I've used my Saturday morning Open Threads to recount how my family arrived in Cleveland in 2010 looking for one of the $1 houses that were advertised in places like Cleveland and Detroit in the immediate wake of the '08 Crash. After a year of looking and dealing with foreclosure sales and Community Development Corporations (CDCs), we ended up buying a lot with two abandoned houses on it that had not been lived in for years. We now find ourselves in a mostly rehabbed house in a neighborhood close to downtown but surrounded on nearly all sides by still-abandoned houses.

Does what we as a community do with abandoned houses matter? Why not hire some buildozers, knock these old houses down and let the Invisible Hand take over to build new, energy efficient housing?

That's been done in a lot of areas in Cleveland. Down around the hungry maw for land that is the Cleveland Clinic, entire old Hough neighborhoods have been replaced by gleaming medical towers and new townhouses for Clinic workers. The foreclosure crisis hastened the process for Fairfax, a poor neighborhood south of the Clinic. Put "Cleveland Clinic" in Google, flip to satellite view and look around the area south of Cedar Ave. These large empty areas will soon be filled with new medical buildings housing doctors' offices, health industry companies, nursing homes, etc.

All that demolition and new construction has a big impact on the environment:

According to new research by construction blog Bimhow, the construction sector contributes to 23% of air pollution, 50% of the climatic change, 40% of drinking water pollution, and 50% of landfill wastes. In separate research by the US Green Building Council (USGBC), the construction industry accounts for 40% of worldwide energy usage.

Old buildings can be made more energy efficient, and even if they end up being less efficient than new construction, it takes many years before new construction catches up to rehabbing because of the high impact of the construction process.

Last week, I pointed out with anecdotal evidence in our neighborhood how houses become vacant. There's usually a foreclosure and a slumlord involved. How do foreclosed, empty houses get new ownership and occupants? In our area, here are the possibilities:

1) They're purchased at a foreclosure sale.

Cuyahoga County runs weekly foreclosure sales. In the early days as the housing bubble was popping, this was a good place to pick up a house. The banks were acting as banks always have and were dumping houses that had been foreclosed. There were so many houses going through foreclosure sales that some attracted no bids. The banks, that had already taken title to these properties, offered them directly for sale, many for $1.

That all changed with TARP. The banks did two things: they quit taking title to foreclosed properties, leaving those homes in limbo indefinitely, and they always bid the amount owed at foreclosure sales, pricing out bidders because the houses were not worth nearly as much as what was owed on them.

The various federal guarantors like Fannie Mae did the same. We had found a house on the west side that we liked and bid a reasonable amount at a foreclosure sale in 2011, but Fannie Mae bid the debt which was 5 times what we bid and 2 times what the house was worth even after it was rehabbed.

Another thing changed in that time period. The banks and Fannie Mae couldn't sit on these foreclosed and abandoned houses forever. Sales were restructured to allow big investors to purchase thousands of houses at a time. While this process has slowed, it has put a large part of the housing stock in many Crash-impacted cities in the hands of a few investors who have been rehabbing but who have also been using their market power to raise rents as gjohnsit has been reporting to us.

2) They're purchased through a Land Bank.

To take advantage of funds available in the '09 stimulus package, states passed laws creating regional land banks that could centralize and oversee the process of dealing with foreclosed, abandoned houses.

The primary goal of our Cuyahoga Land Bank is not by any means to facilitate abandoned houses coming into the hands of new owner-occupiers who will rehab them and live in them. Instead, the Land Bank is there to enable re-development by assembling small residential parcels into larger tracts amenable to development. Secondarily, the Land Bank has taken over the demolition responsibility from the hard-pressed city government along with rehabbing a few houses themselves for re-sale.

The Land Bank does have a program for buyers who want to rehab the house themselves, but only a few houses are involved. and the requirements are so onerous that it would require a large construction loan to complete them and obtain the deed.

3) They're purchased from a CDC.

Our land bank distributes a few houses to local CDCs. Some of these are rehabbed and sold through the CDC. Others are offered for rehab in a way similar to the Land Bank's rehab program.

4) They're purchased from a private re-purchaser.

That's how we got our houses. A man and his son regularly bought tax foreclosure parties in bulk though not the massive numbers of the institutional investors. They thought they could resell our houses to the nearby technical institute, and when that didn't work out, they wanted to dump it quickly.

Millions of families who had been living in homes they owned lost their houses in the Crash. The government stepped into the housing market in a massive way, but putting these families back into houses they owned was not a priority in any way. Instead, federal, state and local policies have largely worked to turn the Crash to the advantage of big investors who saw the drop in home ownership rates as an opportunity to corner the rental market and pump up prices. Governments and their non-profit affiliates have also used the devastating impact of foreclosure on neighborhoods like Fairfax to reshape land ownership patterns to favor large institutions like Cleveland Clinic and big developers who want large parcels for their developments.

The few, small programs aimed at owner-occupiers are not much more than an afterthought, and their unrealistic rehab requirements and timetables price out everyone other than potential gentrifiers with access to bank loans and contractors.

Next week, I'll offer an alternative vision for these neighborhoods that could address those millions of families who lost their homes and revitalize these neighborhoods without gentrification.

Today's Saturday morning meditation music is "Embryonic Journey" first found on Jefferson Airplane's "Surrealistic Pillow" album. The Airplane's lead guitarist, Jorma Kaukonen, also of Hot Tuna with bassist Jack Cassady, plays it at JA's Rock Hall of Fame induction in 1996. Kaukonen lives in Ohio and still plays gigs up here in Cleveland on a regular basis.
[video:https://youtu.be/LbcMa3is-vw]