HUD Grants $2Bil to Repair Nabes and Knock Down Homes

TEXT SIZE:

A A A

What's a city supposed to do when foreclosures tally into the thousands and streets are glutted with far more empty, falling-apart houses than people willing to live in them?

For a growing number of cities, a big part of the answer is: knock 'em down.

The U.S. Department of Housing and Urban Development has awarded $2 billion in grants in the second phase of its Neighborhood Stabilization Program, in which local governments and nonprofits had to compete to prove they had the worthiest plans for foreclosure recovery. But stabilization can take many forms, as the plans make clear.

In some areas, where plenty of people still need places to live and just can't afford it, the grants are being used to help families with modest incomes buy foreclosed homes cheaply. If you live in California – specifically L.A., Long Beach, Modesto or Orange or Alameda counties – and want to buy a foreclosed home, this could be a great opportunity. Same in Miami and some other parts of Florida where affordable housing is perpetually in short supply.

But in many cities, such as Chicago, Tucson, Milwaukee, Denver, Philadelphia and all across Ohio, the situation is dramatically different. Ohio, in particular, has a glut of deteriorating foreclosed homes and little demand. And that requires a different strategy.

Cuyahoga County, home to Cleveland, will be using its $40 million grant to fix up and resell 216 foreclosed or abandoned homes – and tear almost a thousand down. (About a hundred of those will be "deconstructed" so that their building materials can be reused elsewhere.) The city of Springfield will build 35 new homes, fix up and sell 33 foreclosures... and tear down 150 others. Dayton plans to tear down more than 1,600 empty houses. Hamilton County, where Cincinnati is located, is slated to demolish 84 more, Toledo 272, and Columbus 100 more.

Add another 360 tear-downs that Ohio promises to handle, and it adds up to 3,561 homes to be bulldozed on the federal dime. Only Michigan, whose grant will bankroll 2,500 demolitions, comes close.

Why all the wreckage? Simple math provides part of the answer. Ohio's cities have been losing population for years. Cleveland, for instance, has seen its population drop by half since 1960. Many urban homes and neighborhoods suffered further because they became ensnared in mortgage fraud schemes, in which conspirators bought and resold decrepit real estate to one another at insanely inflated prices in order to take out big mortgages and pocket the money. It was literally a shell game, and for years – well before the mortgage crisis hit the rest of the country – Ohio's cities ended up with empty houses, sometimes entire streets of them. In the worst-hit neighborhoods, mortgage servicers have been selling rickety houses once fraudulently appraised at $100,000 or more for less than $5,000, no questions asked, just to be rid of the headache.

Bad as that might sound, the scary thing is that the number of houses slated for demolition is dwarfed by the actual number that are standing there rotting, usually without any lender taking responsibility for the blight. Roughly one in ten homes in the city of Cleveland – more than 20,000 in all – are now vacant.