Cleveland’s Dilemma: Rehab or Demo

Cleveland   Every month in Cleveland, the Vacant & Abandoned Property Action Council, convenes. All the seats around the giant meeting room of the Neighborhood Housing Services were filled with rows of chairs surrounding them, packed as well. Sandwiches and cookies were available, but this was not a group of people who were there for the lunch choices. This was a who’s who assemblage of people from the city, county, Federal Reserve, legal offices, community developers, neighborhood organizations, and nonprofits of all shapes and sizes who had an interest in what was happening to property in Cleveland from soup to nuts.

I was honored to be invited to talk about the ACORN Home Savers Campaign, because the group was discussing various proposals for action on land contracts at the local level in places like Youngstown as well as amendments for legislation proposed in Columbus to reform the existing laws. The “Bad Apples” Committee that was looking into rouge real estate operators had changed its name to the Investors Committee, and their work was exhaustive.

All of that was good stuff, but the most interesting pieces of the puzzle that were beginning to fall in place for me, as I listened to the back and forth in the meeting to the discussion, was the interchange between committee members and a member of the county council’s staff on the budget issues involving demolition funds for dilapidated housing. There was a $9 million dollar item, ostensibly for demolition on the 2019 budget line, but some the group wanted to know if that could be spent in 2018, and if so could they tap into another source lying in reserve if they exhausted that allocation. The spokesperson for the County, trying to navigate his way through the questions, assured them that the number was a placeholder and was a 2-year number for expenditure in both years, but was also clear that the council was increasingly looking at the issue, which meant feeling the pressure, to use a pile of the money for rehabilitation of houses as well.

Talking to organizers in the neighborhoods, this was an issue as well with them leaning increasingly towards rehab at this point. Reading the reports from the Thriving Communities Institute provided the background data became clearer for me. Of the existing vacant housing stock of more than 15,000 houses, recent reports by Frank Ford, their senior analyst, put the number that could be rehabbed at over 8000 with the other roughly 7000needing to be demolished. Other reports by the Institute made the case more dramatically that they believed that demolition was the first order of business in saving a neighborhood with rehab following behind, based on their analysis of what moved property values and tax revenues. Not to put too sharp a point on the debate, but their argument was protect the demo money for demo, and go raise other money for renovation. I should add, “if you can.”

Perhaps they are right on the numbers, but it’s easy to understand from the politicians perspective and the neighborhood-based organizations that are dealing with residents every day, asking them to wait to see progress on their own homes, where getting loans for rehab is almost impossible statistically, for some hope in the future by and by, while they watch – and wait – as more houses are reduced to rubble, creating more vacant lots, is not a winner unless some realistic balance is achieved ASAP.

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Seems No End to Some Rent-to-Own Contracts

New Orleans   As the teams of ACORN Home Savers Campaign student volunteers came in from the field on Sunday afternoon with their reports on the families they visited who were under various housing contracts in Memphis, the stories were stirring and profound. Having been greenhorns on Saturday, now many of them spoke in the language of veterans about their experiences. The campaign had learned from their first day and made the maps tighter and pruned the list, while the teams had buckled down better on the reporting and their own efficiency. We were on a learning curve and making progress. As one canvasser told me, “I wish Sunday had been our long day, and Saturday had been the short one,” as she spoke about the qualitative difference of what she had been able to bring to the work. Skepticism and student sassiness had been replaced with seriousness in the pursuit, as the teams were able to talk to more families and feel both the promise and the pain of their situations.

One of the most harrowing stories was told me by a woman who had asked me the most challenging questions in the first day’s briefing. They had visited a young, 25-year old woman with some children, about their same age. She was in a contract with the local Memphis company, Affordable Property Management. She was paying $700 per month on the contract for a house priced in the range of $70,000 from what they heard. She was reasonably happy with the contract. The kick in the gut came when they heard the term of the contract for her to finally receive the deed. It was fifty-two (52) years. Yes, 52 years! Were she ever to complete the contract, and it’s hard to believe that she will, she would be 77 years old! We didn’t see the contract, but one can imagine for 52 years that the interest rate and other provisions must be incredible. We’ll be speaking to her again soon! The canvasser when leaving turned to me and said, “We may have started out wrong yesterday, but we’re best friends now, Wade.” That’s the story of organizing once boots are on the ground and fists hit the door.

The first thought many would have is that, hey, mortgages are for 30-years. Right, but this isn’t a mortgage. It’s a contract, and contracts can go for 99 years or be in perpetuity for that matter. Even mortgages are not time limited. During the financial crisis, many big league banks in the US tried to modify mortgages by extending the terms to 35, 38 or 40 years. Sweden just reduced the maximum term of its mortgages to 105 years from 145 years. Japan and the UK in their housing affordability crises have extended terms as well.

Many families wanted to convert to conventional mortgages. They were positive about coming to a meeting in early January to push their companies for better deals and a clear path to ownership.

My own visits produced the same range of experiences. One family with Christmas decorations all over the house had been under lease contract for 5 years and desperately wanted to convert. In another case the house seemed abandoned. Windows were boarded and the screen door was tied to the front door. When I knocked, I could hear children inside. There was no answer. They may have been told to never open the door. At one door, I didn’t meet the owner, but tenants who were renting rooms from the lease option holder who was also renting the driveway for commercial trucks. They were the only house on the street, almost within shouting distance of the huge warehouse complex in north Memphis that seemed endless until I drove by the street corner and saw the swoosh known worldwide as the Nike emblem.

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