New ordinances now hold bank servicers accountable when a borrower stops paying the mortgage and a home becomes vacant. This gives new tools to municipalities that have been spending millions of taxpayer dollars to maintain vacant properties during the foreclosure process. This is a good step in the right direction, but to be truly effective the new laws must be enforced. In order to ensure timely and vigorous enforcement of vacant property ordinances, municipalities should consider the following four issues:
Enforcement issues: No more liens for unpaid fines
Liens do not provide enough of an incentive for bank servicers to maintain properties because a fine does not represent an immediate cost. Bank servicers can wait until the property is sold to pay liens off, and therefore transfer the cost of fines to a new buyer. Municipalities should ensure that vacant property fines directly affect bank servicers by imposing actual costs, so there is a real incentive to keep properties up to code during the foreclosure process.
Capacity issues: Use fine and fee money to beef up enforcement.
The purpose of vacant property fines is to provide an incentive for banks to keep properties in good repair. The fines should also pay for enforcement and the funds a municipality uses to clean up properties in violation of the ordinance. Therefore, it is worth investing in good enforcement to force either compliance or to provide enough money for a municipality to bring buildings into compliance themselves. Vacant property ordinances should not put extra burdens on municipalities. Fines should be a source of revenue to compensate for taxpayer money spent on vacant property maintenance and the problems they cause (fire and police response for example), especially when municipal budgets are tight.
Real consequences: Banks servicers must have an incentive to comply.
Enforcement must be swift to show bank servicers that a municipality is serious about compliance. To provide more of an incentive, municipalities should consider larger consequences for bank servicers that do not pay vacant property fines. For example, refusing to hold city money in banks that have not fully paid their fines, refusing to renew business licenses to banks and servicers that do not pay fines, or withholding city contacts are some options municipalities can consider to bring real consequences for not complying with vacant property ordinances.
Impact: Use the new rules to make a real difference at the community level.
Vacant Property Ordinances are a good tool that municipalities and other units of government can use to reduce neighborhood blight and prevent crime and health hazards associated with vacant properties left behind during the foreclosure process. In order for ordinances to be effective however, enforcement of the ordinances must be swift and the consequences for non-compliance must be real. Municipalities should invest in enforcement to ensure vacant property ordinances are taken seriously and make a real difference in the community.
Elected officials, municipal administrators and citizens who would like to get involved with Action Now and work to reduce foreclosures, clean up vacant properties, and create more livable neighborhoods should visit our web site at www.actionnow.org or give us a call at 312-676-4280. We are committed to making sure that vacant property ordinances result in a benefit to all Cook County residents, and we are willing to assist municipalities in developing effective enforcement mechanisms.
Throughout January and February, Woodstock Institute is participating in a series on vacant properties in metropolitan Chicago hosted by the Metropolitan Planning Council. In the coming weeks, the blog will feature guests posts from elected and appointed officials, policy advocates, finance experts, and others about the many ways we are all working together to get a handle on this growing regional and national challenge.