Article Correctness Is Author's Responsibility: Can Pete Buttigieg Fix America’s Vacancy Problem?

Blight is a problem that doesn’t recognize borders. Vacant properties plague almost every place in America, and every kind of place, too, from empty urban rowhouses on the East Coast to abandoned rural farmhouses in the Midwest to disused suburban strip malls in the Inland Empire. Rural areas and small towns arguably have it worse, with a higher vacancy rate than metropolitan areas on average. Meanwhile, some cities, especially Rust Belt legacy cities, suffer from a destructive form of concentrated vacancy known as hypervacancy.

Still, no one can say exactly how widespread the problem really is. There’s no nationwide toll of vacant properties, according to recent research; instead, the national map of blight is piecemeal. A 2015 survey conducted by Gary, Indiana, found that 25,000 of its parcels are vacant (40 percent of the city’s total). Detroit estimates that it has more than 120,000 vacant lots.

Hypervacancy is an alternative housing crisis in America, a calamity that has gripped the parts of America left behind by the recovery—and Pete Buttigieg has a plan to fix it.

Last week, the mayor of South Bend, Indiana, and Democratic Party presidential primary contender released his so-called Douglass Plan, a detailed proposal for shoring up equity and justice. The Douglass Plan is designed to help bridge the racial wealth gap, prioritize environmental equity, and reform the criminal justice system. Embedded within that plan is a housing proposal for the parts of America that are still reeling from the Great Recession, a plan that would promote homeownership by targeting hypervacancy.

Under the Buttigieg proposal, cities would bid for comprehensive financing under a new Homeownership Fund (operated by the U.S. Department of Housing and Urban Development). Pilot cities would establish a land bank to acquire and develop abandoned or foreclosed properties. A special-purpose trust (also administered by HUD) would purchase those properties and provide funds for restoring them. An eligible homesteader would then be granted the property to use as a primary residence—and after 10 years, the homesteader would own the property free and clear.

It’s a massive federal proposal to revitalize entire cities where concentrated poverty, vacancy, segregation, and inequality are the norm, from Buffalo to Cleveland to Detroit.

“You have inequality generally, but you have a specific trend in inequality, which is geographic disparity,” says Mehrsa Baradaran, a professor at the University of California-Irvine and the author of The Color of Money and How the Other Half Banks. “Some cities are winning cities. Some cities are losing cities.”

Baradaran is the author of the Homestead Act for the 21st Century, the template for Buttigieg’s plan to battle blight. It’s a new angle on an increasingly central issue in the next election: federal housing policy. In coastal enclaves and a few other super-heated housing markets, the demand for housing so greatly outstrips the supply that prices have skyrocketed. There’s a related wage concern: Across the country, low wages put affordable housing simply out of reach for millions of working-class households. But in some areas, houses have zero value, and hypervacancy is the primary culprit.

And in many cities, these housing crises run hand in hand. A new report from the National League of Cities points to the case of Milwaukee, which has enjoyed a building boom of market-rate housing downtown over the last decade. Yet nearby neighborhoods, marked by vacancy and blight, have been left behind. Even as the city is adding new homes, low-income families can’t find housing that is safe and affordable, and rising evictions and foreclosures in these concentrated pockets of poverty only make matters worse.

“Some cities are just unaffordably high, where the property values skyrocket. In others, there’s a lot of abandoned, vacant property. You can’t sell them for $5,000,” Baradaran says. “These hypervacant cities are places where markets are broken. A lot of cities have formerly redlined and segregated communities that struggle with this.”

Baradaran’s Homestead Act is a product of the Great Democracy Initiative, a project from the nonprofit Roosevelt Institute. This think tank, an adjunct of the Franklin D. Roosevelt Presidential Library and Museum, is already a destination for progressive policymakers looking to draft the next New Deal. Politico describes Darrick Hamilton and William “Sandy” Darity, the nation’s leading reparations scholars—both Roosevelt Institute fellows—as “in-demand policy tribunes on the left.”

Here’s a sketch of Baradaran’s New Deal–inspired proposal: Eligible homesteaders in pilot cities would be granted full ownership of a lot. The property would come with a lien attached ($100,000 in Baradaran’s plan) that would decrease by 10 percent every year and expire entirely after 10 years, so long as it’s still their primary residence. If homesteaders sell before their 10 years are up, they resell to the city for cost plus improvements. But as long as homesteaders occupy the property for a decade, then the house is theirs to resell at full market price—with no strings attached.

The Homeownership Fund would also provide homesteaders with an extremely low-cost mortgage, payable directly to the fund, to sustain the program and to pay for improvements or maintenance. The monthly rate would be far less than what most low-wage families pay for rent, with the added benefit that they would be building wealth through equity. (Additional assistance would be available for homesteaders who have trouble with the payments; the program isn’t trying to put anyone out of their homes.) By providing loans directly through the Homeownership Fund, the program bypasses the high barriers to homeownership faced by low-income renters, namely poor credit standing and high down payments.

“Because of these historic injustices, there’s an enormous wealth gap between African Americans and white people,” says Alan Mallach, a senior fellow at the Center for Community Progress and a leading scholar on blight and vacancy. “You can’t simply say, ‘We’ll give you a loan to fill the wealth gap.’ A loan isn’t wealth. Debt isn’t wealth.”

With strict standards for eligibility, the new Homestead Act entails a form of reverse redlining. Under the proposal, only residents who received less than the area median income over the last five years and currently reside in the pilot area and have lived there for at least three years or currently reside in any historically redlined or racially segregated area and have lived there for at least three years will be eligible to receive a Homestead Fund grant.

So it’s designed to ensure that the benefits of the program flow to people who deserve them—people who have suffered, historically, due to systemic racism under federal policies. The program is not explicitly based on the race of the applicant; however, concentrated blight is a condition of neighborhoods historically segregated by race and subsequently abandoned by federal bailouts. The Warren campaign has a somewhat similar proposal to provide down-payment assistance to first-time homebuyers in areas that were previously subject to redlining.

Cities would need to do their part to guarantee their participation in the program. Municipal bids would be weighed based on their affordable housing needs, property and vacancy, jobs capacity, community assets, and so on. Each homestead city would make a concomitant plan to spur job creation with new infrastructure, technology, or facilities. This might take the form of a new Veterans Administration hospital, opioid recovery center, or defense manufacturing facility—infrastructure or development suitable to local conditions, funded by the Homestead Act.

Local leaders already know they need some kind of employment hub to stabilize depleted regional economies, Baradaran says, and recently, they’ve even had some practice drafting up these kinds of plans. “This is why cities wanted Amazon,” she says. “You bring in [this] one industry, then that’s it, you don’t need to do anything else. Yoga studios and banks and all of that stuff comes with it.”

To finance what would essentially be a Marshall Plan for restoring America’s broken cities—no small feat!—Baradaran envisions a combination of congressional appropriations and homestead bonds. Congress would appropriate funds for the special-purpose trust to acquire abandoned and vacant properties. The trust would issue shares in securitized bonds guaranteed by the Treasury. Ideally, the bonds would be the kind of investment vehicle sought by pension funds or low-risk mutual funds. (And if not, the Federal Reserve would purchase the bonds—at least, Baradaran sees no reason why the Fed couldn’t step up.) The goal is to build a self-sustaining finance system after an initial heavy investment from Congress.

The concept is built on the New Deal–era mortgage credit programs through which the federal government built white homeownership. The program is named after the original Homestead Act, an 1862 law signed by President Abraham Lincoln to encourage white settlers to occupy and develop hundreds of millions of acres of land (where Native Americans already lived). Cognizant of the harmful legacies of these programs, Baradaran describes the new Homestead Act as a correction to past policy mandates that were sweeping and visionary in scope but also racist and colonial in execution.

“The Homestead Act, like the New Deal, had a dual legacy,” her proposal reads. “On the one hand, it transformed the American landscape and building intergenerational wealth for the white families who were able to benefit from the subsidies. On the other hand, it was exploitative, extractive, and caused a century or more of economic depression and suffering for those whom were displaced or excluded.”

For all its complexity, the Homestead Act is only one component of the Douglass Plan, an effort by Buttigieg to answer for his strained mayoral record on race and to signal to African American voters that his administration would serve them. As with his record as chief administrator of the local police department, Buttigieg’s record combatting blight in South Bend has also come under scrutiny. His push to tear down or fix up vacant homes (“1,000 Houses in 1,000 Days”) left some black and Latinx neighborhoods pockmarked by ghost lots, with no immediate plans to fill them. (Washington Monthly’s Joshua Alvarez makes the case that Buttigieg’s mitigation plan was neither problematic nor unusual.)

South Bend is hardly alone in dealing with hypervacancy. But Buttigieg may be the only presidential hopeful with direct experience dealing with concentrated blight. So far, he’s the only one talking about it. Of the five Democratic candidates who have released housing plans so far—Senators Cory Booker, Kamala Harris, Amy Klobuchar, Elizabeth Warren, and former U.S. Department of Housing and Urban Development Secretary Julián Castro—none has specifically mentioned concentrated blight as a campaign concern.

Housing may be a pivotal issue for the 2020 election. On Wednesday, at the NAACP Convention, Warren and Senator Bernie Sanders even fielded questions on gentrification—not a topic that usually comes up in presidential debates. Warren staked out YIMBY ground (“I have a plan to build 3.2 million housing units”) while Sanders took up the NIMBY position (“We’re going to tell the developers you just can’t come in and build expensive condos and drive working-class people out”).

Considered in this context, Buttigieg’s mini housing plan comes the closest to a PHIMBY platform (public housing in my backyard). The candidate is calling for massive public investment in cities and neighborhoods hollowed out by blight. It’s not public housing, but rather public financing to restore housing in places left behind by the housing market. The goal is to narrow the racial wealth gap and boost the economic vitality of these disinvested cities in a single stroke—with a top-down, federal solution to hypervacancy.

The Homestead Act is designed to reach deeply distressed places—cities such as Saginaw, Michigan, and Youngstown, Ohio. It can be tailored to lift up neighborhoods on the wrong side of the inequality divide, too, as in Baltimore or Philadelphia. Other candidates may get on board with their own plans for dealing with blight: Baradaran says that she’s talked about the Homestead Act with the campaign of New York Senator Kirsten Gillibrand.

And no wonder. While solving hypervacancy is a massive lift, it’s a way into issues ranging from environmental justice to historic land-use inequality to discrimination in lending.

“It’s time to think of creative ways that the government can help in these situations,” Baradaran says. “Prior to now, it’s all been private incentives, and it’s just not working.”