July 5, 2011 [PBS NewsHour]
GWEN IFILL: Next, taking desperate measures in Cleveland to deal with a massive foreclosure problem.
NewsHour economics correspondent Paul Solman has the story, part of his ongoing reporting on the housing crisis and Making Sense of financial news.
PAUL SOLMAN: In Cleveland, Ohio, someone’s former home — since foreclosure, though, it’s been stripped of anything you can sell, is not even worth the price of the wood left behind.
So, down it goes, an ever more common answer to the housing crisis: Clear the blight for alternative use. Foreclosures hit especially hard here, hit especially early, and quadrupled in a decade, making Cleveland a test case of the tear-it-down approach.
Cleveland alone hosts some 13,000 vacant homes, and the numbers keep piling up.
GUS FRANGOS, Cuyahoga Land Bank: In the next several years, it’s probably going to be about 20,000, 30,000 more like this in the county.
PAUL SOLMAN: Gus Frangos runs the county land bank, created to put property back to productive use. But, 80 percent of the time, that first means demolition, $7,500 to level a place this size.
GUS FRANGOS: Naturally, we don’t want to be just demolishing stuff forever, but before you can stabilize something, you have to stop the hemorrhaging. And so we have to bury the dead.
PAUL SOLMAN: Land bank crews will pulverize 700 properties this year, the city of Cleveland, 1,000, to save sinking neighborhoods by eliminating the eyesores and, where possible, to put that land to economic use.
FRANK FORD, Neighborhood Progress Inc.: Probably, we’re standing and looking at about seven or eight different lots where demolitions have occurred within probably 100 yards on either side.
PAUL SOLMAN: Frank Ford works at a housing nonprofit. Alongside the post-wrecking crew lots, abandoned brethren — a few foreclosures are being spiffed up, but that costs more than the backhoe.
FRANK FORD: If you spend, say, $140,000 to bring back a house, all new mechanical systems, you’re going to sell it for maybe $90,000-$95,000. Unfortunately, demolition is much more cost-effective, but we have to do it.
PAUL SOLMAN: Have to do it because once-decent neighborhoods are on the doorstep of doom, due to houses like this one, sitting idle for years.
Betty Ewing lives nearby.
What does it do to the neighborhood that this place is abandoned, or places like it?
BETTY EWING, Cleveland: Look at it. The siding is off. That brings in people tearing off the rest of the siding. There are squatters that live in these houses. When you have an eyesores like this, it just takes away from neighborhood. People don’t want to move into a neighborhood like this.
PAUL SOLMAN: On this block, 22 of 49 properties are abandoned.
SHAUN DORSEY, Cleveland: Abandos. Abandoned houses, we call them abandos.
PAUL SOLMAN: Abandoned houses that have been left to rot, says longtime resident Shaun Dorsey.
SHAUN DORSEY: This was a very beautiful neighborhood, very beautiful. It looked like a suburb. But now it don’t. Raggedy.
PAUL SOLMAN: This was Anita Gardner’s home in better times, the early ’70s.
ANITA GARDNER, Cleveland: When I first moved here, everybody was blue-collar workers. It was Ford, Chevy, Chrysler, G.M., the steel mills. And I worked at TRW Valve Division. So, everybody was blue-collar workers. There was a lot of money in this community, and everybody took care of their homes.
PAUL SOLMAN: Cleveland has been bleeding manufacturing jobs and people for years, shrinking from 900,000 in 1950 to less than 400,000 today. The new infusion of subprime lending seemed to offer hope, but made things way worse.
FRANK FORD: For 40-some years, we have had a slow process of out-migration, loss of jobs, loss of population. Think of that as like a river that’s slowly moving and you’re standing waist-deep. Then you get the tsunami of the foreclosures from subprime lending 10 years ago. And then the banks get title to the homes after the foreclosure, and you can see how they have taken care of them.
PAUL SOLMAN: Investment banks once owned about 70 percent of the blinkered buildings in Cleveland. But more and more, they’re off-loading them as basement bargains to buyers looking to flip them for a fast profit.
Deutsche Bank sold this house for $500 to a firm called XBY, LLC.
FRANK FORD: A company like this is going to put this on the Internet, hope that some unsuspecting person sees it on the Internet with maybe a flattering photograph from a different angle, and pays $1,000. And then they have made $500 on top of their $500 purchase from Deutsche Bank for doing virtually nothing.
PAUL SOLMAN: Is that now a viable business? You buy something like this for $500, put it on the Internet, and hope a sucker somewhere else in the world is going to take it off your hands at a higher price?
FRANK FORD: Yes. If they do a volume, they do 50 or 100, and they make, say, $400 or $500 per house, it is a viable business.
PAUL SOLMAN: Not much reason to invest in landscaping, even if the law demands basic upkeep.
MAN: The garages have had the tree on them for a year.
PAUL SOLMAN: Joe Ayers has never met the Hollywood investor who snapped up the scourge next door. According to City Councilman Tony Brancatelli, that’s common here in his Slavic Village district.
ANTHONY BRANCATELLI, Cleveland City Council: We have been getting investors from overseas who are buying properties on the Internet, and it’s been crazy because then we have to chase people down overseas. And in the meantime, these poor residents have to deal with the aftereffects of it.
PAUL SOLMAN: Local resident Farai Malianga met a German investor and asked:
FARAI MALIANGA, Cleveland: Can you come and cut your lawn? And he says, you know, “Nein.”
PAUL SOLMAN: At the Cleveland Housing Court, Judge Raymond Pianka fines owners who let their property go to seed.
RAYMOND PIANKA, Cleveland Housing Court: In December, we had to go on Skype and Skype a Coptic bishop in Cairo, Egypt, who had purchased property in Cleveland, Ohio. We get calls regularly from Israel, from the United Kingdom of people who have purchased properties in the after-market.
PAUL SOLMAN: Please do not tell me that the Coptic bishop in Egypt is a deadbeat when it comes to keeping up his property.
RAYMOND PIANKA: He pled no contest. He repaired the property. He was fined. And he is no longer in housing court.
PAUL SOLMAN: Foreign investors have been bottom-fishing for great deals, hoping the real estate market will stabilize.
Demolition is an alternative bet, that the city can be redeveloped in untraditional ways — on lots like this, organic food for local, perhaps regional consumption. Nine properties rotted here not long ago.
ANTHONY BRANCATELLI: We were able to clear the houses out and then create our community gardens. Folks come from different blocks, from different areas. They come here, they build their gardens. They are able to grow their produce. And folks can see pride in their community gardens.
PAUL SOLMAN: On another abandoned plot where four houses once teetered, a sparkling instance of inner-city repurposing in the rough Hough area, brainchild of Mansfield Frazier.
MANSFIELD FRAZIER, Cleveland: Yes. Why not?
PAUL SOLMAN: When I think of Hough, I think the riots of the early and middle ’60s.
MANSFIELD FRAZIER: Well, we prefer to call it a uprising. And the land that we occupy is just as valuable to us as Hunting Valley, where they raise horses. So, if I were to say Chateau Hunting Valley or Chateau Westlake, nobody would raise an eyebrow. You say Chateau Hough, and people do a double-take.
PAUL SOLMAN: OK, one vacant lot vineyard doesn’t a winery make. But it may be a demonstration of how to turn abandos throughout the inner city into new revenue sources.
MANSFIELD FRAZIER: It can show what can be done on an acre of land. I would like for my neighbors to buy into it, buying their own acre of land, grow the grapes. Then, I would buy the grapes and press them in my winery.
PAUL SOLMAN: And can you really grow grapes in Ohio?
MANSFIELD FRAZIER: Along Lake Erie, there are numerous vineyards. Most of them are about seven or eight miles inland from the lake. And you have to be near water. I’m less than two miles from the lake. So I think mine will do better than theirs when I — at the end of the day. But that’s yet to be determined. And if it’s not great wine, it might make great vinegar.
MANSFIELD FRAZIER: So I have got plan B.
PAUL SOLMAN: Wine or vinegar, in the end, Frazier’s hopefully hearty perennials symbolize Cleveland’s post-foreclosure philosophy: Anything’s better than this.
FRANK FORD: We have never found ourselves in this situation before with this magnitude of problem. Neighborhoods in Cleveland, at one time, maybe they might have 200 vacant houses, at most, even the worst. Now, were talking about neighborhoods with 1,000 vacant houses. So that magnitude requires a different strategy.
PAUL SOLMAN: A strategy that’s spreading to other cities plagued by foreclosure, wiped clean to start again from scratch.