Two halves of a blighted duplex sagged side by side. Tri-County HDC, developer of affordable housing, bought one half and eyed the other, hoping to demolish both and build new for a revitalizing neighborhood.
“Then somebody came out of the woodwork and bought that property,” said Executive Director Gary Lenker. “There was someone there who put a new window in the kitchen and did about a day and a half’s work, and you never saw him again.”
Meet the newest villain in urban housing: the absentee property owner. This is not your father’s slumlord, milking revenue from beleaguered tenants. This is an internet-enabled bad guy who buys a blighted house for less than the cost of a refrigerator, for no other reason than to sell the rotting carcass to somebody else.
The 21st-century absentee property owner stems from the foreclosure process. Seized homes land on the “upset sale list,” where buyers pledge to pay all back taxes and utilities plus the bid price. If no sale, it’s on to judicial sale, for a purchase clear of encumbrances. Finally, the lowest rung is the repository sale. Asking price: $500.
You know who has $500? A lot of people, some from as far away as Australia, who stumble across the repository list from some obscure place called Harrisburg, Pa. The internet is “a speculator’s dream,” said city Codes Administrator David Patton.
From the repository, properties can land on eBay or Craigslist.
“One guy from Philly bought a house, sold it to someone in Florida, who sold to Utah, and back to someone else in Florida,” Patton said.
They hardly have “noble intentions” for the property, he said.
“It’s all about flipping it and making some quick cash, and we’re the ones that end up paying the price for it.”
Lenker’s Tri-County HDC pays the price in dollars and in time. Tearing down existing properties to make way for new, affordable homes requires a “quiet title” search, assuring clear title for the new buyer. If the owner is AWOL, that search gets lengthier and costlier.
Take the proposed MulDer Square redevelopment on Allison Hill. Tri-County HDC planned to demolish five blighted rowhomes, and the mayor “even signed an order saying they were unfit, uninhabitable.” Demolition could have proceeded in summer 2016, but the search for one absentee owner kept the bulldozers idle until spring 2017.
“For about a year, I worried,” said Lenker. “We did get to the end, but there was a delay.”
Chasing Phantoms
In recent years, Harrisburg has tried to corral in neglectful rental property owners and add teeth to its codes enforcement. For instance, it now requires out-of-area owners to assign a “local” property manager who must live within 50 miles of the city.
However, owners often flout these rules with impunity, especially those who live out of state and, worst still, out of the country.
As physical distance increases, Patton’s enforcement abilities diminish, he said. A summary violation for letting a property languish “has no traction out of state,” and even violations elevated to misdemeanor charges “simply turn into a warrant, which again has no traction out of state.”
“It’s like chasing a snowflake,” he said. “The end result—it always ends up on our demolition list.”
Absentee owners have learned to game the system. A property’s condemned, so they sell it to someone else, forcing the process back to square one. Warrants pile up, so owners meander into Dauphin County Courthouse and flip the property to a new owner, who doesn’t have to sign off or even know they’re now the proud owner of a ramshackle eyesore.
“Any time someone can go over and put their properties in someone else’s name without that person even being there, that’s a problem, because then we’re chasing phantoms,” Patton said.
Harrisburg City Councilwoman Shamaine Daniels, chair of the building and housing committee, wants to see the city impose additional fines allowed by a 2015 ordinance on real estate speculators, to compensate for the extra costs of searches and enforcement.
“It would be nice to see what happens when these ordinances are enforced,” she said. “It’s hard to gauge the effectiveness of an ordinance when it’s not used at all.”
Patton confirmed that the anti-speculation ordinance has not been effective. Without evidence of an owner’s intent to speculate, “I cannot issue a citation under this ordinance,” he said.
And, as for imposing ever-increasing fines, guess what? Courts offer payment plans. One violator is paying off a $7,000 fine at $22 a month. “A lot of times,” said Patton, “they’ll default on the payment plan, and it goes into warrant.”
Yes, a warrant, which can’t be enforced out of state.
Heartbreaking
Among the phantoms Patton chases are absentee owners who create corporations that shield their identities and create smokescreens. One address was a vacant lot in Philadelphia. On another, a Google search revealed “an intersection in Brooklyn.”
Additional legislative action might help, Patton said.
Corporations are meant to protect personal property. Few would dispute that doing business should not put your family’s home at risk. But Patton’s nemeses are “using subterfuge just so they can purchase properties and leave the legacy of their dilapidated properties to us,” he said.
“We need to at least have some agent or principal responsible for the conduct of that corporation so they can be accountable for what their property is doing to our community,” he said.
Through roundtables sponsored by the state Senate Policy Committee, lawmakers hear “loud and clear” that municipal officials need powers to track down the “bad actors” hiding behind corporate protections, said state Sen. John DiSanto, a Republican whose district includes Harrisburg.
“When you’re in a defined blighted area and when there are certain numbers of abandoned homes, we can be more aggressive in taking those properties back and getting them back into use where they’re creating a real hardship on the community,” he said. “But we have to offset that where the LLC is being used in thriving areas and doing what it’s supposed to do.”
Getting the names behind corporations “would make the work easier in terms of who to serve and who to cite,” said Daniels, but she returned to her unanswered question about whether the city’s unused anti-speculation ordinance works or not.
“Similarly, would being able to be named be enough of an incentive for someone to fix their property?” she said. “I don’t know.”
Even when the city proceeds with demolitions after proving that owners can’t be found, the problem lingers. Those vacant lots—still owned by the mystery entity—become overgrown, attracting abandoned cars and illicit activity. Once in a while, neighbors take responsibility for tending to them.
Patton, who keeps a weed-whacker in his truck for those lots, grew up on Allison Hill. His grandfather was raised on Hummel Street. Grandpa met grandma while delivering newspapers on Nectarine Street, around the corner. On those streets, and in Uptown Harrisburg, too, absentee owners find blighted houses ripe for exploitation.
“I see these unique architectural features on these homes built in the early 1900s, and I have to demolish these things,” Patton said. “It’s heartbreaking. You just get vacant lots, vacant lots, vacant lots, and they themselves turn into problem situations.”
