Recession changing Baltimore region's housing paradigm

Memo to the mayor of Baltimore and City Council members: The housing bust and the recession have made significantly more homes in the surrounding counties affordable to first-time home-buyers. That means the city could be losing its long-standing edge in affordability. So you'd better do something to reduce the city's ridiculously high property tax rate — and fast — or lose even more potential customers to the suburbs over the next few years.

The numbers — and that conclusion — come from Jody Landers, executive vice president of the Greater Baltimore Board of Realtors, one-time city councilman, and longtime civic activist.

Mr. Landers looks at median family income (MFI) for the metropolitan area — the city plus Howard, Anne Arundel, Carroll, Harford and Baltimore counties — and he looks specifically at the number of houses on the market affordable to a family making 80 percent of the MFI.

In 2006, affordable houses for a family making 80 percent of MFI ($57,750) would have been priced between $110,000 and $176,000. About 40 percent of homes on the market in Baltimore that year fell into that category, while just 2 percent of all houses for sale in the suburbs were in that range. Only 6 percent of houses for sale in Baltimore County that year fell into Mr. Landers' affordability index.

So, even during the housing boom, Baltimore had a big edge, and the old housing paradigm held: The property taxes are twice as high in the city, but the overall affordability factor was much better.

But here's the difference four years, thousands of foreclosures and the Great Recession have made:

In 2010, even more city properties (63 percent) were considered affordable to people in Mr. Landers' favorite sample — that 80 percent of MFI (now $65,760) group. But the affordability percentage in the suburbs had grown to 17 percent overall. Baltimore County showed the biggest increase of houses in the $125,000 to $200,000 range — a 41 percent affordability rate — followed by 32 percent in Harford County, 16 percent in Carroll, 13 percent in Anne Arundel and 11 percent in Howard.

So, while the city still offers more houses in the most affordable price ranges, affordability has spread to the suburbs, at least for the time being, and that means the first-time home-buyer has more choices. And those choices include homes in subdivisions where the property tax pain is half what it is in the city. This is bound to make Baltimore a tougher sell in the next few years.

The only way the city can continue to compete for new homeowners is by making a bold cut in its property tax collections. This has been suggested for years, of course, but little has been done about it, one of the great failings of City Hall leadership.

Sheila Dixon, the disgraced former mayor, is about the last person we want to hear from on civic matters. She was all over the Daily Record last Friday, with an overdue semi-apology for the misdeeds that concluded with her corruption trial a year ago. And she took some cheap shots at her capable and steady successor, Stephanie Rawlings-Blake. Ms. Dixon even had the gall to criticize the mayor's handling of the city budget — the same budget that, of course, had developed a $121 million deficit during Sheila Dixon's last, fun-filled year in office.

But, all that aside, Ms. Dixon deserves at least a crumb of credit for having a mayoral task force make recommendations for reducing the property tax. It has been two years since the task force — with Mr. Landers as co-chairman — suggested some short-term solutions: Increasing the homestead credit cap, raising the income tax, increasing the hotel tax, expanding slot machine gambling to full casino gambling.

What we need now is for the mayor and City Council to push further — to reduce city government even more without harming essential services, to ask the city's many tax-exempt non-profits to share more of the burden — and begin cutting the property tax in the hopes of expanding the residential and commercial tax base in the long term. If the city doesn't do that, it will lose more potential customers to the 'burbs, and Baltimoreans who once could not afford to leave the city will find comparable, if not better, deals in the counties. Somebody needs to figure this out, and fast.

Dan Rodricks' column appears each Tuesday, Thursday and Sunday. He is the host of Midday on WYPR, 88.1 FM.