No Vacancy

http://planphilly.com/uploads/media_items/http-planphilly-com-sites-planphilly-com-files-vacancy-victories-are-rare-city-says-reform-coming-jpeg.600.450.s.jpgFYI in light of all the policy discussions happening in City Hall and Harrisburg, I wanted to share that I just wrote an article for The Region's Business on the economics of vacant land.  I've pasted it below for your convenience, or you can also view it here.

Vacant Land Continues to Be a Drag on Philadelphia

Vacant land isn’t usually thought of in economic terms.  Rather, it tends to provoke a visceral reaction: there’s an eyesore in your neighborhood, and you’d like it dealt with as soon as possible.

But framing the issue of vacant land in economic terms may be what is needed to best understand why and how to address the problem.  After all, vacant land produces not only negative visceral reactions but also very real negative economic consequences:

Vacant land drags down neighboring property values, destroying individual household wealth and shrinking the tax base for the City and School District;

Vacant land is expensive for the City to maintain, safeguard, and clean, diverting scarce resources away from other essential public services;

Vacant land is likely to also carry tax delinquencies, further diminishing the funds available to the City and increasing taxes for other residents and businesses.

Take Philadelphia, for example: all told, there are some 40,000 vacant parcels throughout the City, each exacting their cost on City government, City residents, and the City’s visual appearance and public reputation.

We didn’t get this way overnight.  The City reached a population of 2.1 million in 1950, planning to max out at 2.5 million in 2000.  Instead, over the next 50 years, it lost over half a million residents.  That’s a lot of closed businesses, boarded up homes, and unused lots.

But that’s not Philadelphia’s story anymore.   We are seeing population increases in neighborhoods throughout the City (Northern Liberties, Italian Market, University City), and businesses are forming or relocating in every month.  With this positive momentum comes the opportunity to turn our vacant lots from negative influences to positive ones: development opportunities for residential or commercial purposes, or other public uses for broader benefit. The Pennsylvania Horticultural Society (PHS) and other non-profits are also stepping up to the plate and turning run-down lots into clean, open green spaces.

Vacant land in Philadelphia therefore brings us back to a simple question: what is the cost of doing nothing? This is the economic argument for addressing the problem of vacancy in the City, and for making sure vacant parcels can be efficiently and productively converted into some positive use.  By doing so, we will minimize the negative economic consequences of vacancy – diminishing property values, increased maintenance costs, and accumulating tax delinquencies.  And, we will add public amenities and private development to these locations, further beautifying the City and growing its population and tax base. Dealing with Philadelphia’s vacant land will lead to a virtuous cycle of improvement.

How this kind of reform can happen is, admittedly, a complex policy question.  But whether and when such reform should be pursued can be answered with simple economics.
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