The Contradictions Embedded in East Cleveland

possible in Cleveland

Cleveland  In several meetings with community development and housing experts in Cleveland, they kept pointing us east. Not just to the east side of Cleveland which had historically housed the largest African-American communities in the city, but to the near suburb and separate city of East Cleveland, so with an organizer from ACORN Canada’s Ottawa office, we hit the doors for several hours while driving around the area to get the measure of the area.

According to census figures, East Cleveland is now about 94.5% African-American in a population that has dropped to less than 18,000 from almost 40,000 in 1970. The median household income is now $20,660 compared to almost $49,000 statewide in Ohio with a poverty rate over 42% compared to almost 16% statewide. The median home value is just shy of $37,000 with 65% renters and a general housing vacancy rate of over 37%. The school district regularly ranks as the lowest in the state of Ohio, and the city has been on the verge of bankruptcy for years, unable to pay police and fire personnel.

On the other hand it is hardly a mile from the expanding campus of Case Western University, museums, the botanical garden, and hospitals associated with the world-famous Cleveland Clinic. Part of the area was the Forest Hills estate of John D. Rockefeller who built the Standard Oil monopoly in Cleveland and lived here. Some of the houses and apartment complexes in the area are huge, both occupied and abandoned. There are case studies that argue that this contradiction was not just deindustrialization and white flight, but a more systematic result of governmental racial housing discrimination over years of the type brought to attention more recently in Richard Rothstein’s book, The Color of Law.

The Thriving Communities Institute has made East Cleveland a poster child. A $100 million fund diverted from the state of Ohio’s foreclosure relief money was earmarked for demolitions, but excluded multi-family dwellings. They argue that a 20-acre tract is hopeless and should be cleared for development and housing. The Institute, which supports land banks, chafes at criticism that it is only about demolitions, and claims that they rehab one house for every three they take down.

Driving through East Cleveland and visiting with families there, it was easier to see the demolitions, and in fact when looking for dumpsters which are the markers for rehab, we saw none. But, visiting with families, ACORN’s Home Savers Campaign was impressed with the enthusiasm that families had for the area, and their commitment to owning their homes, even though they were now on land contracts. Of five families, we met four who were African-American, one white, and one Hispanic. They weren’t running. They were hunkering down. Their repair projects were serious, but the gains were palpable in the large two-story houses with basements that they were trying to make their own.

The economics are brutal though, because for homes that most were contracting to buy for $25,000 or so, the Institute’s back-of-the-envelope figures spitballed at me in various meetings meant that $20,000 in repairs might only increase the value by $5000 in the home on the general sales market, hardly moving the needle on tax revenues and not offering much in collateral for bank loans. In a scary way, this is almost an argument for land contracts to implement rehabilitation, but in another way, it is also an argument for government to step in to create the long term fix that it helped create and that short term capitalist calculations are continuing to enforce.

demo in Cleveland

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Generation Rent Unable to Break the Grip of Unregulated Financing

UK rent signs

New Orleans  A headline in the papers claimed that the level of homeownership inched forward enough to hit the 2014 mark for the highest percentage since the 2008 Great Recession. Funny how a figure like that has so quickly become almost meaningless in this continuing period of housing shortage and soaring home prices in what seems an almost endless credit desert.

In Britain, we worked closely with an organization called Generation Rent. When I first heard the name of the group several years ago, it seemed strange to me, but it didn’t long in organizing all around the United Kingdom for me to get it. The notion of potential homeownership in the United Kingdom was virtually unthinkable for a whole generation of low and moderate income families, so their generation would be renting for sure. The United States seems to be knocking on the same housing door with our own generation rent these days.

A former Ohio-based tenant organizer, Spencer Wells, has come to the same conclusion in a recent column in Non-Profit Quarterly, saying,

There’s an emerging social movement in US cities that’s sometimes characterized as the Renter Nation. This movement brings together young urban renters, childless boomers choosing an urban lifestyle, and former homeowners who have been displaced into single-family rentals by the Great Recession. These “new renters” are adding fuel (and political power) to the struggle of low-income households in inner-city subsidized developments.

Renter Nation, Generation Rent, six of one, half-dozen of another, this speaks to the building housing crisis already holding much of the nation in its grip. The social movement isn’t here yet, as Wells says, but the demand is huge.

Squeezing renters even more is the inability to access conventional mortgage loans to move into homeownership. Admittedly, the housing market in New York City is sui generis, one of a kind, but a recent report by the Association for Neighborhood and Housing Development (ANHD) nails the growing power of non-bank lenders, unregulated by the Community Reinvestment Act:

…non-bank lenders are taking over an increasing portion of lending on 1-4 family homes, particularly to borrowers of color and low- and moderate-income (LMI) borrowers. Lenders in HMDA are categorized as banks, credit unions, and non-bank lenders, which are mortgage companies that do not take deposits from customers or businesses. We define non-bank lenders as non-depository lenders that are not owned by or affiliated with a bank or credit union.

 

  • In 2016, 30% of all home purchase loans were originated by non-bank lenders, up from 23% in 2012. The percentage of non-bank lenders was 50% for refinance loans in 2016, up from 23% in 2012.
  • Non-bank lenders made 30% of home purchase loans to LMI borrowers and 58% of refinance loans to LMI borrowers. They also accounted for 31% of home purchase loans and 61% of refinance loans in LMI neighborhoods.
  • 25% of home purchase loans to White borrowers were made by non-bank lenders versus 59% and 50% of the loans to Black and Hispanic borrows, respectively. Similar disparities appear for refinance loans.

Much of the disparities to LMI borrowers and borrowers of color relates to the higher concentration of Federal Housing Administration (FHA) loans to these populations and the decline in FHA lending by the largest banks. There certainly remain questions about qualified borrowers possibly being steered to FHA loans, which are more expensive than conventional loans. But, the overall concern this trend raises is that non-bank lenders are far less regulated than their bank-chartered peers, nor are they covered by the Community Reinvestment Act (CRA). In the run up to the 2007 economic crisis, the majority of dangerous sub-prime loans were made by non-bank lenders chasing relatively high rates of return for their investors and basing their businesses on relatively costly sources of capital.

Am I worried? Oh yeah, totally!

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Please enjoy

Buffy Sainte-Marie’s You Got to Run

Remington with Amy Jack’s Dallas till I Die

Wild Belle’s Hurricane

Thanks to KABF.

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