The concept of blight is a frequent topic in the headlines and in the hallways of state and local governments. This term has a long history in common parlance, beginning with its early 20th-century use by social reformers to call attention to living conditions confronting new waves of immigrants arriving in rapidly industrialized cities.
Most recently, following the 2007-2008 financial collapse of the mortgage industry and the ensuing foreclosure crisis, state and local governments renewed their focus on blight from the standpoint of the impact on surrounding communities by properties in various stages of foreclosure and especially vacant properties. Today, the term is defined as a state of depreciation of a property in which the property has lost either its value as a social good or economic commodity or its functional status as a livable space. Defined this way, blight is not an objective condition. With each community trying to define for itself what constitutes “blight,” a patchwork of state and local measures aimed at confronting and managing this condition has developed over the years and continues to evolve as new studies are published on the impact of foreclosures and property vacancies on various communities. Blight, at this point, seems to be defined as much by what it would take to remediate it as by what it looks like.
When it comes to taking action against blighted properties, the primary actors usually are local governments, nonprofit organizations and community-based groups that frequently work together to identify approaches for managing blight and set policies for managing such approaches. After years of trial and error, most communities have been coalescing around the following strategies for addressing blighted properties:
- Code enforcement programs – the creation of government departments that inspect, investigate and prosecute local laws on physical condition and safety of properties. These initiatives frequently followed passage of stricter local codes specifying methods for maintaining and securing vacant properties;
- Registration ordinances – a rapidly increasing number of local governments have been adopting regulation that requires property owners and managers to register vacant properties, monitor and maintain their condition, or obtain annual licenses and pass regular inspections;
- Property information and data systems – the establishment of city-wide or regional databases of public- and private-sector tax, foreclosure, code enforcement, and utility shut-off information to track the status of real properties;
- Land bank and demolition programs – many states now authorize cities and counties to create quasi-public authorities to acquire, dispose of, and redevelop primarily tax-delinquent, but also vacant, properties; and
- Neighborhood redevelopment and urban greening initiatives – mainly community-based programs for rehabilitation of dilapidated homes, greening of vacant lots and reclamation of industrial sites.
Broken windows theory 2.0 – doing away with plywood
There is little data on what policies and programs work best to limit, eliminate or remediate blighted properties. However, one consistent finding across all of the studies into the impact of property foreclosures and abandonment is the confirmation of the “broken windows theory” – the existence of a direct relationship between an increase in vacant and abandoned properties in a neighborhood and an uptick in criminal activity, especially violent criminal activity, in the same neighborhood. Property vacancy has been repeatedly proven to be the strongest predictor of violent crime in an area, ahead of any other socioeconomic or demographic variable. And nothing signals property vacancy like broken windows and doors, or windows and doors covered up with plywood.
Plywood has been the cost-efficient material of choice for securing vacant properties. However, localities dealing with large numbers of boarded-up properties quickly came to conclude that securing vacant properties with plywood did nothing to mask property vacancies. Wide-ranging experimentation with alternatives to plywood ensued.
Local initiatives to banish plywood
By 2011, a number of cities in Connecticut passed ordinances requiring any plywood used to secure doors, windows or any other parts of a property to be painted with color that matches the color of the building. Several Minnesota localities in the same year went a step further and required any plywood used to secure property openings to be cut to fit the respective opening and painted to “match the building exterior or covered with reflective material such as plexiglass to simulate windows.” In Hennepin County, Minn., town leaders upped the ante by promoting the use of “urban camouflage” – vinyl sheets with images of windows printed on them placed over the previously boarded windows. Minnesota’s creative approach to securing vacant properties continued with the 2012-2013 Milwaukee “artistic board-up” initiative, in which neighborhood revitalization groups turned plywood window and door coverings into works of art.
But, the practical approach triumphed over artistic in the rest of the country. In 2012, Fayetteville, N.C., passed an ordinance setting a three-year horizon for doing away with plywood as material used to secure vacant properties. As of September 2015, any still-vacant or newly vacant properties in Fayetteville have to be secured with transparent materials. In 2014, Chicago’s city council adopted regulations for securing vacant buildings that still allow plywood to be used to secure a building for an initial six-month period but largely mandate a shift to plexiglass boarding due to its perceived ability to reduce criminal activity around vacant properties. Phoenix made the news in April 2015 when it outright banned the use of plywood and required structures unoccupied for more than 90 days to be secured with polycarbonate sheets.
Anti-plywood ordinances – an abuse of police power?
While this gradual cross-country implementation of plywood alternatives has gone largely unimpeded, a recent case out of Pennsylvania demonstrates that it is possible to go too far in pursuing the un-abandoned property look. Philadelphia’s Property Maintenance Code, in effect since 2003, mandates that a vacant property “that is a blighting influence” must have all openings secured with actual windows, doors, frames and glazing, and boards or masonry can only be used to secure such property if placed behind actual windows and doors. In October 2016, a Pennsylvania court, in apparent rejection of the broken windows theory, found this provision to be an impermissible abuse of the city’s police power because, according to the court, that section of the code was concerned “only with aesthetic appearance of vacant buildings, rather than the safety risks posed by blight.” However, this decision appears to be an exception to the emerging broad consensus that plywood alternatives are more secure and more likely to improve the market conditions in neighborhoods with a high percentage of REO properties.
Fannie Mae and the state of Ohio
Nationwide, the balance continues to tip in favor of polycarbonate plywood alternatives for securing vacant properties. As of Nov. 6, 2016, Fannie Mae, which has been allowing the use of polycarbonate to secure its REO properties for several years, will essentially mandate its use into the foreseeable future by requiring the use of plywood alternatives and making polycarbonate an “allowable” for both pre-foreclosure and real estate owned (REO) properties in its residential servicing guide.
Further, on Dec. 8, 2016, Ohio passed H.B.4463 and became the first state to outright ban the use of plywood and mandate the use of polycarbonate to secure vacant properties that are foreclosed under the new expedited foreclosure process. Ohio REO properties foreclosed upon and declared vacant prior to the April 5, 2017, effective date may continue to be secured with plywood. However, although Ohio has certainly thrown the power of the state behind this major policy change, enforcement of this new law is still left to the discretion of individual municipalities.
The decisive steps by various localities, Fannie Mae and now Ohio to move away from plywood as the default boarding material are anticipated to lead to faster return of properties to the market in a more stable and marketable condition, with the collateral benefit of reducing crime and community blight. Some advocates, such as Robert Klein, founder and chairman of Safeguard Properties, go as far as predicting that “80 percent of the issues that the mortgage servicing industry has with securing vacant properties will be resolved when the industry moves toward polycarbonate clear boarding.” Only time will tell if plywood alternatives will prove to be the kind of panacea the REO market is hoping for.
Natalia Steele is a partner in the Cleveland office of Vorys, Sater, Seymour and Pease LLP and a member of the litigation group, where her practice is focused on civil business litigation. She can be reached at email@example.com.