Increased deterioration of property value
The recent economic downturn resulted in a historic increase in the number of mortgage foreclosures which affected neighborhoods that had not previously had any issues with vacant or abandoned properties. Deterioration of property value and declining neighborhood prices can leave homeowners with negative equity and unable to sell. According to the Center for Urban and Regional Affairs (CURA), neighborhood foreclosures can result in visible signs of neglect which reduce adjacent property values, higher local government expenses due to vacant and abandoned properties and reduced neighborhood quality of life. Further, an increase in housing supply from foreclosures leads to a decreased value of the housing stock.
For more information on vacant properties, read Smart Growth America’s report.
Loss of tax revenues
According to the Center for Urban and regional Affairs (CURA), demolished structures, vacant lots, and forfeited properties not only decrease the revenue stream, they can increase the cost of maintenance to the city or surrounding neighbors of keeping up and securing the property. Inspections, fire, and police services dedicated to these properties use funds without any revenue source. A secondary impact is the decrease of surrounding property values and property tax revenue.
Impact on reinvestment related to the perception of decline
Abandoned houses signify urban decline. The level of investment needed to turn such properties around is generally greater than the market value of the property. Additionally, general health and safety hazards may arise from deteriorated structures when people use vacant buildings for criminal activity. Studies indicate that the presence of blighted properties alone reduces the property values within 500 feet.
Deteriorated structures or vacant lots may invite criminal activity leading to health and safety hazards. Blighted properties may reduce the incentive for neighbors to maintain their own properties, leading to further loss of real and perceived neighborhood value.