Vacant city houses get property tax break meant for owner-occupied homes

Sun analysis finds 465 vacants getting credits worth $325,000

August 23, 2011|By Scott Calvert and Jamie Smith Hopkins, The Baltimore Sun

Property tax breaks meant to encourage homeownership have been awarded to 465 vacant houses in Baltimore, depriving the city of uncollected revenue in a difficult budget year and calling into question past promises from city officials to crack down on tax scofflaws, a Baltimore Sun analysis has found.

Owners of the vacant homes received a total of $325,000 in tax breaks. That's enough money to run municipal swimming pools for more than two weeks, one of the many services that had been on the chopping block — stoking the ire of residents — as the city slashed its budget to address a $65 million shortfall. In the end, Mayor Stephanie Rawlings-Blake opened the pools on a staggered schedule to save money.

Thousands of vacant homes, a longtime scourge in the city, have contributed to creeping blight and sinking property values. To combat the problem, the city has levied fines against owners and tried many strategies to promote the rehabilitation of such properties. The fact that hundreds of those owners are getting undeserved tax breaks incenses homeowners and critics.

"It's not fair," Patterson Park homeowner Beatrice McCormack said when she learned that a vacant home on her block is getting $2,218 in undeserved city and state tax breaks this year. "It's annoying that they get away with it."

Rawlings-Blake said Monday that she has formed a "billing integrity program" to scrutinize the homestead credit and other property tax breaks, and officials say early efforts have spotted $2 million in potential new tax revenue. "While there have been lapses in the past," the mayor said, "my administration not only made it a priority but hired someone to work on it on a full-time basis."

It's not clear why the problem with vacant houses getting the homestead credit has gone unaddressed for years or why previous efforts to ferret out misuse failed to end abuses.

The persistent vacant-property problem has been raised in this year's mayoral contest. Some candidates argue the city should impose a higher tax rate on those properties. The idea is that punitive taxation would discourage vacancies.

The Sun examined the city's own data, comparing a list of current homestead tax credit recipients against a list of houses with outstanding vacant-building notices indicating they are unsafe or uninhabitable.

Vacant houses are almost never eligible for the tax credit. Rare exceptions include a fire or major illness that forces a temporary move. It's also possible some houses are occupied but the owners haven't obtained a city occupancy permit to get the vacant-building notice lifted.

The Sun verified that more than 50 homes listed as vacants have received a credit of at least $1,500 for the fiscal year that began last month. A detailed look at four of those properties found that no allowable exemptions applied. In fact, all four owners claimed not to know they were getting the break, even though in each case the house is listed in public records as a principal residence.

Kevin S. Lomax's property tax bill on his vacant Harlem Park rowhouse is just $324 this year, thanks to a break of $2,125. He said in an interview that no one has lived at the house on North Schroeder Street since he bought it in 2006 because he can't afford renovations. Plywood now covers the front door. "There's no bathroom or kitchen in there," said Lomax, a first-time buyer.

He added that he had no clue that he has been getting the homestead credit, because his mortgage lender paid his taxes.

The state homestead program caps property tax increases on a person's principal residence, and in the city that's 4 percent a year. Even with falling home values, the cap provides a valuable subsidy to many homeowners because the housing market bust hasn't yet erased all the gains of the bubble years. This year, homestead credits in the city are expected to total $121 million.

City finance officials pledged three years ago to crack down on misuse of the homestead credit by vacant-property owners and landlords. Rawlings-Blake, then president of the City Council, said in November 2008 that the city had to "maximize what tax receipts are coming in." Baltimore officials said then that they mailed bills to owners of 200 city properties believed to be improperly receiving credits. The state planned to contact owners of 1,400 other city properties thought to be abusing the system.

"We are flipping over the couch looking for change," Rawlings-Blake said at the time.

But while the city has continued to send state tax assessors a list of rental properties every six months to help weed out landlords who shouldn't be getting credits, it has not done the same with vacant properties, said Robert E. Young, director of the state Department of Assessments and Taxation.

Rawlings-Blake stressed that it's a priority of her 18-month-old administration to catch tax cheats. "Because there have been so many years where this has not been addressed, we have a lot of work to do," she said.

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