1. CUYAHOGA COUNTY HOUSING ISSUES IN THE SHADOW OF THE FORECLOSURE CRISIS Prepared for the Fair Lending and Vital Communities Conference Frank Ford Senior Policy Advisor Thriving Communities Institute June 27, 2014

2. Cuyahoga Median Home Prices 2000 – 2013 Residential 1-3 Family properties with no Sheriff Sale in the chain of title since 1995. Source: NEO CANDO at Case Western Reserve University

3. Foreclosure: down 47% from 2007 But still double the pre-crisis rate Foreclosure prevention counseling – if funded – is more cost effective than removing blight

4. Good News: Board of Revision Tax Foreclosure Is Up

5. Judicial Tax Foreclosures Are Down – Replaced By Sale of Tax Debt to Private Investors? 1,200 Aeon & Woods Cove Foreclosures in 2013

6. Tax Delinquency Is An Issue – But How We Address Delinquent Vacant Property Is A Concern Cuyahoga County $400Million + Approximate Tax Delinquency Vacant and Distressed Property $70 Million Send these to the County Land Bank – or Sell to low value investors at Sheriff Sales? Sell At Forfeiture Sales?

7. Emerging Problem: Condemned Property Being Sold by the County at State Forfeiture Auctions Properties currently listed by CWRU NEO CANDO as being on the State Forfeiture List 559 Cuyahoga County 364 City of Cleveland (subset) 99 Cleveland Condemned Structures Recent Forfeiture Sales 50+ Properties sold to Parcelnomics and Toledo Investment Team (related to Lime Deeds.Com)

8. Apparent Office Location for Lime Deeds

9. Address In Public Records for Parcelnomics and Lime Deeds - UPS store in a Strip Mall in Las Vegas

10. Harvard REO Investor Study – January 2014 Outcome By Investor Type The failure rate for properties acquired by out-of-state investors was double that for Ohio investors. Failure defined as: Vacant Condemned Demolished, or Tax Delinquent

11. Harvard REO Study - Outcome By Investor Type Properties acquired by large investors (100+ properties) were 5 times more likely to fail than those acquired by small investors. Properties acquired by non-profits, land banks or government were three times more likely to succeed than those acquired by small investors.

12. The Consequences Of Housing Market Decline

13. Shift of Tax Burden to Outer Suburbs Blighted property in distressed Cleveland neighborhoods and inner-ring suburbs has caused property owners in the rest of the county to pay a larger share of property tax. $45 Million in tax burden has shifted to other suburbs. Thomas and Gillespie. “The Cost of Vacancy - Everyone Pays”. Thriving Communities Institute (March 2014).

14. Foreclosures Are Down But They’ve Left Us With An Epidemic of Market-Crippling Blight Cleveland City SurveyOctober 2012 May 2013 October 2013 Distressed/Condemnable 6,9747,7618,011 Demolition Estimate $69,740,000$77,610,000$80,110,000 14 City of Cleveland Distressed Property Estimates

15. Blight and Vacancy Are Predominantly in Housing Markets With Weaker Sale Prices Cleveland Distressed Survey (August 2013) 6,669 (83%) Cleveland East Side 1,326 (17%) Cleveland West Side US Postal Vacancy (NST as of 6-26-14) 19,616 Cuyahoga 12,480 (64%) Cleve East Side and East Inner Suburbs 7,118 (36%) Cleve West Side, West and Outer Suburbs Low re-sale prices limit options for renovation.

16. TALE OF TWO HOUSES 2616 E. 114 th Street - New home built by Buckeye Area Development Corporation in 2004. Cost - $141,000. Appraised value in 2014 is $71,900. 2620 E. 114 th – foreclosed by Wells Fargo then sold to an investor who did nothing. Eventually condemned by the City of Cleveland.

17. Blight and Low Sale Prices Have Undermined Market-Based Solutions Low Sale Prices Have Made Traditional Renovation Approaches Unsustainable In Many Cleveland Neighborhoods Full “gut rehab” of home in 2006: no subsidy required. The same rehab in 2013: $50-80,000 subsidy required in distressed neighborhoods. 17

18. “We Can’t Demolish Our Way Out of This”

19. Rehab Analysis – Harvard Study Test Homes Code Only = Replace mechanicals and finishes only if code not met. E.g. 20 yr furnace stays if it works. No sidewall or attic insulation. No Green Standards.

20. A More Accurate Statement Would be “We Can’t Rehab Our Way Out of This”

21. In Depressed Markets, Rehab Requires More Subsidy Than Demolition. + Market Conditions Will Not Improve Until Blight Is Reduced. = Until Market Conditions Improve, Demolition Will Be A More Cost Effective Means of Blight Removal In Severely Distressed Sub-markets. Solutions Need To Factor In Market Reality And A Limited Supply of Subsidy

22. For further information contact Frank Ford, Senior Policy Advisor Thriving Communities Institute 2012 W. 25 th Street Cleveland, Ohio 44113 fford@wrlandconservancy.org