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Chicago court ruling could jeopardize San Francisco rules for vacant properties

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Chicago's ordinance requiring upkeep of foreclosed homes was stuck down.
  • Chicago's ordinance requiring upkeep of foreclosed homes was stuck down.

The power of cities to require owners of vacant properties to register them and keep them in good condition was dealt a blow by a federal court ruling involving a Chicago ordinance that could have ramifications for San Francisco.

In 2009, the Board of Supervisors adopted legislation requiring the owners of vacant properties to register them and pay an annual fee to cover city inspection costs to ensure that the properties were not falling into disrepair. Vacant properties are considered a major source of blight for San Francisco's neighborhoods.

The law came amid the nation's housing crisis, when record numbers of property owners were falling behind on their mortgage payments and losing their assets to foreclosure. Between 2009 and 2011, more than 2,000 notices of default on a mortgage were filed each year, according to data from the county Assessor-Recorder's Office. By contrast, that number was just 578 in 2000.

During the recession, as San Francisco's increasing number of vacant properties became the subject of complaints, city officials created a registry to address the problem.

Chicago followed suit in 2011 by adopting a similar law. But it was sued by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, two mortgage giants. The FHFA argued that, as federal agencies, Fannie and Freddie were exempt from the local law. On Friday, U.S. District Court Judge Thomas Durkin ruled in favor of the federal agency. The ruling does not affect the act's requirements for private property owners.

What Durkin's ruling might mean for San Francisco's law remains unclear. The FHFA would not say Tuesday whether it plans to take legal action against other cities for having similar laws.

Spokesman Bill Strawn of The City's Department of Building Inspection said he has not heard any concerns from federal agency officials about the law since it went into effect.

"The situation here is a little bit different," Strawn said. "Our vacant building list is 600 buildings." Chicago's list is in the thousands.

As of March 2013, Department of Building Inspection data lists 628 vacant buildings in San Francisco. Strawn said a cursory review of the vacant properties by the department's inspectors found that about half are owned by banks or financial institutions. Exactly which banks was not immediately available.

Under The City's law, building owners must register and pay an annual $765 fee. Of the 628 buildings in the department's database, only 236 were in compliance with the law. Strawn said enforcement of the law "has been slow" since the department was short-staffed. But in the past few months, the department has doubled its code enforcement staff and plans to bring the properties within compliance "in the coming months," he said.