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How Demolition Came to Mean Stabilization

Yesterday's lead story on 60 Minutes was about vacancy and abandonment in Cleveland. This is an issue that hits close to home for me.

I started studying the problem in 2008. Back then the pressing question was how to target HUD money to strategically knock down blighted houses. The amount of money that HUD had to distribute wasn't nearly enough to take down all the vacant and abandoned houses, so using it wisely was key, and it still is.

I want to emphasize that even though 60 minutes may have opened a lot of eyes to demolition in Cleveland, it's not something that's new. The idea of knocking down houses as the means to saving neighborhoods may seem counter-intuitive, but it's been the prevailing strategy for several years now. Detroit has been following a similar strategy as well.



I do want to add something to the 60 Minutes analysis - a piece of the story that I don't always feel gets told. Foreclosures may have fueled vacancy in Cleveland, but foreclosure is not the only reason why it's such a big problem.

When homes go into foreclosure, they should get taken by banks and sold at auction for the price they're worth, allowing investors to pick them up and rehabilitate, or allowing new buyers to own a home for a price they can afford. But banks themselves are walking away from these homes, because they're literally worth zero dollars. When you look at it at the scale of the metro area, you realize that there is a big glut of housing supply on the market that's driving down prices across the board, and in these extreme cases, all the way down to zero.

Believe it or not, the house I lived in before I moved to DC went through foreclosure. In 2008, the bank holding the delinquent mortgage sold it for $23,500 to an owner who rehabbed it, and then sold it the following spring for $96,000 (these numbers are all public record, in case you were curious). This is what should happen in a healthy market. Foreclosure shouldn't necessarily mean vacancy, but too often in Cleveland, it does.

The Cleveland metro area is made up of the five counties around Cleveland - Cuyahoga, Lake, Geauga, Lorain and Medina. Between 2000 and 2010, two important but divergent trends emerged:
  • The population of the Cleveland metro area fell roughly 3 percent.
  • The number of housing units in the 4 counties excluding Cuyahoga grew more than 13 percent.
In other words, homes kept getting built between 2000 and 2010, even as people were fleeing the metro area. And most of these new houses were getting built in the suburban fringe counties. If you want to understand why there's an oversupply of housing in the Cleveland area, look no further than these counties.

The fact that there were more houses but fewer potential buyers created an imbalance. When houses started to go vacant, no potential buyers stepped up because there were no potential buyers out there. If there had been potential buyers, houses might have gone through the process that my former house did. Many instead became vacant, because folks looking to buy a house had plenty of areas to look, and the weakest neighborhoods were obviously the first to go rotten.

But there's more. Now that the bulldozers are starting to demolish houses and even entire blocks in the name of stabilization, it's creating a metro area where tons of vacant undeveloped land is being created in the urban core, while developers are simultaneously building on greenfields in the fringe counties. Slowly but surely, it's creating a "donut hole" that will make the entire metro area weaker.

Getting urban neighborhoods stabilized should rightly be the top priority, and Cleveland has decided that demolition is the best way to accomplish it. Unfortunately, years or sprawl and overbuilding, fueled by a foreclosure crisis, has created this reality. Further sprawl isn't going to make the situation on the ground any better.

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