East Shore v. West Shore (Harrisburg) real estate sales

Pennlive.com posts an article about real estate sales in the East Shore v. West Shore (Harrisburg area). The article is inconclusive and nonspecific, but helps highlight the issue.

Harrisburg school tax increased by 3 1/2 percent.

Harrisburg School District has announced a three and one half percent (3 1/2 % )  real estate tax increase as part of its new budget.  WGAL has more details. 

Harrisburg nuisance ordinance

On Tuesday, November 13, 2012, Harrisburg City Council passed Ordinance 12-2012.  This ordinance allows the city to revoke a landlord's license if a tenant commits two acts considered to be a "nuisance" by the City codes officer.  The ordinance allows the City to force landlords to evict tenants under certain circumstances. 

Below is the coverage from ABC27 WHTM. 

This ordinance goes further than courts have allowed in previous cases in holding landlords responsible for the conduct of their tenants.

This ordinance comes a little more than a year after Harrisburg passed ordinances modifying the city's rental inspection program.  Conditions in the City continue to deteriorate as the City doubles down on its attempts to address the issues with more restrictive and expensive ordinances.

Green Urban Initiative; Urban garden demolished in Harrisburg

Click here for previous posts on urban farming and here for a past story on urban farming on multiple lots in Harrisburg City. 

From Fox43 comes the story of Green Urban Initiative, an urban farming organization that leases and operates multiple lots in Harrisburg.  On Wednesday, the City demolished one of GUI's lots at 6th and Curtin streets due to allegations that the property had fallen into disrepair and was being used to hide contraband, an allegation that GUI disputes. 

Additional details have been reported on Pennlive.  GUI's website can be found here.

What is most significant about this story goes beyond the demolition of this one garden.  We are not talking about your average backyard vegetable garden with only a handful of various plants. Gardens of this type often encompass entire vacant lots - or even multiple contiguous lots.

GUI operates "multiple gardens throughout the City," according to the Fox-43 story.  GUI apparently leases vacant lots from the City for this purpose.  This practice provides further indication that gardening provides a more profitable use of certain vacant urban lots than traditional residential or commercial uses. That gardening is more profitable reflects not only increased prices in food and farm products, but also many obstacles to land development and investment, such as increased lending restrictions, real estate taxes, municipal regulations and fees, title defects due to prior tax sales and urban crime.  The demolished lot in this case was located in a high crime area. All of those obstacles, while preventing building, repair or other development, would not interfere with gardening on land leased from the City.

In some cities outside of Pennsylvania, the possibility of increased urban farming has played a key factor in municipal plans for urban consolidation and population relocation. 

Harrisburg passes Ordinances 13 and 14; Rental inspection program

Harrisburg City Council voted unanimously last night to adopt Bills 13 and 14. These bills have been pending in various forms for almost 4 years. They impose new registration requirements on landlords as well as vicarious liability on the landlord and property manager for the actions of tenants. Bill 13 also imposes a residency requirement (plus 50 miles) for owning investment property in the City.

Bill 13 expands the inspection period from three years to five years. The passage of Bill 14 shifts the city's emphasis from inspection upon purchases of residential properties to regular inspections purely of investment properties. Regular inspections have been required by law in Harrisburg since 1996. Proponents of Bills 13 and 14 have argued that the inspection program was not previously enforced because City manpower focused on inspection of residential purchases. City officials have previously stated that this program will increase revenue for the City.

These bills passed on the same night that the City voted to proceed with a bankruptcy filing and voted to increase parking fees.

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update - Breitbart confirms today that Harrisburg has filed its bankruptcy petition.

Harrisburg to announce new blight policies

Mayor Thompson of Harrisburg is set to announce new policies aimed at blighted properties within two weeks. This announcement apparently results from a large empty building on North 18th Street in Allison Hill:

[Code Officer] Patton said his department has cited the building owner nine times, but the problem remains. According to Thompson, in two weeks she will announce new, stricter policies against city blight.

It is not yet known what those new policies will be.

Harrisburg Ordinances 13 and 14 tabled by City Council

Click here for previous descriptions and discussions of Harrisburg's proposed Ordinances 13 and 14. [These Ordinances would impose vicarious liability on landlords for the actions of their tenants, impose a residency requirement on property management and ownership and modify the inspection program.]

Last evening, the Harrisburg City Council voted 4-3 to table both proposed Ordinances after a fair amount of discussion.

Numerous investors (and others) spoke out against the proposed ordinances at the beginning of the meeting. Investor and Realtor organizations such as CARPOA, GHAR and AACP participated in the public comment section of the meeting. We listed pending litigation in Allegheny County and Columbia County relating to similar legislation as bases for the Council to withold action at this time, especially since City officials have previously stated that these measures would constitute a source of revenue for the city (which is illegal under state law).

Council members stated that they wanted to explore the issues further and rework the Ordinances. Council invited investors and others to participate in committee meetings during the new year.

It is my hope that in these committee meetings we can address some of the more basic issues keeping city properties from being improved - such as the large volume of properties that suffer from title defects due to having been sold at tax sale at some point in the past.

Harrisburg Ordinances 13 and 14 scheduled for December 30 vote.

I have written previously about Harrisburg Ordinances 13 and 14. These ordinances would impose vicarious liability upon landlords for the actions of tenants, would impose a residency requirement for Harrisburg real estate investment or management and would attempt to raise revenue for the City by enforcing the inspection program that has existed for fifteen years.

These ordinances were on the agenda on September 28th, but were tabled. They are scheduled for a vote on December 30th at the next City Council meeting.

Harrisburg Ordinance 13-2010

Harrisburg Ordinance 13 is up for amendment tonight before the vote on final passage. The City Council agenda does not say what the amendments will be.

Click here for details on the Ordinance.

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Update

8:25 PM

Harrisburg City Council did not vote on Ordinances 13 or 14 this evening. Council did not discuss the Ordinances or the reasons for the delay.

Prior to the announcement of the delay, I spoke in opposition to the ordinances on behalf of CARPOA and AACP. I spoke briefly of lawsuits filed in other jurisdictions resulting from public comments from city officials. City officials in Pittsburgh had stated publicly that inspection ordinances and rental licensure would serve to raise revenue for the city. Such a revenue raising purpose is illegal and those statements resulted in legal action against Pittsburgh. I pointed out similar statements made by Harrisburg officials in support of Ordinances 13 and 14 in recent weeks. (Click here for a fuller discussion of those statements.)

There was no response to my comments.

In addition to prior statements stressing the need to raise revenue from Ordinances 13 and 14, it is significant that tonight's council meeting was devoted almost exclusively to the City's financial problems. Council's final act tonight was to adopt Resolution 72-2010, which reads as follows:

A Resolution authorizing the engagement of professionals to study the advisability of authorizing the filing of a petition under either the Municipalities Financial Recovery Act (Act 47) or Chapter 9 of the bankruptcy code.

Harrisburg Ordinances ## 13 and 14

I have written earlier about Harrisburg Ordinances ## 13 and 14 and the City's illegal attempts to profit from investment property licensure and inspection as well as new residency requirements for owning investment properties within the City.

These ordinances are currently scheduled for a vote by Harrisburg City Council on Tuesday, September 28, 2010 at 6:00 PM at the King Center downtown. Public comment will be allowed and may alter the outcome.

Harrisburg to raise revenue through inspection ordinance.

Harrisburg City council members press on in their attempts to pass Ordinances 13 and 14.

On September 7, 2010, Council member Brad Koplinski and codes officer David Patton spoke at the Boys and Girls club on Berryhill avenue in support of the ordinances. They estimate that the City will raise roughly $200,000.00 per year from enforcement of these ordinances and the resulting inspection fees.

Koplinski and Patton admitted that the prior inspection ordinance was not enforced.

On September 1, Councilman Koplinski stated that the ordinances would raise "upwards of $100,000" for the City.

Meanwhile, Pennsylvania's Governor has pledged 4.3 million dollars to help the City meet payroll and other obligations.

Harrisburg rental inspection ordinance revisions; residency requirement; Ordinances ## 13 and 14 of 2010.

The City of Harrisburg is proposing to revise its rental inspection ordinance. This is the same ordinance that was passed in 1996. The proposed revision is the same ordinance that denounced the quality of rental properties within the City, despite 15 years of City inspections.

The new revisions will impose residency requirements on investors or require investors to hire resident property managers.

City officials will hear public comment on September 7, 2010 at 6:00 P.M. at the Harrisburg Boys & Girls Club, 1227 Berryhill Street.

Harrisburg rental property inspection program; Harrisburg Bill # 13 of 2010

In the mid-1990's, Harrisburg City adopted its first rental inspection ordinance. The ordinance required owners of rental units to have those units inspected every three years and to pay a regular inspection fee. In the 15 years since that ordinance was adopted, the overall condition of rental properties in Harrisburg has not improved.

Early in 2010, Bill # 13 was introduced in City Council, which bill would create permits for rental owners and establish a residency requirement. (The Bill has not yet passed.) While I will explore this Bill in more detail in the future, the following language from the 2010 Bill is significant:

A growing concern exists in the City regarding the general lack of maintenance, upkeep and resultant decline in the physical condition of residential rental units. The City has experienced a greater incidence and severity of violations of City Codes at residential rental properties, as compared to owner-occupied properties. . . .

Section 8-511.2(a)

If the language of the new proposed Ordinance is to be believed, the original ordinance has not worked. Despite 15 years of inspections, the City considers the stock of rental properties in Harrisburg to be of declining quality.
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previous - Reading's failed inspection ordinance.

Harrisburg; statistics on abandoned and condemned buildings

I wrote earlier about Harrisburg's use of the National Guard to board up abandoned houses in the City.

The same news story that discussed the National Guard operation also revealed interesting information about the state of housing in Harrisburg.

Harrisburg apparently contains the following:

• 1,500 abandoned buildings
• 835 of which have been condemned by the City
• 324 of those buildings are scheduled to be torn down
  

(The National Guard boarded up 15 homes last week).

I know from prior discussions that the City owns roughly 500 properties that could not be sold at various prior tax sales. These buildings now suffer from title defects that hinder any potential sale. I do not know whether any of the abandoned and condemned buildings are included in the 500 city-owned properties.

The destruction of large numbers of abandoned buildings sounds like a small scale version of what is happening in Detroit. No plans have been announced to convert large areas of Harrisburg to agriculture.

Harrisburg uses National Guard to board up houses; Clean and Seal; South 15th Street

The following story from WHP tv-21 attracted some attention this week in Central Pennsylvania:

The 400 block of Harrisburg's S. 15th Street looks like a war zone. And that was before the five-ton truck pulled up onto the curb Tuesday, and several uniformed Pennsylvania National Guardsmen got out.

The City and the National Guard are engaged in a:

. . . joint effort to board up abandoned buildings to prevent children and drug dealers from getting inside. The Guard runs a Counter Drug Program that features a "Clean and Seal" team. That is who will be hard at work on the streets of Harrisburg in the coming days.

First Sergeant Sean Whelan told CBS 21 News that his people will be in the city through Friday, boarding up at least 15 vacant structures.

This program does not address the more fundamental problems that have prevented the real estate in question from achieving its maximam potential, such as title defects resulting from prior tax sales. We will explore those issues in future posts.

Harrisburg, PA bankruptcy discussions.

It is not news that Harrisburg City is considering bankruptcy as well as tax increases to deal with the city's fiscal crisis. Real estate values in the city (and beyond) will depend on how the city chooses among its options.

Click here for previous posts on Harrisburg tax increases and bankruptcy considerations.

Harrisburg, PA; Chapter 9 as an alternative to tax increases.

Twice this month, the potential for a bankruptcy filing by the City of Harrisburg has been mentioned in national publications - Bloomberg.com at the beginning of the month and, last Thursday - The Wall Street Journal.

It is by no means clear that a bankruptcy filing is imminent, but similar talk in municipalities across the country recently has caused investors to rethink the safety of municipal bonds as an investment. See the WSJ article for further discussion of this point.

The effect on the local real estate market is uncertain, but my own opinion is that a bankruptcy filing would place less downward pressure on real estate values than the tax increase recommendations made public last month.

Harrisburg property tax increase; declining values and increasing costs

I wrote earlier this week about recommendations from consultants to the City of Harrisburg that the city raise property taxes by 117%. These recommendations also included large increases in water, sewer and trash fees. I wrote yesterday about the negative effect of these increases on the bottom line for investment properties within the city and, ultimately, on the assessed values of such properties.

This proposal (or anything remotely similar) would have far reaching consequences beyond the assessments and the tax revenues generated therefrom. Major property tax increases depress real estate prices. A sudden decrease in values resulting from a tax increase would trap owners in their properties. Properties with cash flow insufficient to support the new taxes (as well as the prior expenses and the mortgages) will be harder to sell for an amount sufficient to payoff the mortgages. This will be especially true if some city investors manage to sell their properties in order to avoid the new expenses, thus driving down prices in general.

Owners of investment properties might actually be trapped in their city properties. Situations like this often end up being resolved through foreclosure and/or bankruptcy. We could very well be entering a period of general decline in the city, characterized by falling values, higher taxes, abandoned and foreclosed properties, and deferred maintenance.

Harrisburg; Real estate taxes; Municipal charges; market valuation; assessment appeals

Two days ago, I linked to a story about the possibility that Pennsylvania's capital city would more than double property taxes, while raising fees for municipal services like trash, sewer and water. I speculated on the effect such increases would have on real estate values and prices.

Harrisburg quadrupled the trash rates only two years ago. Doubling those rates now (as the current recommendations suggest) would amount to an eight fold increase since the end of 2007. Raising property taxes by 117% on top of the trash increase (together with 20% increases in the already-high sewer and water rates) would seriously affect the bottom line of investment properties within the city. An adverse affect on the profitability of investment properties is more than a mere academic or political matter. Operating revenue is a major component in valuation of investment properties. When net revenue declines, market value declines also.

Harrisburg skyline (city-data.com) - the battleground for upcoming assessment wars




A reduction in the market value of investment properties will result in applications by owners for a corresponding reduction in the assessed value of those properties. While local tax authorities will be reluctant to approve such reductions, the courts are the final arbiters of such matters. Declining real estate values (with the resulting loss of tax revenue) will offset many of the gains the city hopes to realize by raising taxes.

Assessment litigation, already common in Harrisburg and Dauphin County, PA, will become even more common for many years to come if the latest tax recommendations are enacted.

Harrisburg City; Increased property taxes, sewer, water and trash

The City of Harrisburg is considering multiple tax increases in order to avoid bankruptcy, according to the Patriot-News today:

Buried in the 25-page report is a list of "potential deficit reduction actions" the city could take. They were not mentioned in the news conference nor fully explained in the report.

Those potential actions include doubling the parking tax, increasing water rates by 20 percent, increasing sewer rates by 20 percent, doubling sanitation fees, doubling parking violation fines, instituting five furlough days a year for employees, increasing property taxes by 117 percent in 2011, and selling the city’s parking garages.

All of these items are considered high already by local residents and investors. Increasing these items would create an negative impact on property values, especially for investment properties. All of these items would reduce NOI (net operating income), which is a major component of valuation.

As a silver lining, once the new taxes take effect, property owners could apply for a reduction in their assessment. Assessment reduction is a difficult process and involves many variables. These new taxes are only recommendations at this point, so it is impossible at this point to know exactly what will take place or how much it will affect real estate values.
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Update - click here for more discussion of how this proposal would affect assessments.
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Update - click here for a discussion of the effects on valuation and sales.
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Update - click here for a discussion of the potential for increased tax sales and related problems.