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New tools to fight blight

Legislation would allow city to form a “land bank” to redevelop abandoned property.

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In a single block of South Johnson Street, four houses sit abandoned and boarded up, roofs and porches falling in, yards overgrown, property taxes long unpaid.

It’s a prime example of the contagion of urban blight: One abandoned house, left vacant for too long, inevitably leads to a second, and then a third, and so on.

Under current law, it’s almost impossible to stop the blight before it has the chance to spread. Abandoned houses can sit untouched almost indefinitely: It takes a minimum of five years for a tax-delinquent property to work its way through the state foreclosure process into the hands of a new owner — Arkansas’s process is one of the longest in the country — and another two years before the new owner can make any improvements. If the tax-delinquent owner pays the back taxes in the fifth year, before the property is auctioned, he can start the cycle over again.

But a package of four bills working its way through the state legislature would give Little Rock and other larger Arkansas cities a host of new tools for dealing with abandoned properties. The Senate approved three of the bills last week; the fourth ran into opposition from the banking lobby, and supporters are trying to work out a compromise.

“It’s going to give us an opportunity to compile the properties that are now vacant and abandoned — the weed lots and houses that are all boarded up — and give us a way to give these properties to new developers to rebuild and put new housing on them,” said City Director Joan Adcock.

There are more than 600 tax-delinquent properties in the Little Rock city limits, said Andre Bernard, director of housing and neighborhood programs for the city. There are another 7,000 or so weed lots — empty, abandoned land that the city spends hundreds of thousands of dollars each year to maintain, almost always without recouping the cost from the property owner.

After two years of unpaid taxes, properties are turned over to the state land commissioner’s office. The land commissioner holds them for another two years, and then places them on a list of properties to be sold at auction. That process itself can drag out even longer: if a property doesn’t sell at auction, the land commissioner eventually can negotiate with a buyer to sell for a reduced amount.

But even after a new buyer acquires a property, the former owner has two years to challenge the sale. During that time, the new owner most likely won’t make any improvements, because he wouldn’t get his investment back if the former owner won the challenge. So abandoned properties can sit up to seven years before a new owner is free to make anything better.

The bills are the product of more than two years of work by a group of civic officials and activists, including Adcock and Myra Jones, a former city director and state legislator who currently works for the Little Rock Realtors Association.

One of the bills, SB 376, would give the state’s larger cities the authority to establish land banks. These would act as transitional owners of abandoned and delinquent property — acquiring them from the land commissioner, and then selling them to new owners who’d agree to make specific improvements within two years. The goal is to reverse blight, create a real estate market in urban areas and get abandoned properties back on tax rolls.

“In other cities and states where we went looking at this, we saw whole neighborhoods changed,” Adcock said. “We think it’s going to change the core of the city.”

The land bank’s board would have the ability to decide whether a would-be new owner’s plans fit the neighborhood’s needs, Adcock said.

“The property may be next door to your house,” she said. “You may come to the land bank and say ‘I want to make this property more yard for my house.’ The land bank can decide that’s a good use — to expand some yards in the inner city.”

Another bill, SB 373, would allow the land commissioner to auction off a delinquent property after one year instead of two, and would shorten from two years to one the period of time during which a former property owner could contest the sale.

The third bill approved by the Senate, SB 377, would make it easier for purchasers of tax-delinquent property to get title insurance.

The one bill that ran into opposition, SB 372, would allow cities to foreclose on abandoned properties if owners failed to repay the city for maintenance costs. Cities already have the power to place a lien on the property, but the bill would elevate them to first-priority liens and give the city the power to foreclose if they’re left unpaid — meaning the city would have first dibs on the property, ahead of a mortgage holder.

“This is a way we can recapture those taxpayer dollars,” Bernard said.

The state’s mortgage industry, not surprisingly, doesn’t like this bill. But supporters say that practically speaking, it won’t affect them much.

“We think their issues aren’t valid,” Jones said. “Most of these properties don’t have a mortgage on them anymore. They’re too old.”

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