I think lack of market liquidity would be one problem. If you give houses to the homeless they can't afford maintenance and can't afford to sell and leave. This in turn result in house in said neighborhood degrading furtger and people with the means to fix them being unable to buy and fix because the current resident won't leave.I'm not sure by which mechanism you refer to the real estate market being hurt by. Again, I don't the solution to homelessness is giving away keys to empty houses (many of which in Baltimore are condemnable). Do you mean the real estate market would be hurt because no one wants to live near mentally ill people? Because mentally ill people don't take care of their property and so values go down?
These people have that opportunity right now. They just aren't taking advantage. Detroit currently has programs to sell houses for $1 if someone promises to move in and pay a pittance in taxes for a few years before reselling. Baltimore has done this in the past, its current iteration of the program being a "Vacants to Value" subsidy. They want for these people the means to fix them.and people with the means to fix them being unable to buy and fix because the current resident won't leave.
In my highly sleep deprived state this morning it occurred to me that one reason such programs are not super effective is because there is not enough initial momentum. I won't want to put effort into a blighted house if it was the only house being remodeled on the block but if I knew that the entire block was sold to people doing the same thing that would be a big difference. The city should run the sales like a kick starter where everyone needs to put 10-20k into a remodel account but the transaction doesn't occur till all the houses on the block are sold. Additionally the permits need to be streamlined to only the bare essentials, if that means going back to 1970-1980 building code then so be it. 80s construction was safe enough
Coordination is surely an issue. No one wants to make the first move because it's so risky. But surely the goal is dense, vibrant, dynamic neighborhoods. Being the first to move into a neighborhood or city that's blighted or vacant means a several year to lifelong commitment. That's a huge investment for an unassured thing. But one would have to conclude that it's absolutely necessary. That's why I light up at new experiments like these. Create some data. Start a discussion. Unfortunately, I know nothing about city building codes and what stands in the way as especially onerous regulation, so I can't speak to your point about construction in the 80s. That does sound like just a convenient cutoff point--as far back as we can go before we start insulating with asbestos. The 1980s don't strike me as an especially innovative time RE construction, but again, not my area of expertise.