A decade later, housing scars remain
Sharp line between wealth, poverty still evident after crisis.
A decade CLEVELAND, OHIO — after the 2008 financial crisis rocked Wall Street, scars of the Great Recession still mar residential streets across Cuyahoga County.
Even as aggregate, regional house prices inch closer to their pre-collapse highs, longtime homeowners and residents in low-income, largely minority communities are being left behind. The dividing lines between wealth and poverty, revitalization and wreckage are getting sharper.
That’s the message of a new report from the Western Reserve Land Conservancy, where senior policy adviser Frank Ford has been studying local housing-market trends for years. Using data from the Center on Urban Poverty and Community Development at Case Western Reserve University and other sources, Ford makes the case that there are two distinct housing markets.
One is bustling, a seller’s market that’s forcing bidding wars among buyers and, in some hot suburbs and city neighborhoods, driving prices far above asking rates.
In Cleveland, think of Tremont, Ohio City and Detroit Shoreway west of downtown, and University Circle to the east. In the suburbs, Bay Village, Rocky River and Lakewood are at the vanguard of the rebound.
The second housing market is struggling and, in some cases, gasping.
Across the county, East Cleveland and North Randall had the lowest median, or middle, sale prices last year, not even reaching $25,000 for a house, according to Ford’s analysis, which strips out the most distressed properties that sell at county sheriff’s auctions or pass to a bank or federal agency.
And based on the same metrics, median sale prices in 11 city neighborhoods last year were less than a third of what they were in 2005, when values peaked in many places.
“The foreclosure crisis caused different types of effects and consequences in different areas across the country,” said Matthew Rossman, a CWRU law professor who has studied the fallout from the housing collapse and who is familiar with Ford’s work. “It caused some housing submarkets to bend — and others to break.”
Or, as Ford puts it, “the foreclosure crisis cannot be deemed ‘over’ in Cuyahoga County while significant portions of the county continue to be burdened with residual impact.”
Cleveland became a national poster child for the housing bubble and bust 10 years ago, though it certainly wasn’t the only American city to be called “ground zero” for the foreclosure crisis by global media outlets. Now local and national experts say the ensuing real estate upturn has left this city — and its peers — with deepening disparities, by geography, income and race.
“There’s a continuum, and Cleveland is probably far over to one side of it. But Cleveland is not unique,” said Alan Mallach, an author, city planner and a senior fellow at the Center for Community Progress, a national nonprofit group focused on fighting vacancy and blight.
He cited Pittsburgh, Indianapolis and St. Louis as other examples of cities where thriving neighborhoods are the exception rather than the rule. Travel just a short distance from a major medical center, university or downtown, and it’s not hard to find communities mired in poverty and abandonment. In other areas, once-steady real estate markets remain dysfunctional.
This, despite national declarations that the housing market has fully recovered – to the point, even, that some economists have fretted that another bubble is forming.
Ford’s report largely focuses on lingering challenges that buck that national narrative.
He suggests a few remedies, including speedier, targeted demolition to clear out the most decrepit houses, many of them in East Cleveland and eastern Cleveland neighborhoods such as Glenville, St. Clair-Superior and Union-Miles.
He also urges private-sector advocates and local governments to encourage banks to make more loans for home purchases and repairs, particularly in markets where prices are low but buyers still struggle to get mortgages and lose out to investors who can pay cash.
Rossman has advocated for a special tax write-off, available at the time of sale, for homeowners who watched their equity dissolve during the recession. He also suggested that Congress consider reducing popular homeowner subsidies, such as deductions for mortgage interest and property taxes that largely benefit wealthier consumers, and shifting some of that money to support housing investment in lower-income areas.
But between the level of distress in some markets, older homes that demand constant attention and changing demographics — more single-person householders and fewer families — there’s no guarantee that every corner of the market will recuperate.
“The question is, is there enough demand out there to save all the neighborhoods that are struggling? And is it going to be necessary for people to figure out where to put limited resources? Because, ultimately, you can only change the trajectory of a neighborhood to the extent that there’s demand for a neighborhood,” said Mallach, who is scheduled to speak Wednesday at Cleveland State University about his new book, “The Divided City: Poverty and Prosperity in Urban America.”
Amid the bleak statistics, Ford does highlight a few bright spots.
Mortgage foreclosures, which touched homes in the poorest parts of the city and the toniest suburbs alike, are nearing their pre-bubble lows in Cuyahoga County.
And he commended Cuyahoga County Treasurer Chris Murray and Prosecutor Michael O’Malley for their push over the past two years to fight property-tax delinquencies, collaborate with housing advocates, work with homeowners and curb sales of tax debt to private investors.
Despite those efforts, the county’s overall delinquent-tax bill has been climbing, hitting $227.5 million late last year and raising the specter of more foreclosures. Tax-foreclosure filings also are rising, though most of them involve vacant homes that ultimately land in the Cuyahoga Land Bank for rehab and sale or demolition.
It’s too early to say what impact the recent countywide reappraisal, which came up with substantial value increases in some markets, will have on homeowners’ ability to pay their bills.
The data Ford analyzed show that property owners who are already behind are heavily concentrated on the east side of Cleveland and in close-lying suburbs. Those communities are the ones IS with most of the long-running delinquencies — situations in which the arrears go back at least three years.
That’s important, Ford notes, because homes with long-term delinquencies are more likely to be neglected. In turn, those properties are more likely to hamper nearby home values, hurt neighbors and become bigger taxpayer burdens if government has to step in.
Ford spends little time examining city neighborhoods and suburbs where the housing market is working, including pockets where spikes in sales, prices and investment are causing worries about waning affordability and displacement of existing, lower-income residents.
But Mike Cosgrove, executive director at Neighborhood Housing Services of Greater Cleveland, said he’s frequently pulled into discussions about both ends of the spectrum.
“I’m in groups where people are talking about this issue of how do you get housing values up in an area. And then I’m in other groups where we’re talking about how do we ensure that housing remains affordable,” said Cosgrove, a former community development director for the city of Cleveland. “It is odd to be in the same city having quite different conversations.”
That bifurcation is most evident in a comparison of communities east and west of the Cuyahoga River. But wide variations in home values and conditions aren’t just visible from one neighborhood to the next. It’s not hard to find stark differences within just a few blocks.
Take Glenville, for example, north of University Circle. In a neighborhood that began in the late 1800s as a resort community for wellheeled Clevelanders, century-old homes within two blocks of each other have recently sold for as little as $9,700 and as much as $300,000.
Neighborhoods like Glenville, whose residents are 97 percent black, were hit harder by predatory lending and foreclosures than predominantly white communities. In similar markets across the country, the financial crisis and rising blight drove middle-class black families out to suburbs with cheap housing and better schools. Mallach has found that the remaining pool of homebuyers is small, due to limited lending and the tendency of non-black buyers to shy away.
“People will build a brand new home next to a vacant home on the West Side and live there like it’s no problem,” said Khrys Shefton, director of real estate development for Famicos Foundation, a nonprofit community-development group that works in Glenville. “They are far less likely to do that on the East Side.”
Aging homes, vacancy and lack of funds for home repair and renovation projects all are problems, she said. But Shefton believes perceptions — negative assumptions tied to race, made worse by ceaseless and sometimes sensational media coverage of crime — are the chief barriers to healing the housing market in the area.
“That’s a bigger problem,” she said. “That’s beyond numbers.”
In his report, Ford frequently references race, pointing out a staggering loss of stability and household wealth in majority black communities that weren’t faring much differently than largely white communities before the crash.
That inequity won’t change without intervention, by policymakers, housing advocates, financial institutions, philanthropists and residents.
“So much of it depends on the choices we make,” Rossman said. “If we just let things operate as they will, I think those neighborhoods will continue to suffer. If we make wise decisions, if we allocate our resources ... carefully and strategically, I think the potential for some of our neighborhoods to really turn around is there. It’s part of the reason that I really like working in Cleveland. There are people who really care about these issues.”