Are non-performing properties, A) stressors for cities, or B) an opportunity for developers? The answer is both – “A” and “B.”

According to a report put out by the Brookings Institute a few years ago, an estimated 15% of land in American cities is vacant.

Vacant properties located within a municipality – as well as non-performing properties located inside city limits – do not generate adequate property tax revenue for municipalities. All the while, property taxes make up a substantial portion of revenue for municipalities. When property taxes can be collected, that is.

Financial costs and social costs…

A reduction in property tax revenue coming in to a municipality often leads to the cutting back of services provided by the municipality. Impeding day to day life for those who live there. This topic of social costs which are linked to non-performing properties can be its own essay, in and of itself. Or book. And its very unfortunate.

Let’s look at St. Louis, Missouri.

Through the year 2020, it had been reported that St. Louis took possession of nearly 10,000 non-performing properties located within St. Louis city limits – houses, lots and buildings.

The idea in St. Louis? Conveying non-performing properties in St. Louis to developers.

By conveying non-performing properties to developers, St. Louis avoids functioning as the de-facto “property manager” of these non-performing properties.

Snow removal. The mowing of lawns. And so on, and so on. Services St. Louis transfers to developers. Developers who then manage their properties, while renovating them. Or building new. Getting repurposed properties back onto the St. Louis tax roll. As performing properties. As sources of additional property tax revenue for St. Louis.