In parts of Cleveland, people want to pay more than houses are worth | New
Chris Keeney and his wife Raisa Keeney have found their dream home in Cleveland’s Old Brooklyn neighborhood.
He was sitting on a block full of tall, old trees, with a tidy flower garden out front. The living room still had functional pocket doors.
The Keeneys made an offer and the seller agreed.
Then they went to a bank for a mortgage. The bank turned them down, saying their appraisal put the house worth less than the Keeneys were willing to pay.
“I was devastated,” said Chris Keeney. “It hurts because, frankly, I know this house is worth what we got. It’s probably even worth a little more than what we got.”
Despite the bank’s setback, they were lucky. The sellers have agreed to accept appraised value instead of the original offer.
“If they hadn’t retired and downsized to a smaller house, I don’t think we have this house that we love and adore,” Keeney said.
Chris Keeney, right, and his wife Raisa Keeney live in the Old Brooklyn neighborhood of Cleveland. [Chris and Raisa Keeney]
Stuck in the middle ‘
The problem of banks not lending what buyers and sellers think homes are worth is not new. In the 1950s and 1960s, the phenomenon was called redlining – racist lending practices which have created very segregated lifestyles which persist in many old towns in the country, including Cleveland.
But over the past two years, the city of Cleveland has dedicated a full-time staff member to work on the issue. And instead of looking at the city as a whole, Jason Powers’ strategy is to focus on the neighborhoods in the middle.
“The first question I asked myself when I walked into town hall was, ‘Where are they? What is the environment? “Said Powers, project manager of Cleveland Mid-Quarter Initiative and a resident of old Brooklyn himself.
He said he and his colleagues had come to define mid-range neighborhoods as neighborhoods that weren’t poor enough to qualify for federal aid programs like the Block grant for community development, but there were also no “hot markets” like Ohio City or University Circle, where private banks are keen to lend.
“This is really the biggest problem we start with,” Powers said. “If I wanted to call the Mid-Quarter Initiative something more specific, I would call it the Gap Initiative. How can we focus on the areas where there are gaps between the real values of these strong communities and the perceived value based on any number of things? “
Some gaps do occur, Powers said, because appraisers look at home sales that don’t really apply to the particular block someone wants to buy. Or they ignore how openly racist lending practices in the past have led to implicitly racist lending practices today.
In February, Powers presented his work at a city council budget hearing, indicating the neighborhoods qualified as “middle”. He also made recommendations on how to offer loans that recognize the true value of these neighborhoods.
While he received a lot of praise for his work, he also got a lot of loathing.
Cleveland City Council discussed the Midlands Initiative at an online meeting in February. [Cleveland City Council]
“What about Glenville? What about Hough?” asked Councilor Basheer Jones, referring to two mostly black neighborhoods on the east side of town. “I haven’t seen the majority of the East Side there.”
Councilor Jasmin Santana, who represents neighborhoods with a high concentration of Latinx residents on the southwest side, said she was concerned the program would favor new residents over existing residents.
“How to invest in the revitalization of neighborhoods with existing residents? I often hear that the only way to revitalize a neighborhood is to allow gentrification, which I don’t agree with, ”Santana said.
Collinwood councilor Mike Polensek criticized the lack of funding to support the proposals.
“I appreciate everything [Powers] did and I’m very impressed with it, ”said Polensek. But there must be meat on the bone. Where’s the beef? “
In Search of Baltimore
Since then, some funding has materialized in the form of a reserve fund of $ 1 million. This fund is intended to serve as a safety net for what Powers and his colleagues hope is a $ 10 million loan pool created by private banks.
Powers said he had verbal commitments from several banks to join the initiative. He expects an official announcement to arrive soon, with loans available in early 2022.
If this is correct, the loans will look a lot like those in Baltimore, which has a 17-year-old mid-neighborhood initiative which serves as a model for Cleveland.
“One of the solutions we have come up with is to provide a loan at 110% of the value of the property,” said Chuck Martin, vice president of M&T Bank, one of the banks involved in the Baltimore program. “So even if the appraisal is low, you can go up to 110 percent of that, which gives you more than enough to buy the property and make some improvements.”
In Baltimore, a mid-neighborhoods initiative offers bank loans of up to 110% of a property’s appraised value. [Baltimore Healthy Neighborhoods]
He said that so far, buyers haven’t ended up in over-indebtedness because community organizations have helped them prepare them to make improvements that will increase the value of their homes.
“And then if there is a situation where they fall behind, [the organizations] working with them on the back end to find a solution, ”Martin said.
The initiative, Martin said, stabilized population and property values in target neighborhoods.
Including and excluding
But what about that concern from Councilor Jones, who hasn’t seen much of the East Side included on the map of target areas in Cleveland?
Martin and Powers cited a study by the Lincoln Institute, a progressive think tank, which found that stabilizing mid-neighborhoods can stabilize cities as a whole by stopping the ‘domino effect’ of investments and incomes that increasingly shift outward, isolating low-income residents and preventing them from finding employment.
Still, Jones said he wasn’t convinced.
“It needs to be more inclusive of the whole city,” Jones said. “And when you include and exclude, what happens is what you see on the east side: you see you see an intentional exclusion of an entire community, primarily the black and brown community, primarily the east side of Cleveland.
Meanwhile, the problem of losing value communities and people isn’t just about the city anymore. A recent analysis from Cuyahoga County found that the inner suburbs are now losing population at a faster rate than the city.
Maple Heights Mayor Annette Blackwell is keen to see new loan programs in the inner suburbs she represents. [Annette Blackwell]
The suburbs are not part of the Cleveland program. But Maple Heights Mayor Annette Blackwell said that while she doesn’t have a “mid-neighborhoods initiative” per se, getting the banks to reconsider their policies is a big part of her job.
“We keep saying, ‘We need your help, we need your help. We need help with the down payments. We need to look at our credit policy, “” she said.
Specifically, Maple Heights – a suburb of the Inner Ring – is working with banks to develop purchase-rehabilitation loans for homes valued under $ 50,000.
As with the program in Cleveland, Blackwell is hoping that investments in low-value homes could stabilize housing in Maple Heights.