How blockchain might help Baltimore solve its vacant housing crisis

Baltimore’s leaders are trying all sorts of tactics to reduce the city’s thousands of vacant properties.

Attorneys with the Department of Housing and Community Development have been testing out a legal tool they think could soon bring hundreds of delinquent properties into the city’s control each year. One councilwoman wants to create a “land bank” to channel vacant properties into the hands of community-minded developers. Earlier this month, Mayor Brandon Scott rolled out an $8 billion blight abatement plan, proposing an ambitious gamut of financial mechanisms to fund redevelopment for thousands of vacant homes around the city.

Those ideas might sound nice. But what about — hear them out — blockchain?

Often considered the domain of Bitcoin bros and mega-rich fraudsters in the Bahamas, blockchain technology takes transaction records — tracing currency, cartoon apes or the ownership of a Gucci purse — and adds them to an unchangeable digital ledger. The idea is that, by etching this history into (digitized) stone, anyone can scrutinize an asset with confidence that none of its records have been omitted or tampered with along the way.

Baltimore officials think they could apply those uses to property transactions and redefine how they manage vacants. The owners of Baltimore’s vacant homes can be hard to trace, and salvaging any given property involves a long chain of paperwork — from the city taking over a property to transferring it to a developer to getting it into the hands of a new owner — a time-intensive process requiring many redundant title searches and costly fees from title insurers.

“Why are we wasting time like this?” wondered Acting City Solicitor Ebony Thompson, while considering the extensive record search process involved rehabbing a vacant. The city’s top attorney, Thompson developed a mild obsession with blockchain during her days in private practice. She took an online MIT course on the topic, and she’s spent close to two years working to bring the technology to City Hall.

Thompson’s push for the technology dates back to the start of her job, in January of 2022, after three firefighters were killed in a vacant South Baltimore rowhome fire. In the wake of the Stricker Street tragedy, the mayor challenged his agency heads to come up with innovative solutions to widespread vacancies, Thompson recounted.

“I was like, ‘I got one for you,’” the solicitor said, not masking her excitement. After instituting plans for judicial in rem foreclosure, a promising legal tool the housing department is now deploying to bring vacant properties into its ownership, Thompson introduced her other idea — to streamline title searches through blockchain.

Two years of Thompson’s efforts have culminated in a new pilot program with Medici Land Governance, a tech company partnering with city, state and national jurisdictions around the world to administer land records through blockchain. Among its clients, the company has counted Carbon County, Wyoming; New York City; and the nations of Rwanda, Zambia and Guyana.

Whether the experiment in Baltimore turns out to be more flash or substance remains to be seen.

The city’s three-year, $225,000 agreement with Medici, approved this month by the Board of Estimates, calls for the company to put the city’s inventory of vacant homes onto the blockchain, establishing a parallel record of thousands of properties while the city continues to rely on its existing digitized systems for now. Officials with the city’s housing department say they’ve cut the number of vacant homes below 14,000, though many advocates believe that the count of blighted homes in Baltimore to be higher. The city owns only a fraction of that number.

While Medici has tested its model with other governments for uses like fraud prevention, its pilot in Baltimore may be the first time the technology has been deployed to combat vacant housing.

Ali El Husseini, the company’s CEO, knows the idea might sound dubious to some. But he argued that his model could have several benefits to the city’s vacancy problems.

For one, the unchangeable nature of blockchain provides protection against cyber attacks and fraud. Like Thompson, El Husseini pointed to the benefits of blockchain for streamlining the time-intensive work of running titles. At the same time, El Husseini argues the approach has benefits for homeowners with poor credit, allowing them to verify the value of their property and sell or take out a loan without getting dinged for their financial history.

Of course, the blockchain record is only as good as the information fed into it, El Husseini acknowledged. He said that’s why Medici is starting with the city’s inventory of vacant housing, not the entirety of its land records. As the city works to acquire more and more vacants, it establishes “a blank canvas,” El Husseini said, where it can wipe out a property’s long history and begin efforts to redevelop.

El Husseini estimated his company will spend over $2 million on its Baltimore project, losing money in effort to showcase how the model works. Once the title record is logged on Medici’s blockchain servers, he hopes to share this information through a public online portal, where residents could scan the list of vacant homes, find information about each property and bid on them.

One proponent of Medici’s model is Walter Nesbeth, formerly with New York City’s Department of Finance, who has championed moving New York’s property records onto blockchain to protect against an epidemic of real estate fraud. Similar to the program Baltimore is now pursuing, New York City has experimented with Medici’s technology to create a secure, unchangeable ledger of deeds in an effort to prevent properties from falling into the hands of scammers.

What sticks out to Nesbeth about Baltimore’s efforts, though, is the support for the idea from the city’s top attorney. Typically, it’s the tech folks in City Hall begging the law department for permission to pursue ideas like this one. To have the legal team moving the idea forward is a real “paradigm shift,” he said.

Jim Kyung-Soo Liew, a finance professor at Johns Hopkins Carey Business School specializing in artificial intelligence and blockchain, said some might argue that turning to blockchain for Baltimore’s tasks is overkill, especially since real estate changes hands relatively infrequently. It’s a reasonable perspective, said Liew, whose students pitched uses for blockchain in Baltimore City Hall during a “Shark Tank”-style exercise judged by Thompson and Deputy Solicitor Stephen Salsbury.

But like El Husseini, the Hopkins professor pointed to more dramatic ways blockchain could shift Baltimore’s real estate market beyond administrative tasks. By assigning “tokens” to different properties, the technology could allow residents or investors to buy fractions of a single home, which Liew argued could open up the market to new crypto-savvy investors.

Thompson, too, has ambitions for blockchain in Baltimore that go beyond an index of vacant homes. The city could one day deploy the technology for “smart contracts,” she suggested, automating payments to subcontractors so they don’t have to rely on the timing of larger businesses that deal directly with the city — a recurrent problem for minority and women-owned businesses.

“I wanted to get the city comfortable with it first, to see it, to see the power of it,” said Thompson. “And I want to expand it.”

Councilwoman Odette Ramos, who has championed many of the City Council’s policy plans to address vacant and affordable housing, said there’s a reason the city goes through so many steps to check title records. Her main concern is ensuring that a more efficient system doesn’t overlook any forgotten property heirs, who may then contest the city’s efforts to acquire a vacant in court.

But Ramos, who has led the proposal to establish a land bank in Baltimore, said fixing vacant housing is a complicated puzzle, and this blockchain idea might be one piece. “We need all the innovation we can get,” she said.

“What I’m really excited about is that Baltimore is taking a risk using some of these technologies,” added Liew, who owns a blockchain company of his own.

For the Hopkins professor, Baltimore’s limited foray into blockchain could have a bigger payoff for the city’s reputation as a leader in emerging technology.

If the city’s approach takes off, Liew said: “Imagine the following.”

Adam Willis

adam.willis@thebaltimorebanner.com

Adam Willis covers city government for The Banner, including the impacts of the large COVID-19 stimulus package that Baltimore received from the federal government.

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