As this blog has discussed before, Chicago, like many other metropolitan areas, is fighting a losing battle with an ever-increasing number foreclosures and their negative effects. In an effort to curb the number of foreclosures, the Chicago City Council adopted the Vacant Building Ordinance (“Ordinance”) in 2011, designed to hold owners of vacant buildings in the city accountable for their condition.
Under the Ordinance, a building is considered vacant if it lacks the “habitual presence of human beings who have a right to be on the premises.” Essentially, this means that the building has to be vacant of individuals who are actually supposed to be or allowed to be on the premises. Alternatively, the Ordinance also defines vacancy as any property where no legal business or construction activity is taking place.
Residential apartment buildings are not deemed vacant unless they ninety percent or more unoccupied, and an individual residence is not considered vacant unless no one has lived there for nine months of out of the year and no one intends to return and live there.
The Ordinance requires that owners of vacant buildings promptly register them upon becoming vacant, pay a $500 registration fee, and maintain the property to certain standards. Violations of the Ordinance can result in fines of $500 to $1,000 for each infraction.
Shortly after the Ordinance became effective, the Federal Housing Finance Agency (“FHFA”), overseer of Fannie Mae and Freddie Mac, filed a federal lawsuit against Chicago, claiming that properties the FHFA had backed in foreclosure were exempt from the Ordinance. The FHFA argued that Chicago’s city ordinances are not binding on federal agencies and that the registration fees associated with the Ordinance amounted to a tax on the federal government.
Last month, U.S. District Court Judge Thomas Durkin, issued a decision in favor of the FHFA, holding that Chicago cannot enforce the Ordinance against the FHFA. In so ruling, Durkin opined, “This is not to say that FHFA can let properties where it is the mortgagee become decrepit. Fannie and Freddie’s own guidelines, not unlike the city’s, require it to maintain the properties in a manner to preserve their value. This is consistent with their overall mandate to preserve the assets of Fannie and Freddie — a field into which the city of Chicago may not encroach.”
As this blog has mentioned before, a study by the Lawyers’ Committee for Better Housing found that, from 2009 to 2011, more than 50,000 rental units went into foreclosure in Chicago, comprising nine percent of Chicago’s entire rental housing.
The study concluded that the loss of available properties has placed an increased strain an overburdened rental market, resulting in higher rates of homelessness and additional financial burdens to the City. As of May of 2013, approximately 2,900 building owners and 2,100 mortgagees had registered vacant buildings, and between June 1, 2012 and May 21, Chicago collected $2.8 million in registration fees.