Rust Belt Cities Demolish Homes as Defaults Blight Neighborhoods

Cleveland’s population has been shrinking for 60 years as the city lost manufacturing jobs. Now, after more than 33,000 foreclosures since 2005, it’s demolishing hundreds of deserted, derelict homes.

An agency started last year to manage abandoned houses in Cuyahoga County, which includes Cleveland, plans to acquire as many as 1,000 properties next year, and tear down as many as 900 of them. The city of Cleveland may raze double that amount, according to Gus Frangos, president of Cuyahoga County Land Reutilization Corp.

“You really have to bury the dead right now,” Frangos said in a telephone interview. “You have to remove blight. It’s unfortunately on a grand scale.”

Cities and counties across the Rust Belt are ending up with abandoned properties under their control as owners stop paying taxes. In Cuyahoga County, a record 2,400 tax foreclosures may occur this year, said Chris Warren, Cleveland’s chief of regional development. The governments are choosing to tear down some buildings rather than sell them as residents move to the suburbs and steel, automotive and manufacturing jobs disappear.

“That decision reflects a perception of what the future is going to be,” said Nicolas Retsinas, director emeritus of the Joint Center for Housing Studies at Harvard University in Cambridge, Massachusetts. It’s “the phenomenon of the shrinking city,” he said.

Detroit Demolitions

In Detroit, like Cleveland, the population has dropped by more than half since 1950. The city is in the process of demolishing more than 3,000 houses, according to Dan Lijana, a spokesman for Mayor Dave Bing. The mayor, elected last year, has pledged to tear down 10,000 abandoned and dangerous homes in his first term, Lijana said in an e-mail.

Detroit has almost 51,000 properties for sale and may add more through this year’s tax foreclosure auction in Wayne County, where the city is located.

“These cities really have to take on the properties,” said Alan Mallach, a senior fellow at the Washington-based Brookings Institution. “If they’re going to be responsible stewards, they really don’t have a choice.”

Detroit, which has about 911,000 residents, plans to spend $14 million of $47 million from the first grant it was awarded in the federal Neighborhood Stabilization Program to get rid of vacant properties that breed blight. Detroit razed 12,600 homes in the decade before Bing took office, Lijana said.

Homes Being Razed

In Ohio, Cuyahoga County Land Reutilization Corp., also known as the Cuyahoga Land Bank, won a $41 million grant in a second round of funding from the federal government’s stabilization program. The land bank has budgeted about $6.3 million to demolish 605 houses in Cleveland and some of its suburbs, according to a report filed with the U.S. government.

“There’s just not nearly enough money to solve the devastation in these neighborhoods,” Frangos said.

A block on Kinsman Avenue near East 144th Street in the Mount Pleasant neighborhood of southeast Cleveland is pocked with boarded-up homes and empty lots where homes once stood. Nailed to one house, its front gutter dangling over the porch, is a piece of plywood spray-painted with “NO COPPER,” an attempt to keep metal scavengers away.

Another neighborhood bearing the plywood scars of foreclosure is Slavic Village, also southeast of downtown. On a residential side street off the main thoroughfare of Fleet Avenue, about every seventh home is boarded up.

Demolitions Scheduled

Cleveland is scheduled today to demolish 11602 Cromwell Ave. on the city’s east side, and 6530 Hosmer Ave., in the southeast part of the city, according to Andrea Taylor, a spokeswoman for Mayor Frank Jackson.

The Cleveland area’s foreclosure rate ranked in the top third of more than 200 U.S. metropolitan areas in the third quarter, according to Irvine, California-based RealtyTrac Inc.

“Foreclosures continue unabated,” Jim Rokakis, the treasurer for Cuyahoga County and a board member of the county land bank, said in a telephone interview. “It’s an ugly situation.”

Ohio’s seasonally adjusted unemployment rate was 10 percent in September, the latest month for which figures are available, higher than the national rate of 9.6 percent in October, according to the U.S. Bureau of Labor Statistics. Michigan’s was 13 percent. The Cleveland metropolitan area’s jobless rate, which isn’t seasonally adjusted, was 9.4 percent, and Detroit’s was 13.4 percent.

‘Seriously Distressed’

Cleveland has 7,000 “vacant and seriously distressed properties,” according to a report by Warren, the city’s chief of regional development. That’s down from 8,009 last year as the city rehabilitated and demolished homes.

Municipal groups teamed up to target 20 neighborhoods in several cities in the region as part of a revitalization program, according to an “action plan” the Cuyahoga County Land Bank filed with the U.S. Department of Housing and Urban Development. Neighborhoods in such suburbs as East Cleveland, Shaker Heights and South Euclid are among the targeted areas.

Dayton, Ohio, with a population of about 153,800, is also using money from the second round of federal grants to demolish properties and build new homes and apartment buildings for low- income families. In one neighborhood, the city is spending $1.55 million to buy 40 abandoned properties that will be torn down and replaced with homes for families earning less than 50 percent of the area’s median income.

Urban Agriculture

Cities also are encouraging urban agriculture through the planting of community gardens on vacant lots. In some cases, homes acquired by a municipality are rehabilitated and occupied again.

When buildings are demolished, the lots left behind may be cleaned for agriculture or the planting of gardens, or used for new construction. In the Cleveland area, multiple plots may be put together to allow for larger developments, which won’t go forward until demand for redevelopment emerges, according to Cuyahoga Land Bank.

Phoenix, which has the eighth-highest U.S. foreclosure rate, also received money from the federal government and plans to spend 3 percent of the first round on “clearance,” which includes cleaning up vacant lots and demolishing properties, according to government records.

For Sun Belt cities such as Phoenix, where there likely will be greater growth than in Cleveland and Detroit, the more practical strategy may be to hold on to homes until the real estate market recovers, said Terry Schwarz, director of Kent State University’s Cleveland Urban Design Collaborative in Cleveland.

“Depending on the property and climate, it may be possible to mothball the buildings,” Schwarz said.

Buying Foreclosed Homes

That’s what Phoenix is doing. The city of 1.6 million is buying foreclosed homes through the National Community Stabilization Trust, according to Kate Krietor, deputy director of neighborhood services for Phoenix. The Washington-based trust, sponsored by six nonprofit groups, helps local community- housing organizations buy foreclosed properties from lenders.

Phoenix-area home prices fell 52 percent in August from their peak in June 2006, according to data from the S&P/Case- Shiller home-price indexes. Farther east, values in and around Detroit dropped 44 percent from their 2005 record. Cleveland- area prices are down 13 percent from the peak four years ago.

Foreclosures are likely to continue in Cleveland as the economy struggles to rebound.

“It’s a dismal picture,” said Rokakis, the Cuyahoga county treasurer. “The only thing positive is this land bank and what we’re doing.”

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.

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