Vacant city houses get property tax break meant for owner-occupied homes

Property tax breaks meant to encourage homeownership have been awarded to 465 vacant houses in Baltimore, depriving the city of uncollected revenue in a difficult budget year and calling into question past promises from city officials to crack down on tax scofflaws, a Baltimore Sun analysis has found.

Owners of the vacant homes received a total of $325,000 in tax breaks. That's enough money to run municipal swimming pools for more than two weeks, one of the many services that had been on the chopping block — stoking the ire of residents — as the city slashed its budget to address a $65 million shortfall. In the end, Mayor Stephanie Rawlings-Blake opened the pools on a staggered schedule to save money.


Thousands of vacant homes, a longtime scourge in the city, have contributed to creeping blight and sinking property values. To combat the problem, the city has levied fines against owners and tried many strategies to promote the rehabilitation of such properties. The fact that hundreds of those owners are getting undeserved tax breaks incenses homeowners and critics.

"It's not fair," Patterson Park homeowner Beatrice McCormack said when she learned that a vacant home on her block is getting $2,218 in undeserved city and state tax breaks this year. "It's annoying that they get away with it."


Rawlings-Blake said Monday that she has formed a "billing integrity program" to scrutinize the homestead credit and other property tax breaks, and officials say early efforts have spotted $2 million in potential new tax revenue. "While there have been lapses in the past," the mayor said, "my administration not only made it a priority but hired someone to work on it on a full-time basis."

It's not clear why the problem with vacant houses getting the homestead credit has gone unaddressed for years or why previous efforts to ferret out misuse failed to end abuses.

The persistent vacant-property problem has been raised in this year's mayoral contest. Some candidates argue the city should impose a higher tax rate on those properties. The idea is that punitive taxation would discourage vacancies.

The Sun examined the city's own data, comparing a list of current homestead tax credit recipients against a list of houses with outstanding vacant-building notices indicating they are unsafe or uninhabitable.

Vacant houses are almost never eligible for the tax credit. Rare exceptions include a fire or major illness that forces a temporary move. It's also possible some houses are occupied but the owners haven't obtained a city occupancy permit to get the vacant-building notice lifted.

The Sun verified that more than 50 homes listed as vacants have received a credit of at least $1,500 for the fiscal year that began last month. A detailed look at four of those properties found that no allowable exemptions applied. In fact, all four owners claimed not to know they were getting the break, even though in each case the house is listed in public records as a principal residence.

Kevin S. Lomax's property tax bill on his vacant Harlem Park rowhouse is just $324 this year, thanks to a break of $2,125. He said in an interview that no one has lived at the house on North Schroeder Street since he bought it in 2006 because he can't afford renovations. Plywood now covers the front door. "There's no bathroom or kitchen in there," said Lomax, a first-time buyer.

He added that he had no clue that he has been getting the homestead credit, because his mortgage lender paid his taxes.


The state homestead program caps property tax increases on a person's principal residence, and in the city that's 4 percent a year. Even with falling home values, the cap provides a valuable subsidy to many homeowners because the housing market bust hasn't yet erased all the gains of the bubble years. This year, homestead credits in the city are expected to total $121 million.

City finance officials pledged three years ago to crack down on misuse of the homestead credit by vacant-property owners and landlords. Rawlings-Blake, then president of the City Council, said in November 2008 that the city had to "maximize what tax receipts are coming in." Baltimore officials said then that they mailed bills to owners of 200 city properties believed to be improperly receiving credits. The state planned to contact owners of 1,400 other city properties thought to be abusing the system.

"We are flipping over the couch looking for change," Rawlings-Blake said at the time.

But while the city has continued to send state tax assessors a list of rental properties every six months to help weed out landlords who shouldn't be getting credits, it has not done the same with vacant properties, said Robert E. Young, director of the state Department of Assessments and Taxation.

Rawlings-Blake stressed that it's a priority of her 18-month-old administration to catch tax cheats. "Because there have been so many years where this has not been addressed, we have a lot of work to do," she said.

Other city officials could not explain why they have not forwarded the list of vacant houses. However, Henry Raymond, the city's deputy finance director, said in an interview last week that the city would start doing so.


Last month the Finance Department launched the so-called billing-integrity program. Any violators will be sent higher tax bills for current and prior years, Raymond said.

The department plans to check property records against data on deaths, foreclosures and business licenses as well as vacant-building notices. One unknown is whether owners of vacant houses would or could pay the rightful amounts. If not, the city could take possession of the homes, adding to an inventory of thousands of vacant houses.

The city has seen promising early results from its new initiative, Rawlings-Blake said, finding 24 properties that were improperly receiving "brownfield" tax credits worth a combined $1 million. And Raymond said the city has identified 17 other properties that no longer qualify for a nonprofit tax exemption. That should yield $1 million more in additional city taxes.

"Of course it's a loss of revenue to the city," Raymond said of tax credit misuse. "It also means individuals are gaming the system in terms of trying to obtain credits that they're not entitled to."

And, he added: "It's not fair to the other citizens."

A change in state law is aimed at snagging homestead credit scofflaws who have evaded detection. By the end of 2012, every owner must apply for the credit, and new enforcement measures will be used to verify eligibility, Young said.


When told of The Sun's findings on 465 vacants in Baltimore, Young said, "That shows you why you have to have a deadline." Already some property owners, after receiving the application forms, have contacted the state to say they aren't eligible for the tax break and didn't realize they were getting it.

"Eventually, this problem will disappear," he said.

City resident Matt Gonter said the problem has long been easy to track, and he has taken it upon himself to root out tax credit scofflaws. Over the years, he said he has reported to the state that more than 1,200 city properties with vacant-building notices were being inaccurately listed as owner-occupied. The owners were either wrongly collecting a homestead credit at the time or could have done so in the future.

"The city is losing out on a lot of money" because of unwarranted credits, Gonter said. "Every year, when we have to talk about new taxes being created to balance the budget, why don't they focus on the people who are cheating on their taxes and clear that up first?"

Gonter has helped focus attention on the issue, said Michael Braverman, deputy city housing commissioner for permits and code enforcement. Braverman said it's up to city finance officials, not the housing agency, to blow the whistle with the state.

"At the end of the day," Braverman said, "we have had meetings with the Finance Department about what information is available and about how they might go about mitigating the misuse of this credit."


McCormack, the Patterson Park resident, wants someone to enforce the law. The 73-year-old owns a home in the 100 block of N. Streeper St., a block north of the park, and regularly picks up candy bar wrappers and other litter. The vacant houses in the area have marred the generally vibrant neighborhood, she said, attracting "junkies" and other undesirable people. "They see a window open, they're going in," she said.

Indeed, neighbors say trespassers have broken into the empty Formstone house up the block that got the $2,218 tax break this year. Neighbors say the house has been empty at least a year, and in prior years was rented out. The city issued a vacant-building notice last September. Neither vacant nor rental properties qualify for the homestead credit.

Owner Jeffre Powell said in an email he did not realize he was receiving the credit. He suggested the title company or his lender made an error. When he bought the house in 2005, the land instrument intake sheet had the "yes" box checked by the question, "Will the property being conveyed be the grantee's principal residence?" It's not clear from the records who filled out the form.

"I never told anyone at any time that I intended that to be my primary residence," Powell wrote in the email. "So I am not sure how it is that I received a homestead credit."

Powell, who lives in Columbia, said he lacks money to fix up the house, assessed at $124,400, and is trying to sell it. His mortgage servicer had almost foreclosed on the Baltimore property but dropped the case in January for reasons that are unclear in court papers. Powell said the servicer decided it did not want the home.

Over the past three years, the home has received $6,507 in city and state homestead credits.


A half-mile away in Butchers Hill, Katrina Doering bought a house in the 2100 block of E. Fairmount Ave. last year, then purchased the two vacant lots next door from the city. She transformed the lots from weedy rat habitats, littered with trash and syringes, into a well-tended yard and vegetable garden.

"This and that don't match," she said, pointing first to her property and then to the boarded-up front door across the street.

The end-unit rowhouse is vacant, the only property on the block with boards on the front door and back windows. The city issued a vacant notice in October. A homestead credit, meanwhile, has slashed this year's $5,348 property tax bill by $3,100.

But the vacant home's owner, Tyrone A. Lincoln, said he was "dumbfounded" to hear about the tax break. "As far as I know, I'm not getting this credit," he said.

He bought the house over a decade ago but said he moved out three or four years ago, amid financial troubles that forced him into a foreclosure process that's still unresolved. He said he hasn't made any payments on the house in several years, though the first installment of this year's tax bill has been paid, perhaps by the mortgage servicer.

"It's been boarded up for over a year now," he said. The house has had intruders, and on a recent Sunday the sliding door on a second-floor deck stood wide open to the elements.


Alex Stroh, who bought on the block two years ago, said he has long wondered about the vacant property across the street.

"To me, it's just an eyesore," Stroh said. It bothered him to learn that The Sun flagged the property because it appeared on two publicly available lists — vacants and homestead recipients.

"Why couldn't the city just do that?" he asked.