Knowing when to fold ’em

The Washington Post had a fascinating article yesterday about how banks are responding to one city’s foreclosure crisis:

Cleveland — The sight of excavators tearing down vacant 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.

This closely mirrors the approach that Youngstown, another Ohio city, has taken to their dwindling population:

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.”

However, unlike in Youngstown where that city is simply trying to shrink to a manageable size, the Cleveland demolitions are already leading to redevelopment:

The demolitions in some cases have paved the way for community gardens, church additions and parking lots.

For good or ill, this looks to be a growing trend for some time. The article notes that New York, Philadelphia, Georgia, and others have or soon will pass laws similar to the ones Cleveland used to authorize its land bank and teardowns. Unfortunately, there doesn’t seem to be any shortage of foreclosed property candidates:

At the end of August, the nation’s banks, along with Fannie Mae and Freddie Mac, had an inventory of more than 816,000 foreclosed properties on their books waiting for a buyer, according to RealtyTrac. An additional 800,000 are working their way through the foreclosure process.

H/t to the ABA Journal for the original link pointing me to the Post article.

The Chicago Tribune makes a case for land banks

A number of Rust Belt American cities have lost population in recent decades, including Chicago in the 2000s. A number of strategies have been proposed for what municipalities should do with the buildings and land that is no longer occupied. The Chicago Tribune makes a case for one solution: land banks.

By putting unwanted properties under centralized, local control, land banks fight urban blight. Instead of becoming an eyesore, safety hazard or worse, an abandoned home can be turned into a side lot for another home, or combined with other properties for green space or eventual development.

Municipalities have powers to clean up or knock down unmaintained properties — Chicago is among the best at it. But land banks can make the process more open, efficient and cost-effective…

Done right, land banks can enable cities to clear away unwanted structures and debris, giving the sites around them new life. Over time, parcels can be pieced together for optimal use. In St. Louis, Indianapolis and elsewhere, land banks have shown promise in dealing with properties nobody wants — a number certain to soar with so many homeowners behind on their mortgages.

When people leave and don’t come back, cities need to reorganize. Recent census figures show Detroit and Cleveland at 100-year population lows and falling. They can’t afford to stand pat and hope that somebody — anybody? — moves back in. Chicago lost 200,000 people in the last decade. In Flint, eventually, entire blocks will be cleared, enabling the city to consolidate services, save money and boost efficiency.

The article suggests that realtors are opposed to this in Illinois and this is holding back the legislative process. I wonder who is for or against this idea among the broader spectrum of political, business, and community leaders. I imagine there might be some others who might wonder at the ability of the city to manage all of this land. In this era of budget deficits, would this be expensive in Chicago in the short term? Additionally, the Tribune uses the term “urban blight,” a concept that might remind people of programs after World War II that allowed cities to wipe out affordable and/or ethnic neighborhoods.

The editorial cites a land bank in one other city: Flint, Michigan. Is Chicago in such trouble that it needs to use the same strategies as other Rust Belt cities that tend to draw more attention for population loss and vacant/abandoned/foreclosed properties? The editorial suggests foreclosures are a big problem in Chicago but I haven’t seen data that suggests the city has been hit that hard by foreclosures compared to a number of other places.