Spotlight on the Main Actors: How Land Banks and Community Development Corporations Stabilize and Revitalize Cleveland Neighborhoods in the Aftermath of the Foreclosure Crisis

Abstract

Cleveland, Ohio provides a useful case for examining and contrasting property transfer practices among certain key actors before, during, and after the foreclosure crisis. Transfers among key actors—Cleveland’s two land banks, the State of Ohio, Fannie Mae, investors, and community development corporations (CDCs)—differed considerably. This article empirically shows that inappropriate property transfer practices by financial institutions and speculator-type investors negatively impacted neighborhoods, compounding the damage brought on by the foreclosure crisis. By contrast, a case study of one of the hardest hit neighborhoods in Cleveland finds that the land banks and CDC are producing positive outcomes. A proactive land bank as a conduit and robust CDCs as a project promoter are an effective combination to cope with vacant and abandoned properties.

Keywords:

• Depopulation
• foreclosure
• land bank
• neighborhood deprivation
• vacant and abandoned properties

Acknowledgements

The author is grateful to the following persons who provided research data and comments to pursue this research: William Whitney, Chief Operating Officer, Cuyahoga County Land Reutilization Corporation; Michael Schramm, Director of IT and Research, Cuyahoga County Land Reutilization Corporation/Visiting Researcher, Case Western Reserve University; James Downing, Development Officer, City of Cleveland Land Bank (Department of Community Development, City of Cleveland); Robert N. Brown, Director, Cleveland City Planning Commission; Frank Ford, Senior Policy Advisor, Thriving Communities Institute; Rob Curry, Executive Director, the Cleveland Housing Network; Stacia M. Pugh, Housing Development Officer, Slavic Village Development; W. Dennis Keating, Professor, Cleveland State University. The author also thanks to André Sorensen, Professor, University of Toronto Scarborough, Alan Mallach, Senior Fellow, Center for Community Progress/non-resident Senior Fellow, Brookings Institution, and Steven J. Bass, Partner, Orion Partners Japan who gave invaluable feedback to earlier versions of this paper. Last but not least, the author acknowledges the constructive comments by two anonymous reviewers.

Notes

1. REO stands for real estate owned, a property typically owned by a lender after an unsuccessful sale at a mortgage foreclosure sale.

2. A personal contact with a person in charge of NEO CANDO system in May 2014.

3. Deutsche Bank and Wells Fargo Bank together occupy more than half of the total transaction volume in which the 21 financial institutions were involved in Cleveland during 2002–2013. Note that the names of the some securitizers did not appear as either a grantor or a grantee.

4. In the legal document by the City of Cleveland, securitizers are described as investment banking firms from Wall Street and elsewhere that actually provided the case used to make loans, regardless of the lender or broker nominally involved in the transactions.

5. Sometimes, these investors have funny or provocative names such as “Destiny Ventures” and “Go Invest Wisely.” The term “investors” in this article refers to nonprimary post-REO investors.

6. Two neighborhoods—Downtown and Industrial Valley—were excluded from the calculation. Downtown is not a typical residential neighborhood. Industrial Valley is primarily an industrial area with very low residential density (672 persons/square mile compared with 5,168 persons/square mile for Cleveland citywide in 2010). A moderate population increase in Industrial Valley resulted in 105.5% increase from 1990 to 2000, which is not suitable for comparison with other neighborhoods.

7. Henry J. Gomez, Northeast Ohio Media Group “Cleveland sues 21 banks over subprime mess.” The Plain Dealer, January 11, 2008. http://blog.cleveland.com/metro/2008/01/cleveland_sues_21_investment_b.html (accessed October 2, 2013).

8. Five servicers here are Ally/GMAC, Bank of America, Citigroup, Inc., J.P. Morgan Chase Co., and Wells Fargo & Company.

9. The Board of Revision (BOR) is a county agency to hear complaints and revise assessments of real property for taxation.

10. W. Dennis Keating, “Cuyahoga County Land Reutilization Corporation: The beginning, the present, and beyond 2009–2011.”

11. The Nolo Law for All webpage. http://www.nolo.com/legal-encyclopedia/zombie-foreclosures.html (accessed June 26, 2014)

12. Milker is explained as investors who buy properties in poor condition for very low prices and rent them out as it is with minimal maintenance (Mallach, 2014).

13. Data provided by the City of Cleveland Land Bank.

14. Public Financial Management, Inc., “City of Cleveland management & efficiency study.” November 2009.

15. The Cuyahoga County Land Reutilization Corporation, “Priorities and policies for property acquisition and disposition.” September 2009.

16. An interview with the Cuyahoga County Land Reutilization Corporation, October 2013.

17. Only Fairfax Renaissance Development Corporation, which serves neighborhoods of Fairfax, Central, and University, acquired more properties in 2002–2013 than Slavic Village Development. Burten, Bell, Carr Development, Inc., which serves neighborhoods of Kinsman, Central, and Fairfax, in fact acquired more properties than Fairfax Renaissance Development Corporation for the same period, but was excluded as an outlier because most of the acquisitions were vacant lots from CCLB.

18. Slavic Village Development 2014, “Neighbors Invest in Broadway: A Slavic Village renovation program.” A presentation file at the Ohio Land Bank Conference 2014, Columbus, Ohio, September 12, 2014.

19. Slavic Village Development 2014, “Neighbors Invest in Broadway: A Slavic Village renovation program.” A presentation file at the Ohio Land Bank Conference 2014, Columbus, Ohio, September 12, 2014.

20. Slavic Village Development 2014, “Neighbors Invest in Broadway: A Slavic Village renovation program.” A presentation file at the Ohio Land Bank Conference 2014, Columbus, Ohio, September 12, 2014.

21. Zip code 44105 where South Broadway sits had the foreclosure rate of one in every 356 property in January 2015. Zip code 44125 adjacent south to 44105 (the City of Garfield Heights) has the highest rate of one in every 236 in Cuyahoga County (Source: RealtyTrac).

22. Alex Kotlowitz, “All boarded up.” The New York Times, March 4, 2009.

23. http://www.nytimes.com/2009/03/08/magazine/08Foreclosure-t.html?pagewanted=all&_r=0 (accessed September 20, 2014). The Cuyahoga County Land Reutilization Corporation, “Cuyahoga County Land Reutilization Corporation acquisition criteria (revised July 2012).”

24. The Center for Community Progress, established in 2010 after merging the National Vacant Properties Campaign and the Genesee Institute, is the sole national nonprofit organization focusing on the issues of vacant and abandoned properties.

25. The website of Slavic Village Development. http://slavicvillage.org/aboutsvd (accessed March 2, 2015).