After 10 years and 8,000 demolitions, Cuyahoga Land Bank shifts focus to rehabs
Published by John on
CLEVELAND, Ohio — Chris Alvarado likes to joke that when he became executive director of Slavic Village Development, he thought the full name of the neighborhood was “Slavic Village: the Epicenter of the Foreclosure Crisis” because that is so often how people refer to the neighborhood.
“But it’s true,” Alvarado said. “We had the highest number of foreclosures of any zip code in the country, 44105, back in 2008, 2009.”
The neighborhood has come a long way since then. Housing sales are up. Home values are up, too, bringing a restoration of wealth to a predominantly African-American community that saw values plummet in the foreclosure crisis.
Alvarado credits much of this progress to his organization’s partnership with the Cuyahoga County Land Reutilization Corp., the land bank that formed 10 years ago this month in response to the foreclosure crisis. As it marks this anniversary, the land bank is evaluating the impact of its first decade in operation and preparing for its next chapter.
That impact, according to a recent study, is $1.43 billion, a figure that takes into account the organization’s role in restoring property values by demolishing and rehabilitating distressed structures, returning properties to Cuyahoga County’s tax rolls, and bolstering the local economy with the money it has spent and private-sector investments it has spurred.
The land bank’s biggest impact has come from the program that represents the bulk of its work to date: demolition of vacant and abandoned properties. But with demolition funds dwindling and significant progress made on tearing down the county’s most blighted properties, the organization is preparing to pivot, including expanding its roles in rehabilitation and both residential and commercial development.
Stopping the hemorrhaging
The county treasurer’s office had seen an uptick in foreclosures for several years in the mid-2000s. But by 2008, the county had a full-blown crisis on its hands.
“The properties were coming through tax foreclosure like a firehose — vacant and abandoned properties,” recalled Gus Frangos, land bank president and general counsel. At the time, he worked for then-county Treasurer Jim Rokakis. “What became very clear, especially in 2008, was, OK, now we need a responsible repository that can triage these properties and at least try to manage this chaos.”
Rokakis spearheaded the effort to create an organization that could work seamlessly with government agencies but that would have the teeth needed to operate speedily. Frangos helped write the legislation that created the land bank in 2009.
It was set up as a nonprofit entity that would act as the clearinghouse for vacant and abandoned properties, shepherding the properties through the foreclosure process and then putting them back to some kind of productive use. It would be supported by a reliable funding source: $7 million set aside each year from the penalties and interest on delinquent taxes the county collected, supplemented by government grants and the proceeds from properties it sold.
“The theory behind it was to have a nimble, transactional entity outside of government that was properly funded, that could try to stabilize the real-estate market,” Frangos said. “And back then, we could not really stabilize anything until we stopped the hemorrhaging.”
For much of the last decade, that meant the land bank’s primary objective was tearing down vacant, abandoned properties that were depressing real-estate values. Initially, there was some pushback from some who were concerned about such drastic changes to neighborhoods and who wanted to see more structures preserved, but ultimately stopping the bleeding became the first priority. By the end of this summer, it will have completed approximately 8,000 demolitions. It has been aided in this work by a $50 million demolition fund established by the county in 2014.
For many Cuyahoga County communities, the program was a lifeline. Community leaders in the city and suburbs alike say they benefited from the expertise of the land bank’s staff, relied on them to come up with plans to address thousands of problem properties and appreciated the land bank’s streamlined process.
“The land bank has really been our partner in recovering from the housing crisis in Northeast Ohio,” said Jennifer Kuzma, director of the First Suburbs Consortium, an advocacy group representing 18 Cleveland suburbs. “Without them, I don’t know what some of my cities would have done. They were able to come in and assist in a very capable and efficient way to make headway through the problem housing that many of my cities had in their stock following the foreclosure crisis of 2008.”
Cuyahoga County Council President Dan Brady points to the breadth of support the land bank has won over the years.
“I think it’s one of the most positive things we can point to in the last 10 years in the region, for economic development and what I call community development,” he said. “It’s been a remarkable achievement.”
Moving the needle
To quantify what its impact over the last 10 years has been, the land bank commissioned a study from Dynamo Metrics, a Michigan-based firm that uses data to evaluate public-sector investments. The land bank will share the results Wednesday at an event at Cleveland State University’s Maxine Goodman Levin College of Urban Affairs.
The analysis is based on a model built with data from Case Western Reserve’s Center on Urban Poverty and Development.
Dynamo calculated that CCLRC spent approximately $79 million on nearly 7,000 demolitions from 2009 to January 2019, breaking down to an average of $11,380 spent per unit. On average, each demolition resulted in nearly $60,000 in property value benefit to neighboring homes, or about $5.26 for every $1 spent on demolition. The total impact was $415.3 million.
On the property rehab side, the study puts the land bank’s spending at about $56.3 million over the same time period, or $26,535 per rehabilitation, on average. The total property value affected was $320.6 million, and on average a rehabilitation had an impact of $151,105 in restored property value, according to Dynamo’s analysis.
Additionally, the study attributes to the land bank $18.5 million in tax revenue generated by 11,500 distressed properties that were returned to the tax rolls since 2009; $305.5 million in economic impact from the land bank’s expenditures; and $57.3 million from the impact of private-sector rehabilitation expenditures spurred by the land bank.
Nigel Griswold, an economist and co-founder/CEO of Dynamo Metrics, also pointed to another highlight of his team’s findings. While previous research suggested that demolitions and rehabilitations in the county’s weakest markets did not affect neighboring property values, that is now changing. “This is the first study where there’s enough value in the weakest areas, where we’re starting to see an impact,” he said. “That alone is a huge needle moving for Cleveland and for Cuyahoga County.”
With the number of vacant and abandoned homes now at pre-2008 levels and county demolition dollars running out, the land bank is shifting its focus.
Frangos, the land bank’s president, detailed a long list of priorities and goals, including:
- An expanded role in home rehabilitation.
- Providing access to capital to low- and moderate-income people who are having trouble getting home loans or closing the gap between their loan and the home price.
- An expanded role helping local social-service organizations fulfill their housing needs.
- Land assembly for economic development projects.
- Building homes in areas where housing markets do not currently exist.
- Experimenting with development concepts such as container homes.
- Investing in catalytic, community-development-oriented projects.
- Expanding its role in real-estate development.
- Providing code enforcement services to local municipalities.
The move away from demolitions has some concerned, particularly because most of the remaining blighted properties are concentrated in East Side neighborhoods and suburbs.
“There are so many abandoned structures still sitting out there that are in need of demolition, and where’s the money going to come from?” said Ward 8 Cleveland City Councilman Mike Polensek, who represents North Shore Collinwood, Collinwood Village and part of Glenville. “Especially on the East Side, we’re going to be left with a major problem.”
The city has its own demolition program that will continue with its work, but Polensek expressed doubt about its capability to pick up the slack. “The Cuyahoga Land Bank has taken down more derelict structures than the city has, at least in my ward. To me, that says a whole lot about the city’s ability to take down structures.”
Others say that the worst-of-the-worst have already been torn down, and they are now comfortable turning their attention to structures that can be saved. Plus, the land bank will still have funds available for targeted demolitions — for example, it may tear down a blighted property near a home that is being rehabilitated.
Many of the land bank’s partners have also expressed a desire to see it expand its role in rehabilitation and development. The county, for example, approved a new six-year, $30 million housing program in which the land bank will take a leading role. The program, which starts in 2020, has three components: home renovation, which will have the land bank getting vacant properties up to code; homeowner assistance, for which the county is setting aside about $1 million a year for home loans and other forms of assistance; and a “Future Markets” initiative, which will focus on restoring and creating real-estate markets in areas that have not yet recovered from the foreclosure crisis.
The land bank is already starting this work, such as with a planned project to build six to eight homes behind the Greater Cleveland Fisher House in Glenville. “Right now there are no [comparable sales] there,” Frangos said. “Our job is to try to go into places where there is a difficult market and jump-start it.”
While the land bank has played a critical role in several large-scale economic development projects already, such as assembling the land required to convert the former Randall Park Mall into an Amazon fulfillment center, some see an opportunity for it to take on a larger role.
“There’s more opportunity on the horizon for the land bank to be involved in those commercial, economic development opportunities,” said Nate Kelly, Cushman & Wakefield/CRESCO managing director and a land bank board member. “Our clients that are here, or the ones that want to be here, need sites to expand. They’re not experts in site assembly or clearing title.”
But the land bank is.
“They’ve generated so much credibility in being able to identify development opportunities on the residential side,” Kelly added. “Expanding that further on the commercial side is a natural next step.”
Alvarado, too, would like the land bank’s help building new homes on vacant land in Slavic Village and revitalizing the neighborhood’s commercial district.
“Hopefully in the next couple of years, we’ll have several businesses that will have opened shop on property that came through the land bank,” he said.