Bringing life to empty buildings can help save downtowns

By Susan Odum University of Illinois Extension

Reports say communities need to find ways to recapture the value of vacant properties, bringing vitality back to communities. Small towns need to market their niche while filling local business needs to keep downtowns active.

Many Illinois communities have a vacant or derelict building in the heart of their downtown or on main street. While the missed opportunities of a property sitting vacant seem basic, the concept is complicated.

Intent, code, statute, and insurance classification may be used to determine if a property is classified as vacant, unoccupied, abandoned, or derelict. This category of properties can overshadow neighborhoods, business districts, and communities large and small.

In an August 2005 report, “Vacant Properties: The True Cost to Communities, the National Vacant Properties Campaign” (NVPC) defined vacant properties as residential, commercial, industrial, and vacant lots with one or both of the following:

  • The site poses a threat to public safety (e.g., a public nuisance as the property owner abandons routine property maintenance)
  • The property owner neglects the fundamental financial duties of property ownership (e.g., they fail to pay taxes or default on mortgages)

Vacant properties rarely incite a sense of urgency, other than with neighboring property owners. However, evidence shows that vacant properties are an expense that local governments cannot afford to ignore, as the expense grows with every year a property remains vacant or abandoned.

The cost of vacant buildings

As outlined by the U.S. Department of Housing and Urban Development (HUD), physical deterioration and derelict buildings are visible signs of a community’s reversing fortune. Expenses for local governments may include nuisance abatement and crime and/or fire prevention efforts.

The negative impacts of vacant properties can run deep, according to The Preservation Leadership Forum of the National Trust for Historic Preservation. An abandoned or deteriorating building can impact the community’s ability to attract new residents, property owners, businesses, and tenants.

The aesthetic impact of vacant buildings is not easily quantified, but their presence can make the entire community appear run-down or shabby. Vacant buildings symbolize that no one cares, resulting in spillover effects that impact neighboring properties and, when concentrated, can lead to overall community decline and disinvestment. This results in a costly spiral of blight, decreasing property valuations and reducing property tax revenues.

Abandonment can become contagious if it makes it harder for property owners to sell, or if banks lower appraisal values or deny loans in areas with abandoned properties. For communities facing abandonment issues, the longer a property remains abandoned, the higher the cost of renovation, which can result in continued abandonment. Similarly, when populations decline and properties become vacant, a greater proportion of the local government’s tax burden is borne by the remaining residents and property owners.

The negative impacts of vacant properties can run deep, according to The Preservation Leadership Forum of the National Trust for Historic Preservation. In addition to affecting adjacent property owners, a deteriorating building can diminish the community’s ability to attract new residents, property owners, businesses, and tenants. A derelict property can hamper a community’s overall downtown revitalization efforts.

In the 2020 blog post Vacant Storefronts – How Bad Is It?, the author outlines that local shops and offices in the downtown inject life into the community, while empty storefronts send a powerful, and negative, message to passers-by – suggesting unsafe conditions, complacency, or a lack of pride in the community. Vacant storefronts not only negatively influence the local economy, but they impact safety and quality of life for both residents and visitors and can impede population growth.

HUD outlines that local governments and nonprofits have resource limitations, the most desired outcome is to quickly return a property to its previous use – whether as an owner-occupied residence or a business.

How to recapture a property’s value

The 2005 NVPC report confirms that whenever possible, communities need to find ways to recapture the value of vacant properties, bringing vitality back to neighborhoods and communities. Taking no action allows the problem to grow worse. To stem these problems, communities must address the issue early and end the financial drain of vacant properties by recognizing their value.

Turning vacant storefronts into eye-catching displays can call attention to prime real estate space, and provide a vision of the various types of businesses that could work well in the space.

The Preservation Leadership Forum suggests a variety of reasons why properties are vacant or neglected. Sometimes, property owners “sit-on” properties with no plans for putting them back into use until market conditions change or they can demand higher prices, ignoring the fact that the community may never reach its full market potential while they are sitting on these buildings. Some absentee owners have no idea what their buildings look like or what condition they are in.

Securing the title to a neglected property

Some communities use eminent domain, while others acquire title when a property is tax delinquent. Unfortunately, in many cases, tax-delinquent properties are sold at auction to the highest bidder, with no regard to who the buyer is or what plans he or she has for the property.

As outlined in the NVPC Report, while tax sales provide a source of income for local governments, they do not ensure that the abandoned property will be put back to productive use, as properties are sometimes purchased by speculators without any intent to restore them. Even if taxes are paid in the future, those taxes don’t typically amount to much in comparison with taxes on a rehabilitated property. However, a focused effort to bring vacant properties back to life can restore value and taxes for the community.

Strategies for securing properties

The Federal Reserve Bank of Atlanta, the Federal Reserve Bank of Cleveland, and the Center for Community Progress joined to explore and highlight strategies to address challenges related to vacancy and abandonment in the 2021 publication Tackling Vacancy and Abandonment: Strategies and Impacts after the Great Recession.

Galena is viewed as small town success story with a have thriving economy based on heritage tourism made possible by the city investing in and leveraging its historic buildings. (Photo courtesy of city of Galena)

Approaches to tackle the unique challenges associated with vacant properties in rural places include:

  • Creative code enforcement
  • Anticipating end uses and/or strategies for property acquisition to streamline processes
  • Regional land banks.

Code enforcement is perhaps the first defense against vacant or derelict properties, but rural communities may not have the capacity for code compliance activities. Compliance may be impossible to enforce on tax-delinquent owners who are insolvent, absentee, or unidentified. Identifying a potential reuse or new tenant, removing barriers to acquisition, reducing transaction costs and streamlining processes are ways of getting a property into a new owner’s hands.

Land banks are a tool for unlocking properties that are unattractive to the private market because of legal and/or financial barriers. These special-purpose governmental entities can be used to acquire, maintain, and reposition properties to break the cycle of vacancy and abandonment by transferring control and ownership to residents and local businesses, creating vibrant places in vacant spaces. In rural regions, the creation of a regional land bank may be most beneficial as counties and municipalities can pool funds or draw on existing regional entities, such as planning or economic development agencies with more resources and expertise.

Insight on the increasing importance of land banks as a community development strategy was outlined during the February 2022 Illinois Institute for Rural Affairs 33rd Annual Community and Economic Development Conference “Repositioning Rural for the Economies of the Future.” There, Brent O. Denzin of Denzin Soltanzadeh, LLC outlined how regional land banks in Illinois are helping rural communities move from “band-aid” solutions to better outcomes that get vacant and abandoned properties into developers’ hands at a lower cost.

Michael Davis, Central Illinois Land Bank Authority

Michael Davis with the Central Illinois Land Bank Authority explained how their organization serving communities in Vermilion and Champaign counties and the city of Decatur in Macon County are taking a proactive approach to code enforcement and growing the resource pie as they use state and federal resources for rehabilitation and other community development initiatives.

Recordings of the conference presentations are available online at Land Banks and Land Banking in Rural Communities and Land Banking in Illinois: Options for Rural Communities.

Preserve historic buildings rather than demolish them.

The Preservation Leadership Forum warns against hasty responses when a new buyer or tenant hasn’t brought a new use to a vacant building, as difficulties in identifying a new occupant are generally temporary conditions. Historic buildings are typically irreplaceable, as most were built with quality materials and an attention to detail that is expensive to replicate. So instead of demolishing these vital links to the community’s past, they may need to be protected until a suitable buyer can restore them to their former glory. After all, it is better to pay to protect a building than to pay to have it demolished (if it is deemed savable).

In Galena, Illinois and Savannah, Georgia, historic buildings sat vacant for years, but were eventually restored. Today, both communities have vibrant economies based on heritage tourism — a lucrative industry that would not have been possible without the historic structures the cities leveraged.

As outlined in the Leadership Forum, part of the waiting game for reusing an old building is resisting the urge to allow inappropriate uses, such as ground-floor residential or storage, can hinder a community’s revitalization efforts. Main street districts rely on a series of storefronts lining the street to portray a unified business district. Inserting residential units on the ground floor or in vacant buildings can disrupt that image.

While mothballing a vacant structure may include plywood to secure windows and doors, it may be desirable to paint those panels to look like windows or doors, so they detract from the “boarded-up” appearance of the building. While mothballed, community leaders need to keep looking for a new owner or use for the building so that it doesn’t stay vacant long.

Window displays add downtown appeal

In a March 2021 blog post, “Main Spotlight: Windows of Opportunity – The Transformation of Empty Storefronts on Main Street”, Main Street America emphasizes the importance of turning empty storefront windows into “Windows of Opportunity.” Main streets remain the cornerstone of commercial business in our country. So, now more than ever, it makes sense for groups to come together to turn the lights back on in these shuttered storefronts. Activating vacant storefronts into eye-catching displays can call attention to prime real estate space, entertain passersby, and provide a vision of the various types of businesses that could work well in the space.

Window displays are an inexpensive tactic that not only adds life to the vacant storefront but gives the downtown more visual appeal. Displays can include before-and-after photos, renderings, historical information, local artwork, seasonal displays, and even merchandise displays from nearby business owners. These tactics demonstrate to property owners, residents, and visitors that community leaders see opportunity and possibility.

Short-term shops can fill in the gaps

As outlined by both the Leadership Forum and Main Street America, another strategy is to support pop-up shops and house a temporary business in an empty storefront. This can be a wonderful opportunity to put a home-based or online-based business into a brick-and-mortar space. With effective promotion, pop-up shops can create buzz and ultimately help a business owner determine that they are ready to make a brick-and-mortar investment in their business idea and your downtown.

With the right resources, some collaboration, and a little imagination, empty storefronts can come alive, create positive results, and become vibrant community spaces that showcase main street opportunities.

Explore more resources to build healthy, prosperous communities at Community & Economic Development.

Susan Odum is a University of Illinois Extension specialist in Community and Economic Development, specializing in community development and planning.