WASHINGTON — Reps. Steve LaTourette and Marcia Fudge of Ohio have introduced a bill that would provide $4 billion for states and land banks to issue newly-created 30-year tax credit demolition bonds to demolish vacant, foreclosed and abandoned homes across the country to prevent “a tsunami of blight.”
LaTourette, a Republican, and Fudge, a Democrat, unveiled the Restore our Neighborhood Act of 2012 on Monday. The bill would provide $2 billion of tax-credit qualified urban demolition bonds, orQUDBs, to all states, resulting in about $40 million per state, while another $2 billion would go to states that have been hardest hit by the foreclosure process.
“These vacant monstrosities are stripped bare, are magnets for crime and are causing surrounding property values to plummet,” LaTourette said in a release.
Under the proposal, the Treasury Department would allocate bond authority to states and the states or land banks would issue bonds to finance the costs of demolition and clearance projects.
Land banks are governmental or nonprofit organizations that raise money to purchase property and use it for public purposes, said Garth Rieman, director of housing advocacy and strategic initiatives at the National Council of State Housing Agencies.
“While the demolition strategy is an important part of community revitalization, we support the distribution of funds that have more flexible uses,” Rieman said. He said it would be a “heavy lift” to move an individual tax bill such as this that would require new resources, especially in an environment where Congress is tightening its belt on federal spending.
Neither LaTourette or Fudge sit on the House Ways and Means Committee.
Under the bill, revenue from a variety of sources including state and local funding, land banks, private investors, and philanthropic contributions would be funneled into sinking funds to pay off the principal of the bonds in 30 years.
Aides to Fudge said cities would have no direct exposure and that this method would leverage dollars so communities are able to pursue demolition projects quickly. States would have two years to issue QUDBs and, if they don’t, the allocations would be redistributed by the Treasury secretary to hard-hit states like Ohio and Michigan.
Jim Rokakis, former treasurer of Cuyahoga County, Ohio, was the brainchild behind the bill, sources said. Rokakis, now director of the Thriving Communities Institute of Western Reserve Land Conservancy, first created Ohio land banks in 2009 and has been on a mission to restore blighted communities in that state.
“The blighted properties that are vacant and abandoned are cancers on these neighborhoods,” Rokakis said. “There won’t be new American cities if we don’t take down the old ones.” He estimates there are around 100,000 vacant houses waiting to be demolished in Ohio. A recent Federal Reserve report indicates there are 19 million vacant homes nationwide.
While housing experts said the proposal is a good step forward to clean up communities, they expressed concern that tax-credit bonds have not been popular in the municipal bond market among investors.
Paul Komlosi, financial adviser to Thriving Communities Institute, said the QUDB program mimics some of the best features from existing tax-credit programs like qualified school construction bonds.
“We tried to pick the things that work and have institutional investor appeal,” he said. “Investors don’t have to get their minds around something totally new if they are familiar with the other programs.”
John Murphy, executive director of the National Association of Local Housing Finance Agencies, applauded LaTourette and Fudge’s efforts “for what seems to be an innovative and responsive approach to the problem.” But he isn’t optimistic there will be an immediate vehicle for it on Capitol Hill.