge three-story rowhouses into complexes of one-level condos. Some units have sold for more than $300,000, he said.

"It's just a wealth of opportunity," Zichos said.

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