Fed Board Governor Elizabeth Duke spoke at the NY Fed last week, addressing what she saw as significant issues in the long term vacant housing market. Full transcript link here.
Duke’s analysis of Baltimore as an example of ‘low demand, high vacancy’ is as good as any one could come up with without mentioning Detroit by name. Baltimore is interesting in a number of different ways. The most prescient is that there is still a multi faceted economy, and that the land in vacancy is more a symptom of long term flight to suburbs rather than a specific crisis. So the problem is more a long term trend as opposed to a long term housing issue.
Not all markets are equally attractive to private investors, so some governments are developing programs to attract private capital to “low demand,” high-vacancy neighborhoods. The city of Baltimore, Maryland provides a good example of such a program. Baltimore is burdened with approximately 16,000 vacant and abandoned buildings, about a quarter of which are owned by the city. Much of this vacancy has been caused by population loss and suburban flight–Baltimore City has lost nearly one-third of its population over the last 50 years.18 However, not all parts of Baltimore have a significant number of vacant properties. In fact, only 5 percent of census tracts in the Baltimore metropolitan area have a long-term vacancy rate in the top decile of the national distribution.19 The city of Baltimore has recognized these micro-market distinctions and initiated an innovative data-driven program to identify areas with a high concentration of vacant properties and turn these properties into valuable assets.