Real Estate

Baltimore uses bonds for its glitziest developments. What if they could rehab vacant rowhomes?

Joseph “Joe” Meyerhoff II has a solution to Baltimore’s vacant home crisis that even he knows sounds crazy, but some in the city of Baltimore are examining the idea.

There are at least 15,000 vacant homes in Baltimore, a level of blight rarely seen on the East Coast. Yet the city has an affordable housing shortage, so Meyerhoff wanted to know why somebody couldn’t just fix up those homes and sell them.


The retired businessman and philanthropist put the question to a nonprofit builder, who told him he spent $200,000 to fix up a vacant Baltimore house that then appraised for only $150,000.

That’s a $50,000 loss.


“I’m like, ‘What?’” Meyerhoff recalled saying. “He was describing the appraisal gap before I knew what it was.”

That appraisal gap — the difference between how much it costs to rehab a home and how much someone will pay for the home afterward — means there’s no financial incentive to renovate a vacant home and sell it. A private developer will lose money on the deal.

Meyerhoff, who describes himself as having a tenacious personality, became obsessed with the appraisal gap and set about trying to bridge it.

Joseph “Joe” Meyerhoff II is floating an idea to create a massive subsidy to fix up vacant homes using a noncontiguous TIF bond.

The 64-year-old — he and Joseph Meyerhoff Symphony Hall were named for his grandfather, a real estate developer and philanthropist — lives in Baltimore County’s Hunt Valley. His two daughters are grown and, aside from two dogs, he’s an empty nester. Meyerhoff started spending days in his sunroom overlooking a nearby field, working on an answer to the appraisal gap.

Meyerhoff knows the city doesn’t have much wiggle room in its budget. But what if there was a way to create a pot of money — tens of millions of dollars or more — that could cover appraisal gaps and spur thousands of vacant home renovations?

He thinks he’s figured it out.

“That’s been the hardest thing for people to believe,” he said. “‘You’re telling me that you can borrow tens of millions of dollars, and that affordable housing pays for itself, and that it won’t cost the city a nickel?’”

For years, Baltimore has issued bonds, borrowing millions of dollars, to help finance major development projects in and around downtown, like Harbor Point. While the city backs those bonds, they’re designed to be paid off by increased property taxes from the subsidized project in what’s known as tax increment financing or TIF.


Meyerhoff’s idea is to use that same strategy, but to finance the renovation of vacant homes across the city.

The city would sell millions of bonds to investors who manage pension funds, hedge funds, mutual funds and more, creating a huge pool of money. The city could tap that pool and give money to developers and builders who successfully renovate vacant homes — a subsidy for the appraisal gap. New homeowners move into the houses and start paying property taxes. Those taxes from the newly renovated homes would pay back the debt, leaving rebuilt, repopulated neighborhoods.

After workshopping the idea for a few years, Meyerhoff has been giving presentations to housing advocates and nonprofit leaders. A spokesperson for the Baltimore Department of Housing and Community Development said a consultant paid by the city is looking into the idea.

Tax increment financing is being used elsewhere to build affordable homes. For instance, in some Michigan cities and counties, a homebuilder can take out a loan to cover the appraisal gap and divert future property taxes to pay back that loan. Emily Doerr, executive director of the Michigan State Land Bank, said such financing allows developers to build homes that nurses, firefighters and teachers can afford.

“It does cost the city more time that it won’t collect taxes on this home,” Doerr said. “But it also took a blighted house and was able to sell [a renovated home] to a moderate-income person that you want living in your neighborhood.”

This is essentially Meyerhoff’s plan in miniature form. Because what he’s envisioning would apply to more than a single location, he calls it a “noncontiguous tax increment financing bond.”

Rowhouses in the 1700 block of East Biddle Street renovated by ReBUILDMetro, with vacant homes in the 1700 block of East Preston Street.

A key feature of Meyerhoff’s plan is that the city would not be on the hook to repay these bonds and it would not take voter approval to create them. Baltimore could do this tomorrow, he said.

“You could issue a half a billion dollars of these bonds, if you wanted to,” Meyerhoff said.

Taxpayers can sleep peacefully knowing that if the housing market were to collapse, this bond plan would not drain the city’s finances, and investors would know upfront that they’ll be repaid only if the homes get rebuilt and the new homeowners pay their property taxes.

Democratic Councilwoman Odette Ramos said she convened a meeting in September for Meyerhoff to present his plan to the housing department and stakeholders.

While she is working on several policy changes to address vacant housing, Ramos said Meyerhoff’s idea would help address another need — money. According to Ramos, experts estimate it will cost $3 billion to fix the city’s vacant housing crisis.

“We need all the tools. We need everything. We need to ask the state for money. We need the city to put up money. We need our private investors. We just need money,” she said. “What Joe has is one tool in the toolbox to be able to get to that point.”


No American city or locality has ever tried a similar plan on the scale proposed by Meyerhoff — at least none that municipal bond expert Matt Fabian and his colleagues had ever heard of.

Fabian is a partner at Municipal Market Analytics, a Massachusetts research firm specializing in municipal bonds. He thinks Meyerhoff’s proposal generally makes sense if Baltimore can keep its books straight. There would be hundreds, potentially thousands, of subsidies spent on home renovations across the city, he said, and those subsidies and newly generated property taxes would need to be accounted for.

“The city’s going to have to create some pretty serious and transparent guardrails against corruption,” Fabian said.

Another consideration is cost.

“It’s very innovative,” Fabian said of Meyerhoff’s idea. “And in the financial markets, innovative usually means expensive.” Investors will demand a higher yield on their bonds for an untested idea, he explained, which will make borrowing money more costly.

For years, Baltimore has issued bonds, borrowing millions of dollars, to help finance major development projects in and around downtown, like Harbor Point.

Julie Egan is one such investor. Egan, who’s based in North Carolina, is a former chair of the National Federation of Municipal Analysts, a group of professionals in the bond market. Egan said she spent the past 14 years buying bonds for a multibillion-dollar mutual fund. Her specialty was housing bonds, and she’s skeptical of Meyerhoff’s plan.


“I like the idea. … I just think this deal will be facing a lot of headwinds,” Egan said. “If it works, a lot of things would have to line up.” Those factors include interest rates, the health of the economy, and whether there are enough developers, builders and homebuyers to finance, renovate and purchase these vacant homes in a timely fashion, she said.

Both Egan and Fabian suggested the city of Baltimore could back the subsidy with its own credit, though that would require voter approval.

Fabian noted that it could be politically risky if the plan fails.

A third option is for a philanthropic group or wealthy nonprofit to back these bonds.

Meyerhoff knows there are costs to implement his plan, but he argues they pale in comparison to what Baltimore’s vacant housing crisis costs the city.

Two researchers from the Johns Hopkins University, Mac McComas and Mary Miller, recently published a paper estimating Baltimore spends at least $100 million annually on vacant homes for responding to 911 calls, outreach to squatters, cleaning and boarding up properties, mowing, rat control and much more.


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As part of their research, Miller — a 2020 Democratic candidate for mayor and a former U.S. Treasury official and T. Rowe Price Group executive — said she spoke with a developer who calculated the typical appraisal gap in Baltimore. A two-story vacant house might need a $63,000 subsidy, she said, and a three-story vacant would take $87,000.

And developers need more than just a subsidy to repair Baltimore’s vacant homes, Miller said.

“Developers are working with a pretty slim margin to begin with and it can get wiped out by one or two things going wrong,” she said. “You really need a plan where you’re bringing to bear the city’s infrastructure spending to clean up streets and alleys and lighting and all of that at the same time that the private capital is fixing up the houses.”

Trees grew in vacant rowhouses in the 1800 block of North Chester Street.

Before any bonds are issued, Meyerhoff said the city would need to work with community members and create comprehensive neighborhood plans in areas with high rates of vacancy, he said, a process that could take a year or longer and cost $150,000 or more per plan.

Baltimore can’t simply unleash this subsidy on the city, Meyerhoff explained. He outlined three main requirements:

  • Any renovation or construction would align with an already established plan approved by neighborhood residents.
  • Any development cannot displace residents.
  • Subsidized homes can be sold only to people with incomes below a certain level.

Meyerhoff knows it would take time, money and creativity to turn his idea into reality, but he emphasized people need to remember the scope and cost of Baltimore’s vacants crisis.


“This can save the city so much money,” Meyerhoff said. “They should be willing to fund whatever it is that needs to be done to stand this up.”