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Stabilizing Local Housing Markets in Cuyahoga County: Blight Elimination

Ten years removed from the housing crisis, local housing markets are still feeling the negative effects of the collapse. The share of foreclosed homes has declined from peak levels, but blight remains an obstacle to stabilizing local housing markets. Strategic interventions to eliminate blight balance demolition and rehabilitation of homes in order to promote housing market stability.

To aid efforts to address the problem of blight in neighborhoods, the United States Department of the Treasury allowed Hardest Hit Fund (HHF) dollars to be used for blight elimination. The HHF is a housing initiative started by President Obama in 2010 “as part of the Administration’s overall strategy for restoring stability to housing markets.” The HHF provides funding to enable states “to develop locally-tailored foreclosure prevention solutions in areas that have been hard hit by home price declines and high unemployment.” Originally, HHF dollars were used to keep people in their homes by providing mortgage payment assistance or principal reductions.

Of the 18 states receiving HHF dollars, so far only 7 have money allocated for official blight elimination programs. Ohio ranked number 2 on that list, behind Michigan, in terms of funding dollars awarded for blight elimination, at $238 million, or 31 percent of Ohio’s total HHF funding. According to the Ohio Housing Finance Agency (OHFA), the state agency in charge of distributing the funding, Ohio has used $65 million of its blight elimination allocation as of the first quarter of 2017. The remaining $173 million will have to be spent by the end of 2020 if the state doesn’t want to lose this funding.

In this recent round of funding, Ohio has the second most Hardest Hit Fund (HHF) dollars dedicated to blight elimination programs.

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But what is “blight,” exactly, and what does eliminating it actually entail?

According to the Department of Housing and Urban Development (HUD), a structure is blighted “when it exhibits objectively determinable signs of deterioration sufficient to constitute a threat to human health, safety, and public welfare.” Similarly, Ohio’s blight elimination program, the Neighborhood Initiative Program (NIP), describes blight as meeting several conditions, vacancy chief among them, that when “collectively considered, adversely affect surrounding or community property values.” In a significant number of cases, “blight elimination,” often intended to stabilize home values, means demolition. When demolition occurs, finding a productive reuse for the remaining land is a subsequent but equally key component of the neighborhood stabilization process.

In Cuyahoga County, diverse perspectives and opinions around the need for demolition have emerged, creating some debate regarding the extent to which demolition plays a role in restarting local real estate markets. While there is some common ground concerning the need for both demolition and rehabilitation to produce stable neighborhoods, the exact combination of the two strategies required to produce the best results is less clear. Moreover, the diversity in Cuyahoga County’s real estate markets requires pursuing tailored demolition–rehabilitation strategies to meet the needs of each local market.

Why Cuyahoga County?

According to the OHFA, the Cuyahoga Land Bank has been allocated $57.9 million for demolition for use by 2020. Cuyahoga County has the demolition program with the most funding, but its program isn’t the only one in Ohio. The Lucas County Land Bank and the Franklin County Land Bank were allocated $27.2 million and $20.8 million, respectively, and the remaining 41 land banks in Ohio each received between $0.5 million and $17.8 million for demolition.

Sean Thomas, executive director of the OHFA, says the Cuyahoga Land Bank, serving Cuyahoga County, the seat of which is Cleveland, is a prime candidate for demolition funds because of two things: the county’s shrinking tax base and overburdened city services and its potential for new development that can capitalize on revitalizing neighborhoods and demographic trends favoring urban lifestyles. What makes Cuyahoga County a prime candidate for demolition, though, also makes it a prime candidate to consider the rehabilitation of existing housing stock as an approach to neighborhood stabilization.

The decision-making process used to decide if a home gets demolished may vary slightly from land bank to land bank. Gus Frangos, president of the Cuyahoga County Land Reutilization Corporation, describes the process like this: Before deciding to move forward with a demolition, “land bank officials decide what is to be demolished by professionally inspecting and evaluating the condition of premises, the cost to rehabilitate, the market value, and the marketability of a property.”

A demolition decision made within a framework such as this one is essentially a function of the rehabilitation cost and market value of a property. In practice, higher market values in a neighborhood indicate that demolition may not be an option, whereas in a market in which the cost of rehabilitation exceeds the market value, demolition tends to be the outcome. While this seems like a straightforward process, it may have artificially created an “either/or” debate that pits demolition against rehabilitation when it comes to neighborhood stabilization. Rehabilitation is often more expensive than demolition, at least in terms of material and labor costs. Adding to the debate is that funding for home rehabilitation is limited because HHF dollars can’t be spent on these activities.

Demolition opinions abound

In Cuyahoga County, discussions comparing rehabilitation costs and housing market values have become quite common in community development and housing circles, and not everyone agrees on the best course of action. Collegial debates turn passionate when the conversation inevitably moves toward repurposing the money allocated for the demolition program into rehabilitation dollars.

How do counties and communities weigh the benefits of demolition—for some, a loss of history and neighborhood texture—against the benefits of preserving older housing stock? Jim Rokakis, vice president of the Western Reserve Land Conservancy, and Frank Ford, senior policy advisor for the Thriving Communities Institute at the Western Reserve Land Conservancy, counter that question with one of their own: “How and when can the market recover while the most blighted homes continue to send a message to current property owners that it makes no sense for them to invest in their homes?”

They instead suggest that we “reverse the looking glass.” Demolition isn’t only about removing some older housing stock; it’s also about preserving it. That is, they assert that removing the most-blighted homes in a neighborhood will ostensibly help to preserve the rest. And it’s in these already vulnerable neighborhoods, Rokakis and Ford argue, that much of the predatory and abusive lending that led to the housing crisis occurred. The fragile state of these neighborhoods should be considered as carefully as possible in demolition and preservation decisions in order not to inflict further harm onto those living there.

In many areas of Cuyahoga County, neighborhoods are densely built, and demolition of blighted properties allows for an increased range of growth possibilities. Sally Martin, housing manager for the City of South Euclid, acknowledges that demolition is “just one tool in the tool box,” but, she says, it’s “a crucial one.” She advocates for demolition done in context, not a vacuum: “It must be part of the overall plan for neighborhood stabilization.” She maintains that in South Euclid, “demolition has opened up a unique opportunity for new construction. In our almost fully built-out city, this option didn’t exist before we began demolishing distressed properties. It’s providing a housing option that wasn’t available before, and these parcels are moving quickly and improving neighborhood values dramatically.”

But there are others who warn of relying too heavily on demolition to restore neighborhood property values—or attempting to restore values while, in fact, destroying the very fabric of the neighborhoods themselves. Joel Ratner, president and chief executive officer of Cleveland Neighborhood Progress, notes his concern “that if we take down too much in some places, we will destroy the opportunity to restore markets.”

Ratner argues that we should take this opportunity to “rethink our neighborhoods,” and that includes fostering rehabilitation alongside demolition efforts. It’s one way to help save Cuyahoga County’s tax base. In relying too much on demolition, he suggests, “We’re really destroying our tax base and sending it to outlying counties. One of the ways not to do that is to make investments in our neighborhoods and rehab houses.”

Ratner concedes that it’s more expensive to rehabilitate a structure than to demolish it, but rehabilitation is an investment in a neighborhood, one that provides housing for residents and an opportunity to regain a sense of neighborhood cohesion. Demolition can also begin a nasty domino effect: “When you demolish a house, if it doesn’t restore the market, then the next empty house on that street, the next time someone dies or moves away, you’re going to need to demolish it, too. No one wants to live on a street with a bunch of abandoned houses, but nobody wants to live on a street where there’s a bunch of vacant lots, either. That’s not how people who have choices choose.” Instead, with rehabilitation, he says, “we’re looking for opportunities to restart markets”—to encourage neighborhood development—“and the best option is to restart a market.”

While there are differences in opinions and plans, restarting markets is something that sits near the top of nearly everyone’s wish list regarding these blighted communities.

Sum and substance: Stakeholders looking to restart local housing markets need to work with community members collaboratively to incorporate both demolition and rehabilitation in their plans to stabilize neighborhoods.

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