Tea Leaves in Cleveland

In January 1992, The New York Times Sunday Magazine ran a piece by Columbia's Nicholas Lemann, titled "The Myth of Community Development".  It was then - timed to provoke critical thinking about the Clinton Administration's vanilla urban policy of Empowerment Communities (EZ/EC) - a poignant evaluation of community development, and it asked hard questions.

Questions about the capacity of local organizations, the wisdom of economic development efforts in the hands of anemic CDCs.  Neither wholly right nor wrong, the piece put on the table a necessary skunk:  was it sensible to try to revitalize the inner city using the tools and thinking then at hand?

Sadly, the community development field largely ignored the piece, dismissed it, or otherwise resettled comfortably into our low-income housing tax credit barcaloungers and proceeded for the next 15 years to define the whole of community development as a production problem to be solved by a corps of community-based organizations, few with any real estate capacity whatsoever.

Thank goodness we have another chance.  Another opportunity to PAY ATTENTION.

In "All Boarded Up," Northwestern University professor Alex Kotlowitz details part of the foreclosure contagion in Cleveland.  In exquisite detail he outlines the contours of falling demand, loss of manufacturing jobs, bottom feeding reprobates, the simply stupid, the sadly unlucky, and the havoc many places have yet to feel in quite so harsh a way as it is now being lived in Cleveland and places like it.

Intentionally or not, the piece does so much more, and our field would do well to unpack the story a bit.

The conventional way to read this excellent piece is to try to think technically.  How could properties be bought and rehabbed in bulk?  Or bought and razed in ways that obtain an economy of scale.  What set of technical fixes could be designed?  This is surely necessary.  It is important to have systems - to build systems - to acquire and manage property.   The better way is think differently, mindful of key ingredients in the back story. Thankfully "All Boarded Up" roadmaps our work quite nicely.

In "All Boarded Up," Kotlowitz rightly notes that "vacant houses are not a new phenomenon to the city," [ravaged as it had already been by] "the closing of American steel mills."

This is our first breadcrumb.  Having lost jobs, and lost population, Cleveland was shrinking.  Like so many other places, it was losing people.  This is a reduction in demand.  Yet national and local urban policies treated this challenge as an affordable housing problem.  It treated the rapidly declining urban core as a revitalization problem solved by more housing, and not just more housing, but more subsidized housing.    The first valuable breadcrumb Kotlowitz provides is that our response then was wholly wrong:  a place in decline with excess product and exiting people does not need more of anything, certainly not more concentrated subsidy.  This raises the stakes considerably for anyone thinking critically about housing policy today, for it now squarely locates the burden on any actor using yesterday's tools to articulate how they could possibly work today and tomorrow when they have failed before?  I would argue any national body failing to make a good case for yesterday's tools and yesterday's justifications for those tools, is not helping.

The second breadcrumb has to do with national policy and dollars.  Specifically, what Kotlowitz described as $3.9B in "emergency funds for cities to acquire and rehab foreclosed properties" (otherwise known as the Housing and Economic Recovery Act), quickly became legislation permitting if not encouraging a range of practices counterproductive to neighborhood health.  What should have been legislation and funding to help rightsize (get smaller) markets became just one more flow of dollars to derascinated communities pushed by a cadre of the usual suspects upon a schizophrenic community development braintrust that hasn't been willing to sort out the affordable housing problems of strong markets from the challenges of distress in weak ones.

Third, Kotlowitz creatively reminds us that this is - by virtue of magnitude at least - an opportunity to reimagine the city, to, as he eloquently put it, "erase the obsolete."   But how?  The old way (the one that failed Cleveland long before Deutsche Bank and Countrywide ever invented the practice of toxic titling) will try to see those empty houses more as real estate to be developed or razed than work a community can come together to undertake, in much the same vein as the owner of Johnny's Beverage ‘kept watch over" over the property next door.  The old way (the one that gave us Sandtown Winchester and other developments like it) will try to find a 6th or 7th or 8th source of equity to finance tax credit apartments to house the homeless in new buildings constructed on cleared lands in Slavic Village, rather than clear and hold and rightsize on one hand, and infill affordable nearer to jobs on the other.  Erasing the obsolete, as Kotlowitz noted, is not necessarily just about removing properties lacking market value.  It may also be about removing outdated thinking.

Fourth, codes are ever the bastion of the uncreative in such situations.  When housing codes are the last refuge, it is a sign there is no market viability remaining, for codes are technical answers to what at heart is an adaptive problem of insufficient confidence.  Codes become critical in such cases as a means, not the solution; they become a tool for annulling the toxic marriages of bottom dwelling owners and distressed markets.

The essence of what's happening in such places is not that it is happening now, nor now at a faster clip and larger scale than ever before, but that at its core this problem is not new.  North Philadelphia has been struggling with tens of thousands of vacant properties for decades.  As has Baltimore, and Buffalo and Pittsburgh and Detroit and.....  The Cleveland story is important not for telling us we have a problem, but that the way we have been addressing this problem has not worked and is not going to work.  Tax credit housing, CBO/CDC-based real estate development, concentrated subsidy, market misidentification, housing where the jobs aren't.  These have been tried and have not worked.

Fortunately we have the seeds of a way out.  Housing production is not the goal; it is a means of rebuilding a market, provided it serves the market first and the affordability challenges second.  More and more elaborate housing codes are not the goal; they are a tool for stabilizing a market, provided they aim to send signals to investors that it can make sense to put dollars at risk.  Permanent subsidy is not the answer; gap financing is a tool that should have a definitive endpoint designed to make a clean handoff to an eventually unsubsidized private sector.

The assets in places like Slavic Village are the people who, with the right tools - which are not the same tools as those needed in West Baltimore or Stockton or Phoenix or Norfolk - can leverage their efforts to stem disinvestment one parcel at a time in strategic coordinated fashion.  Not every block in Cleveland, or even in Slavic Village will possess sufficient human capital for recovery; only some are capable of holding steady, and fewer still will revitalize in the true sense of the word.  So policy must convey the work of choosing which blocks.

Reimagining is a powerful enticement to Utopia; more appropriately it is the hard work of making hard choices. How hard?  In one community where I have worked in 2008, the market has 7,000 more homes than households, and it's possible to buy a house on a $8/hr job.  Yet the community development infrastructure there still thinks a low-income housing tax credit project makes good market sense.  I am not making this up and this is not a unique situation.

The silver lining in this mess may be a bit of a twist on Amory Lovins' oft-quoted view that "if it exists, it must be possible," meaning that we now have Cleveland, thanks to Mr. Kotlowitz, to both tell us what's coming, and remind us to think differently than we have in the past.