August 18, 2012 [Olivera Perkins, The Plain Dealer]
Gus Frangos is president and general counsel of the Cuyahoga County Land Reutilization Corp., more commonly called the Cuyahoga Land Bank. Many believe it is a county agency.
In fact, it is a nonprofit community improvement corp., which he describes as a “marriage between good government powers and the flexibilities and powers of a corporation.” Like government, it can do nuisance abatement, including demolition. Like a business, it engages in redevelopment, including rehabbing and selling properties.
Working with former County Treasurer Jim Rokakis, Frangos wrote the legislation that enabled counties to establish land banks to help manage the deluge of vacant and abandoned properties resulting from the foreclosure crisis.
Creating the land bank took several years, with Frangos taking the lead in writing two state bills essential to its formation. The first streamlined the foreclosure process, allowing the land bank to acquire properties more quickly. The second created the land bank structure.
Since its founding in 2009, about 15 land banks have launched in Ohio, including those in Lucas and Hamilton counties.
Would “down to the last detail” be an apt description for the research you did in forming the land bank?
I literally had to go to every agency involved in the foreclosure process — the treasurer, the sheriff, etc. — and really get down to the level of the orders of sales the clerk was doing to the way the sheriff types up legal descriptions to the way the prosecutor orders the title report. I not only studied every statute [relating to the foreclosure process] but every single line of every statute.
You don’t want to write a piece of legislation that is beautiful on paper but it doesn’t work for that clerk or manager.
Most of the land bank’s annual budget of $7 million to $10 million comes from penalty and interest collected on delinquent real estate taxes. You are slated to receive nearly $24 million for demolition from national foreclosure settlement funds and government matches. How will this change things?
We now have 22 employees but will probably ramp that up by at least another four. We’ll need to demo 2,000 to 3,000 homes in a couple of years.
Demolition does more than just remove blight.
When we knocked down 60 properties, including 24 apartment buildings, in East Cleveland, people were wondering: “Why are you doing that?” The answer is that those properties were condemned; they were stripped and had negative value. All of a sudden, the cleaned-up area created 7 acres of clean, developable land — 500 to 600 feet away from the Cleveland Clinic. That property, and everything around it, has been advanced.
Cites are trying to assemble bigger tracts over time, and that is a good thing. Now you can make it useful to the sewer district, for example, for above-ground water retention. You can make a 1-, 2- or 3-acre community garden.
Better to assemble them for the future than waiting until you need them and end up being held hostage by the owner. As painful as it is to have to hold these lots and cut the lawns, there is a long-term benefit.
Describe your program that gives, or sells at low-cost, houses to social services groups.
What excites me is the ability to take our brick and mortar mission and integrate it with social service agencies that have housing as a component of their missions. For example, the disabilities community has a social service mission that helps serve people’s basic life needs, which also includes housing. The land bank has housing.
So I am not just fixing a house — doing the brick and mortar thing — but I’m actually impacting somebody’s life. And so the same thing for providing housing for veterans. The same thing with the refugees. We have an initiative in which fathers who were incarcerated, but now are on a good path, learn how to fix homes. We end up selling the houses and recouping our money. It is a win-win situation.
I wake up every morning and say, “We’re not just doing brick and mortar. We’re doing something that is changing people’s lives.”
You sell houses to rehabbers for $2,000 to $15,000? Seems like an invitation to flippers.
The deed and escrow program only sells to private owners and private rehabbers under certain conditions. We develop the specs for how the property should be rehabbed. We don’t want people who just slap a coat of paint on the property then try to resell it. We developed this system called “the eye” that checks to determine whether that person has been involved in a chain of flippers, if they have been chronically tax delinquent or chronically in housing court. If you agree to the specs, we’ll sell you the property for say $5,000. But first you must pull the permits, close the permits out, and then we will deliver you the deed. This way I am still controlling it.
What are the challenges of running a land bank in a depressed real estate market?
Since 2009, we’ve taken in about 2,177 properties as of July 31. We have 1,350 in our inventory now.
This is the challenge: I’m not going to get 1,350 rehabbers. I don’t have 1,350 urban gardens. I don’t have 1,350 businesses that need of them.
Still, we have made progress. We developed a system that not only takes these properties through tax foreclosure quickly but gets them to an entity that has the tools to begin managing that chaos — that is, to demolish the ones that are bad and enlist the private sector to help rehab, on an incentivized basis, the ones that are good. We made groundbreaking agreement with Fannie Mae and the U.S. Department of Housing and Urban Development to take their low-value assets. They were in the business of taking these low-value properties and throwing them back on the market, and selling them to anybody who would buy them, and that was highly destabilizing
I do want this enterprise to get into true economic development, such as assisting on projects by performing environmental reviews and property transactions — all things we are really good at here. But we first must stabilize the market. We can’t do that unless we stop the hemorrhaging.