The law authorizes Baltimore City and Maryland county governments to set tax rates for vacant lots and properties to discourage speculation and stimulate development.

Decades of inadequate housing production and robust economic growth have led Maryland into its current housing crisis. Through deregulation, corporate consolidation, and technological innovation, real estate speculation has a growing stake in the housing market and only exacerbates the affordability crisis.

Property speculation is an approach to real estate investment in which expected profits are based on predicted changes in local market conditions rather than physical improvements or rents. This makes property speculation a high-risk, high-reward endeavor, where properties are often bought and sold at a rapid pace.

In some cases, real estate speculation won’t provide homes for anyone at all. A real estate investor may buy a residential property with no plan to rent the units. Rather than investing the capital to renovate or manage a building, a speculator may determine that holding onto a building or lot is more profitable until the neighborhood housing market heats, reaping profits from the property sale itself.

Artificially removing residential properties from the market only drives up the cost of housing. Fewer families finding affordable housing means longer commute times, a higher percentage of paychecks allocated to transportation and housing, and fewer dollars spent on other goods and services. Consequently, unpaid property taxes and the burden of mitigating safety hazards related to these properties fall on local governments, ultimately reducing their capacity to provide critical services.

For fiscal 2024, the State Department of Assessments and Taxation reports 242,361 vacant real property accounts statewide, excluding exempt and partially exempt accounts, with a total assessed value of $14.1 billion. Fortunately, MACo successfully advocated for the Maryland General Assembly to address vacancy and the economic impact of housing market speculation by granting counties the authority to enact a vacancy tax that more accurately reflects the entire and considerable cost that empty, — and sometimes unsafe — units have on a community.

House Bill 2 authorizes Baltimore City and county governments to establish, by law, a subclass of real property consisting of vacant lots or improved property cited as vacant and unfit for habitation or other authorized use on a housing or building violation notice. Further, Baltimore City and county governments may set a special property tax rate for a vacant lot or improved property cited as vacant and unfit for habitation or other authorized use on a housing or building violation notice. Finally, the bill adds a specified reporting requirement for jurisdictions that enact a special property tax rate.

While there are no simple solutions to a vexing issue like affordable housing, addressing challenges like workforce, financing, interest rates, supply chain issues, and significant out-of-state corporate interests requires a multi-pronged approach from federal, state, and local policymakers. As the frontline actor in housing policy, counties remain committed to working with all stakeholders in broadly advancing comprehensive housing solutions, including taking appropriate steps to turn vacant lots into housing and intentional mixed-income communities.

Stay tuned to Conduit Street for more information.