The sight of excavators tearing down vacant buildings Cleveland buildings has become common in this foreclosure-ravaged city, where the housing crisis hit early and hard. But the story behind the recent wave of demolitions is novel — and cities around the country are taking notice.
A handful of the nation’s largest banks have begun giving away scores of properties that are abandoned or otherwise at risk of languishing indefinitely and further dragging down already depressed neighborhoods.
The banks have even been footing the bill for the demolitions — as much as $7,500 a pop. Four years into the housing crisis, the ongoing expense of upkeep and taxes, along with costly code violations and the price of marketing the properties, has saddled banks with a heavy burden. It often has become cheaper to knock down decaying homes no one wants.
The demolitions in some cases have paved the way for community gardens, church additions and parking lots. Even when the result is an empty lot, it can be one less pockmark. While some widespread demolitions could risk hollowing out the urban core of struggling cities such as Cleveland, advocates say that the homes being targeted are already unsalvageable and that the bulldozers are merely “burying the dead.”
The task of plowing under the homes rests with the Cuyahoga County Land Reutilization Corp., which grew out of a 2009 state law aimed at creating “land banks” with the power and money to acquire unwanted properties and put them to better use — or at least put them out of their misery.
The efforts have led other states to pursue similar laws to deal with their own foreclosure epidemics. New York passed a comparable measure this summer. Similar legislation is in the works in Georgia, Philadelphia and elsewhere.
Cleveland has found progress in the sliver of common ground between the land bank’s mission and the interest of financial firms, including some that helped fuel the housing crisis through risky loans and later botched paperwork in carrying out foreclosures across the country.
This collaboration was uncomfortable at first, said Gus Frangos, the Cuyahoga land bank’s president and one of the people behind the state law.
“Two years ago, when we started . . . it was difficult,” he said. “Everybody was guarded.”
After countless meetings, however, land bank officials and banking representatives shed their initial wariness of one another. Frangos made a simple pitch: We’re not here to point fingers. We’ll take your worst properties, the ones not worth keeping. Pony up for the demolition, and you’ll still come out ahead. Just don’t walk away from them.
Bank of America and Wells Fargo announced plans this summer to donate more than 100 properties to the land bank. J.P. Morgan Chase also has made regular donations, and several other banks have given sporadically. Fannie Mae, the massive mortgage finance company seized by the federal government three years ago, began donating properties early on and now hands over about 30 properties a month, Frangos said.
For those companies, the arrangement equals good public relations. But it also makes economic sense.
“It feels great that we’re able to help nonprofits, help neighborhoods, help families,” said Tyler Smith, an assistant vice president at Wells Fargo, which donated 300 properties nationwide last year and is on track for about 1,000 this year. “But we certainly have to have the piece that shows it makes business sense.”
The bank, which often services mortgages on behalf of other investors, knows what it costs daily to hold each foreclosure — the upkeep, the taxes, the broker’s commission, the potential for costly code violations.
“We can make the financial case to the investor that, ‘It’s in your best interest to donate this,’ ” Smith said.
Thanks in part to the steady stream of donations, Cuyahoga land bank officials expect to complete roughly 700 demolitions by the end of the year.
On a recent Tuesday, the excavators roared to life. On tap: Four empty homes and one decaying apartment building, some on foreclosure-riddled streets, others in leafy neighborhoods with tidy lawns.