Cleveland poised to move forward with plans to demolish blighted buildings, but will $15 million be enough?: Stimulus Watch

CLEVELAND, Ohio — Cleveland City Council could soon approve $15 million to demolish blighted properties with the goal of revitalizing neighborhoods.

The idea is to use a relatively small chunk of the city’s $512 million in American Rescue Plan Act money to destroy abandoned and condemned buildings that take up valuable real estate and drag down property value.

Proponents say the demolition projects are a perfect use for ARPA money, because they can transform neighborhoods in one fell swoop, without recurring expenses, such as those of other projects that require maintenance and a sustained workforce.

On Monday, a Cleveland City Council committee is set to consider the demolition expenses. If the proposal passes committee, the legislation will come before the full council Monday evening.

The city is home to roughly 3,900 blighted buildings, according to a 2021 analysis by Frank Ford, senior policy advisor at the Western Reserve Land Conservancy’s Thriving Communities Institute. Ford concluded the estimated demolition cost for all of those structures would be $78 million.

While Cleveland seeks to demolish many of its blighted properties, the city is hesitant to destroy all of them. For some, the city would rather invest in improvements.

“There are approximately 800 condemned units, and we are trying to take down the worst first,” Cleveland spokeswoman Marie Zickefoose said in an email. “We are also putting together a strategy related to saving as many of these parcels as we can, given the dire need for affordable housing units.”

Long-term strategy

The city hasn’t arrived at a comprehensive demolition strategy just yet. Since Ford’s analysis, Cleveland has continued demolishing houses, while also planning to conduct another survey this summer. Meanwhile, it’s unclear what percentage of Cleveland’s blighted houses are salvageable.

Nevertheless, the $15 million in ARPA money – dollars that must be contracted before 2025 and spent before 2027 – is more than enough to get started, so city officials aren’t worried about those details just yet, Zickefoose said.

“We have enough backlog that we can address with these funds while we also work on the survey and other plans/programming are coming together,” Zickefoose said.

But even in the short-term, it’s hard to say how far the $15 million in ARPA money would stretch, Sally Martin, the city’s director of building and housing, said at a Tuesday City Council committee meeting.

That’s because while single-family home demolitions cost roughly $10,000 a piece, the city is still figuring out how much of the ARPA money to spend on far more expensive commercial or industrial sites, Martin said. When the city demolished the Victoreen Building on the city’s East side in 2019, for example, the estimated cost was $800,000, a quarter of which was asbestos removal.

Blight

The push to demolish blighted properties is nothing new. Between 2006 and 2018, Cleveland spent $72 million demolishing 9,700 abandoned or blighted structures, according to an archived news release. During the Frank Jackson administration, one of the justifications for demolition was creating safer routes for children to walk to school.

While the city has made significant progress toward removing blighted properties, there are always some that must be razed, as the aging housing stock continues to fall into disrepair.

“It’s not like you’ll knock down those three (thousand) and you’ll never have an abandoned home again,” said Gus Frangos, president of the Cuyahoga Land Bank. “There’s always an amount that’s going to be there, but the point is, as a practical matter, you want to make sure you manage it.”

Frangos says it’s obvious $15 million won’t be enough to fully address the city’s problem with blight. He agrees there are probably 3,000 residential properties in Cleveland that require demolition, in addition to the more expensive commercial and industrial properties that have been languishing in the queue.

Cleveland is hoping the Cuyahoga Land Bank, which acquires run-down properties and either sells, renovates or demolishes them, can aid with the city’s backlog of more than 300 demolition-ready residential properties, Martin said.

To that end, the land bank has applied for a $9 million grant through the Ohio Department of Development to expand its services, said Kim Kimlin, the land bank’s director of Community Stabilization.

Rehab

Of the estimated $78 million needed to address the totality of Cleveland’s blight, per Frank Ford’s analysis, $40.2 million is for major projects – commercial buildings, four-plus family homes. The remaining $37.8 million is for smaller homes built to house one, two or three families.

But Martin says demolition isn’t the answer in all cases, and just because a house is in poor condition, or even condemned, doesn’t mean it needs to be torn down. During the committee meeting, Martin told a story of a city resident who moved into a condemned house, made $20,000 in repairs and asked the city for support. For residents who choose to renovate condemned housing, the city can send an inspector to see if the house is no longer deserving of condemnation. Removing that distinction allows the homeowner to apply for housing grants or loans, Martin said.

The city should be less hasty about condemning properties, Martin said, and should consider those alternative uses that allow residents a chance to make investments and establish generational wealth.

However, it can be difficult to get potential homeowners to consider investments in the East side of Cleveland, where despite the seller’s market, property values are worth less than they were 20 years ago.

East side homes reached their peak median value in 2005: $80,000, according to Ford’s analysis. In the late 2000s, the housing market crashed, driving down home prices throughout the region and beyond. Since then, every region in the county, except for the city and the East side, has exceeded its previous high in median home value.

On the East side, median home values are increasing, but reached only $45,000 in 2021, according to Ford’s analysis. With that math at play, sometimes it makes sense to start fresh, Ford said.

“When you demolish a house for $10,000, you lose that, but when you put $70,000-$80,000 into a house and sell it for $40,000, you lose more,” Ford said.

As officials strategically target neighborhoods for improvement and improve home values, the theoretical success of the program raises concerns about gentrification — the movement of wealthier people into a lower income area and displacement of its residents.

There are safeguards cities and land banks can use to prevent newly cleared lots from leading to gentrification, such as controlling tax abatements and restricting how quickly lots are sold, Frangos said. However, many of these areas, especially on Cleveland’s East side, are in such dire need of investment, the area can’t afford to turn away investors, he said.

“There are some neighborhoods where you’re desperate to get people to come in and build,” Frangos said. “So if you’re in East Cleveland, I wouldn’t worry about gentrification. I’d worry about stabilizing a market.”

The high concentration of blighted and abandoned homes in predominantly Black neighborhoods on the East side of Cleveland, also presents a socioeconomic issue, Ford said.

“It’s a tragedy that the African-American homeowners in eastern Cleveland should be stuck,” Ford said. “The East side of Cleveland is still held back by a significant amount of blight.”

However, there is hope, Ford said. His analysis of property values on the East side shows “a direct line” between increasing home values and the number of blighted properties that have been demolished. While the city has razed thousands of blighted homes since the foreclosure crisis ravaged Cleveland neighborhoods in the mid-to-late 2000s, the city is still trailing a lingering problem.

But with the flood of millions in ARPA dollars, that money could be just the solution.

“This is a one-time opportunity to complete this unfinished task,” Ford said.