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How the Proposed PMO Could Affect Home Values

For 15 years, Art Gastelo hasn’t lived in the home he owns in Flagstaff’s Plaza Vieja neighborhood. He’s rented it for some of that time, and on several occasions, he’s tried to sell it. He’s finally found a buyer, after dropping his asking price from $150,000 to $110,000.

As for profits, “I’ll be lucky if I get five grand,” Gastelo lamented. He blames his bum luck on an abandoned house next door.

“I’ve had two buyers. They went through the entire process. Then they said, ‘We need to look around and find something different.’ The new buyers wouldn’t retain that property until that house was knocked over,” he said. “Even some of my renters who were going to sign a lease backed away because of the abandoned house, because they saw homeless people in it.”

Gastelo was rooting for Flagstaff to develop a property maintenance ordinance, which the city recently tried, and failed, to do. The effort is back on the drawing board because some opponents complained it was too intrusive – but Gastelo, along with some of his neighbors, hopes some sort of ordinance gets on the books soon.

City officials haven’t yet researched the effects of local eyesores on property values, but it’s been well documented in other cities; a 2011 General Accounting Office report cites study after study. One points to a foreclosed property in a Chicago Neighborhood that reduced the values of 13 surrounding homes by $17,000 per property compared with the median house price in Chicago.

A 2010-2011 study in Cuyahoga County, Ohio, found that a vacant property “within 500 feet of another property reduces that property’s price by approximately 0.7 percent,” the report continued. “Another study that examined the impact on sales prices of nearby foreclosed and vacant properties in Columbus, Ohio, found that each vacant property within 250 feet of a nearby home could decrease its sales price by about 3.5 percent.” That study also found that the average sales price of homes located nearest to foreclosed and vacant homes declined more than $8,600. Another analysis in Flint, Mich. found that a vacant property could reduce the value of surrounding homes by approximately 2.27 percent.

Besides the drop in property values, the GAO study notes there are numerous costs that cities bear when they have to maintain neglected properties and/or police them, since they are frequently magnets for crime. Secondarily, declining property values translate into dropped tax revenues.

The wave of home foreclosures that swept the nation has affected local economies in all of these ways. According to the U.S. Census Bureau, non-seasonal vacant properties have increased 51 percent nationally, from nearly seven million in 2000 to 10 million in April 2010, with 10 states seeing increases of 70 percent or more. Arizona saw a 61 percent increase in that time.

But Jesse Dominguez, a long-time member of the La Plaza Vieja Neighborhood Association, says there’s an additional hit to the condition of local neighborhoods, especially those flanking the university: owner absenteeism.

He sees a pattern that he calls the “cycling of a neighborhood: The older folks are dying off, and then the kids are left with a house and they have to deal with rentals,” he explained, “and … they’ve moved somewhere. They’re sitting pretty because they’ve got this rental; all of a sudden you’ve got broken windows.”

N. Edward Coulson, an economics professor at Pennsylvania State University, was lead author on a 2003 study in the Journal of Housing Research that backs up Dominguez’s observations. That study found that housing prices are generally higher in neighborhoods where owners are present to a high degree.

There’s no property maintenance ordinance that can force homeowners to live in their buildings; but done right, one could at least provide incentive for owners to take care of their homes.

Dominguez certainly hopes so.

“I think the PMO that was presented was probably too strict,” he said. “It was too intrusive and maybe just a little bit overreaching. I don’t want anybody’s property rights being violated, including mine. But drive around here, and see what I see every morning.” FBN




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