History of the Dollar Home in Baltimore

April 29, 2009

I recently had the opportunity to sit down with Robert Embry, currently president of the Abell Foundation and formerly Commissioner of the Baltimore City Department of Housing and Community Development. Mr. Embry managed the dollar house program that the city ran in the early 1980s, and was kind enough to provide some historical insight into the program’s origins and mechanisms.

The program was created in response to a rather unique set of circumstances. The City had purchased a number of houses in order to demolish them for the construction of interstate I-170, a strip of connector highway intended to link I-70 to I-95. Neighborhoods on the western edge of downtown, such as Barre Circle, Otterbein and Ridgely’s Delight were where the city had concentrated property holdings. Due to public opposition to the I-170 construction plan, the project was terminated, though not before the current expressway section of US-40/Franklin St. was completed. The City suddenly found itself as a large residential property owner in some marginal neighborhoods, and formulated the dollar house program to handle the change in situation.

The program had four key points that contributed to its success.

  1. Truly low barrier to homeownership. Resident homeowners are the lifeblood of a city. Converting renters to homeowners, or attracting new resident homeowners from other locations maintains the vitality of a place. Investing in where you live is a heavy incentive to increase your involvement in community life.
  2. Clustered properties. Since the City had purchased whole blocks of properties, it was possible to quickly improve large parts of a neighborhood. When an entire block of homes is renovated simultaneously, residents can see progress on a large scale being made daily, and the investment in homeownership creates financial rewards immediately.
  3. Direct loans from the city. Of course, renovating a home costs more than a dollar. Since the city was selling the homes for $1, a prospective buyer didn’t need to come to closing with thousands of dollars in collateral to get an 80% mortgage on the property. However, there weren’t any banks that would finance the renovation loans under those circumstances. To provide the capital for renovation, the City issued bonds and loaned the resulting money to the new homeowners at + 1%. Over the course of the program, not a single homeowner defaulted on a loan, and the city turned a handsome profit on loan interest. Read that sentence one more time.
  4. A dedicated office. A dedicated advisory office was established to help guide the homeowners through the renovation process, as many had not been through it before. The office helped the homeowners connect with architects and reliable, licensed contractors, and provided a general resource for information and support.

Mr. Embry considered the program to be an unmitigated success, and if you take a stroll through any of the neighborhoods I mentioned, you’ll find them to be some of the most charming places in Baltimore.  Consider that the City treasury grew through running this program, and it certainly seems like a win-win-win for the city government, the new resident homeowners and the city-at-large.

Time has not stood still over the past 30 years, and circumstances are different now than they were then, but the keys illustrated above can guide us to a new vision, a new strategy and new tactics to address the issues of today.

Please feel free to continue the discussion in the comments. If you have any questions or would like clarifications, I’m sure Mr. Embry would be happy to answer what he can. Many thanks to him for his time!

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