The Laurel City Council unanimously approved an ordinance at its meeting Nov. 26 that offers residents who purchase foreclosed homes within the city limits a five-year property tax credit.
The tax credit, which goes into affect immediately, is only available to purchasers who will use the foreclosed home as a primary residence. It offers qualified buyers a tax credit of up to $3,500 each year for the first five years following the purchase of the home.
In the first two years, eligible recipients will receive credit for 100 percent of their property taxes, up to $3,500 maximum. In each of the following three years, purchasers of foreclosures will receive a decreasing credit equivalent to 75 percent, 50 percent and 25 percent of their property taxes.
Mayor Craig Moe said the idea for a tax credit, which can be applied for through the city's tax credit program, came as a response to the number of foreclosed homes within the city of Laurel.
Through October, 171 homes within the city of Laurel (ZIP code 20707) have been foreclosed in 2012, according to RealtyTrac.com (see chart).
"When you drive around town, you can see some houses that are just sitting with nobody living there," Moe said. "It's a good opportunity to help people get into houses. If we can turn the house around, it's good for the neighborhood and good for the community."
Moe said while the city could lose up to $50,000 per year of tax revenue as a result of the ordinance, seeing foreclosed homes within the city off the market and inhabited is a welcome trade-off.
"When the house is not vacant, there are people taking care of the property and shopping locally, doing things here in the city. ... Our hope is it will pay for itself in the long run," Moe said. "People just need a little head start, especially when you are talking about first-time home buyers."
Michelle Saylor, the city's director of Budget and Personnel Services, said the program is modeled after the city's Historic District Tax Credit, which provides a 10 percent credit on real estate taxes for those who make qualified improvements to the exterior of a building within the city's designated historic districts.
Like the Historic District Tax Credit, Saylor believes the Foreclosure Tax Credit will create an incentive that ultimately benefits the whole city, not just the property owner.
"This will improve the neighborhoods by getting properties off the foreclosure list," Saylor said.
Saylor added the purpose for providing the tax credit only to dwellers, and not purchasers who plan to use the home as a rental property, is because absentee landlords don't always provide the same amount of attention to a home as someone living in it.
Saylor said some purchasers may be eligible for an additional year at 100 percent deduction, if the property they purchase qualifies as a distressed property in serious disrepair.
According to Saylor, the city building inspector will evaluate foreclosed homes to determine if they can be considered distressed.
If the buyer is eligible, Saylor said the 100 percent deduction would continue for a third year, and buyers would begin receiving three years of decreased credits starting in the fourth year of the program, totaling six years of tax credit.
City Council President Frederick Smalls said he and the council are very excited about the tax credit.
"Nobody benefits from vacant homes," Smalls said. "We are doing what we can to give the community a boost in the arm."
Ward 1 City Council member Ed Ricks said a home down the street from him is still vacant more than two years after being foreclosed.
"It encourages people to move to Laurel," Ricks said. "It's comforting knowing that a home that is foreclosed today, could have someone in it tomorrow."