Here at The Property Advocate, we like sharing what's new in the community of housing and real estate owned property. Check out this article to gain a wider perspective concerning the demolition of abandoned and/or forced foreclosed homes.
By Maryjo Minarik
Inner ring suburbs across America are wrestling with declining property values, population losses, and vanishing jobs. The cumulative effect of these challenges is wreaking havoc on municipal budgets, and the city of Euclid no exception. Its population has fallen more than 12% since 1990, from a census of almost 55,000 to an estimated 48,139 as of 2013. Unemployment is estimated at 6.6%. Property values have declined an average of 25%, with some areas dropping as much as 40%. According to Case’s NEO CANDO, Euclid’s poverty rate rose from 9% in 2000 to 16% in 2010, and the number of children living in poverty has nearly doubled to almost 25%. Owner occupied housing dropped from 59.5% to 54%.
In December Mayor Bill Cervenik announced that 2014 income tax revenues were well below projections. He has estimated 2015 revenues to be around $38 million, but expenses to be above $39 million. Income tax revenue has dropped $2 million from $26 to $24 million. Approximately $1 million in local government funding from the State has been pulled over the last few years. The drop in property taxes has cost the city around $500,000 a year, forcing the city to forego much needed capital improvements for the second year in a row.
To staunch the bleeding, over the last year the administration turned its jail operations over to the county. It is in the process of moving its dispatch center to Chagrin Valley Dispatch and it is ending its self insurance program in favor of a county employee health plan. These actions are expected to result in a savings of several million dollars, but it’s not enough. To balance the budget as required by law, Cervenik is not filling open positions in Police, Fire and Housing and is laying off 2 firefighters.
These factors have led many to focus on the decline of Euclid’s housing stock and the city’s response.
The housing crisis may not be as acute a national problem as it once was, but it remains a big problem in Euclid. Vacancies through forced foreclosure or abandonment abound. The distressed home sale market has undercut arms length transactions. The 5% increase of rental property in the single-family home market coupled with the already high apartment and two family rentals contributes to a high transiency rate. Euclid Schools estimate the student transiency rate close to 38% — about 2,000 children a year. As owner-occupied homes shift increasingly to rental investments, the transiency rate rises and neighborhood destabilization accelerates.
In the last ten years, Euclid has lost over $1 million dollars in property value. All 17 census tracts are at risk, and HUD has scored 16 of them as “areas of greatest risk”.
In August 2011, CSU’s Levin College of Urban Affairs published a study, The Housing Crisis in Euclid, OH: Analysis and Outlook. Authors Brian Mikelbank and Eugene Basile examined arms-length sales and distressed sales. Arms- length sales are homes sold between two non-related par- ties, the typical buyer seller arrangement. After the hous- ing market’s initial bottom out, Euclid is beginning to see an uptick in median price in the arms-length market. Distressed sale prices though, are still falling and make up almost 75% of single-family homes sold. These sales erode both the city’s overall property value as well as homeowners’ confidence in the value of their own houses.
The pattern of decline was set years ago. In “The Complications of our Deteriorating Inner Ring Suburbs”, Daniel McGraw of the online Belt Magazine wrote on January 5th that part of the problem is Euclid’s aging housing stock:
“About 67 percent of the housing in Euclid was built between the end of WWII and 1959. Given the economy in Northeast Ohio, the market for such homes has basically vanished. Millennials looking for starter homes can find cheap houses in urban redevelopment areas like Ohio City or Gordon Square in Cleveland, or move further out to suburban Mentor or Solon and grab a better home for not too much more... Cheap starter homes as a bridge to a better one have little value.”
One way the city is attacking the distressed housing problem is through demolition. Since 2008 Euclid has received close to $4 million for demolition and rehab. Most of the funds have been used for residential demolition. As of February, the city has taken down over 150 blighted structures. In February the city applied for a $1 million demolition grant from the county. If approved 12 more homes and eight commercial establishments will be torn down.
Is Demolition Working?
Tyronne Ave. in the northwest quadrant is comprised of 56 lots. It is fairly typical of the streets between East 185 and East 200. Seven of the 56 lots (12%) are owned either by the City, the County or the banks. Eleven (20%) are investment owned. Five houses (10%) have been torn down and another is scheduled for demolition.
Numerous studies support the use of demolition in conjunction with strict housing code enforcement and long term planning. Thriving Communities Institute, a program of Western Reserve Land Conservancy studied the impact of demolition on home equity and mortgage foreclosure from 2009 to 2013. Their recently released report suggest “[there is] an available hedge in real estate equity from strategic and targeted demolition activity in relevant markets.”
Some members of city council are beginning to look at the impact of the current demolition program on city neighborhoods and overall Euclid’s property values.
Ward 6 Councilman Pat Delaney is concerned the city has no long-term plan for demolition. On two separate occasions he has publicly asked Development Director Jonathan Holody for the city’s plan. “What I would like to see is a little more effort in planning. We have to put more thought into how we approach these buildings, not just hey, city council you’ve got a list. There has to be some sort of criteria that we look at.”
Delaney is not necessarily opposed to demolition but is looking for evidence that the city has a viable overall plan. He thinks the process the city and county have gone through has “squandered a lot of opportunity and a lot of resources just in Euclid.”
Delaney’s requests have been met with silence from the Cervenik administration.
Ward 1 Councilwoman Stephana Caviness has concerns from a socioeconomic perspective. “There are many factors that have come into play to force the decline in property values through- out the nation. But when we look at Euclid specifically, I wouldn’t want to just look at those factors but also the effect that it is having on our families. Look at the change in the demographics in the past 10 years. This is not just seen as ethnicity but to look at the makeup of households, i.e. the increase in single-parent households, unemployment/ underemployments; the effects that this has on the children; how this social/economic change effects our schools and community.”
Possible Election Issue
Euclid’s has spent millions of dollars on its demolition program, and vacant lots now outnumber occupied dwellings on some city streets. Questions remain, however, whether the city’s policy is positively affecting the city’s tax base.
Euclid may have a unique opportunity to reinvent itself through smart planning and targeted demolition that restores Euclid’s tax base, while at the same time improving quality of life through principles of smart growth, place making and new urbanism. It will be interesting whether city residents, especially its property owners, will hold city officials and candidates accountable in this election year.