Housing

Ohio County Demolishes Homes to Remove Blight

A land bank knocks down foreclosed homes to stabilize Cleveland-area neighborhoods -- all at the lender’s expense.
by | November 2011
 

Years ago, when home foreclosures left properties neglected, cities would often pay to have them torn down. But as the number of foreclosures has grown to 5 million since 2008, cities have found it increasingly hard to keep up. Repossessed and abandoned, some of these once well-maintained homes in nice neighborhoods with well-kept lawns have given way to neglect and weeds. They sit vacant and vandalized, pulling down house values.

Before the housing crisis hit Cuyahoga County, home to Cleveland, the jurisdiction was already dealing with an abundance of vacant homes due to a declining population. When the economy slumped and foreclosed homes flooded the market, even more vacant houses piled up; lenders found they couldn’t unload them at any price. So they sat unoccupied, amassing thousands of dollars’ worth of code violations. To combat the blight, the Land Reutilization Corp., informally known as the Cuyahoga County Land Bank, was formed.

To start, the land bank offered lenders a simple deal: Pay to knock the houses down, and we’ll take the land off your hands. “If you take these pockmarks out, all of a sudden you stabilize the street a little bit,” Gus Frangos, head of the Cuyahoga County Land Bank, told National Public Radio.

And that’s exactly what the land bank has been doing since June 2009. “Part of our initial mission was to try to quell the tide of continual flipping and intervene by acquiring large numbers of low-value properties to knock down,” says land bank Chief Operating Officer William Whitney.

The first major agreement the land bank signed was at the end of 2009 with Fannie Mae, which pays the land bank about $200 for each property appraised at $25,000 or less, as well as $3,500 per unit toward demolition costs. Fannie Mae offloads an average of 30 properties per month to the land bank, as does the U.S. Department of Housing and Urban Development (HUD), which pays $100 for each property appraised at less than $20,000 and a share of the closing costs. It doesn’t, however, contribute toward demolition, simply because the law doesn’t require it. But if the land bank didn’t take these properties and demo them, Whitney says, HUD would sell them to investors, many of whom are flippers. Ultimately, they do very little or nothing to improve the properties and then sell them to someone else. “They can simply go back into foreclosure in the next year or two, and the cycle repeats itself,” he says.

Once a home is demolished, the vacant property remains in the land bank’s possession -- unless an adjacent homeowner wants to purchase the property, or a community group wants to buy the vacant lot to build a garden, water swell or urban forest, among other things.

Not all homes are demolished, however. When Fannie Mae or HUD sends over a list of properties, the land bank does a “quick and dirty” site visit to check for historical designations, and to make sure they’re unoccupied and that they’re freestanding structures rather than part of a five-unit row house or townhouse. If the property is worth saving, the land bank renovates and sells it.

“I’ve been in community development for 35 years,” Whitney says, “and up until this housing crisis, you always worked hard to save any house that you could -- particularly affordable housing. That’s just not the case anymore.”

The demolition or rehabilitation of more than 60 homes per month keeps surrounding home values from declining and the neighborhoods themselves from appearing rundown. But unfortunately, the land bank can’t undertake every foreclosure that is requested of it. “In Cleveland, there is such an overabundance of slum properties [that] a lot of people want to give us their property -- but we have to start being selective,” Whitney says, adding that in addition to the high costs of demolition, localities are left with figuring out what to do with the vacant land.

Still, the program’s success has led to its expansion. New legislation was passed in 2010 that allows any county in Ohio to form a land bank, which is essentially a nonprofit. Overseen by a board that consists mainly of elected officials, the bank gets part of its funding from the late fees and interest payments collected on delinquent taxes. Former Cuyahoga County Treasurer James Rokakis, the man behind the bank’s establishment, now works in a technical assistance program to help other counties set up land banks.

Lenders in particular are looking at starting similar programs in Chicago, Detroit and Milwaukee, according to NPR. But the Cuyahoga County Land Bank isn’t the first of its kind -- it is patterned after the Genesee County Land Bank, which is based in Flint, Mich. “Flint was hard-hit long before the foreclosure crisis because it was so dependent on the automotive industry,” Whitney says.

Since its inception in 2002, the Genesee County Land Bank has played an active role in stabilizing neighborhoods and revitalizing Flint and surrounding areas. It encourages reuse of the more than 4,000 residential, commercial and industrial properties that it has acquired through the tax foreclosure process.

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