by hilzoy
The subprime crisis in Cleveland (h/t Undiplomatic):
“All over Cleveland, lenders from across the country were pouring money into communities that not long before had complained about being redlined.
Much of that money, from National City and other banks, found its way to Slavic Village, the childhood home of Rep. Dennis J. Kucinich (D), which local officials call ground zero for the foreclosure crisis. For decades, the neighborhood, which abuts a steel mill in the city’s southeast, was a struggling working-class community with an aging population and few new residents. But Slavic Village underwent a dramatic change beginning in the late 1990s as the tide of mortgage money flooded the area with new homeowners, lifting prices to unprecedented heights. Thousands of the neighborhood’s small wooden homes turned over, with investors selling to new buyers at multiples of their purchase price, sometimes within months, and often after making only cosmetic repairs.
“The deals became toxic immediately,” said City Council member Anthony Brancatelli, who for 17 years headed the Slavic Village Development Corp. “What should have been $20,000 or $30,000 homes became $80,000 or $90,000 homes with toxic loans.”
The result has been a rush of foreclosures. The number of foreclosure sales in the five-square-mile neighborhood swelled from 114 in 2001 to 840 last year. In the first six months of this year, 316 Slavic Village properties have been through foreclosure, according to figures compiled by the development corporation.
The story has been repeated to varying degrees throughout Cleveland, and the result has been the virtual collapse of the city’s housing market. Livable homes can be had for as little as $6,000 or $7,000, while many others have tumbled into complete disrepair, leaving city officials in a desperate battle against the resultant blight. In Slavic Village alone, more than 50 arson fires have been set this year, while many of the vacant homes are ravaged by scavengers, looking to cash in on the copper wiring and plumbing and aluminum siding that they sell as scrap metal. It is a stunning decline that is sure to shrink the city’s property tax base for years to come.”
According to that article, “nearly 10 percent of the city’s properties have gone into foreclosure.” That’s staggering. I’m trying to imagine being someone whose home is in Slavic Village, who has worked hard, been responsible, and made all her mortgage payments, and who sees her property values plummet because of the burnt out and boarded up houses all around me. In particular, I’m trying to imagine my reaction to Alan Greenspan saying that he had “found a flaw” in his ideology, or to the news that “the bailout is now the hottest lobbying game in town.” Unfortunately, it’s unprintable.
And it’s not just homeowners, of course. Under the best of circumstances, many cities have tax problems. They have higher tax rates than the surrounding suburbs; as a result, people who can move to those suburbs do so; as a result, the city’s tax base shrinks, and it has to raise taxes some more; rinse and repeat. When nearly ten percent of homes go into foreclosure and property values fall drastically, that problem gets much, much worse. And it’s not as though people considerately stop committing crimes, going to school, or in some other way drawing on municipal services until the city’s budget problems are over. On the contrary: their needs go up at the precise time when cities cannot pay the bills.
We’re in for a world of hurt.
Cleveland’s been particularly messy, and a lot of it is due to fraud.
As you’ve mentioned in other posts, one of the main reasons government regulations are so lengthy is that someone will always try to game the system if they can. And the result of the laissez-faire attitude championed by (mostly) Republicans is now on display for all to see.
In China they execute people for crimes that threaten the social order. That’s what I propose for CEO compensation – a $0.17 .45 round in the back of the head, on their knees lined up all the way down Wall Street. And charge their families for the bullet.
Jim, if you’re not in direct violation of the posting rules here, you’re right at the edge. Please step back and take a deep breath.
All cities are in trouble for now. But having lived in Cleveland, I’m not shocked to hear they’re doing even worse than most right now. The local government never seemed to have any grasp on economics and development. Forex, the hot legislative initiative when I was there was a convention center, 5-10 years after most major cities had already built one and 3 years or so after even the mainstream press had figured out that convention centers do not generally attract enough touristry or industry to pay for themselves.
Crafty, that’s STILL the big initiative here, except the county commission found a way to pay for one by rooking the taxpayers without even asking their permission via a ballot issue. This after we already got rooked on a ballpark and a basketball arena and a football stadium and Tower City and the Galleria and . . .
Scavenging electical cables and copper plumbing- Welcome to Baghdad.
If I were from Iraq, I’d be pleased to hear that the the great USA is a looting target.
Freedom’s untidy- D.Rumsfeld
So is capitalism.
Sorry to hear it, Phil. And yes, tho Tower City is pleasant, it struck me as underused given the amount of $$ that obviously went into it.
I never figured out why they didn’t do more with the waterfront. The Lake is cold, but it does have a pretty beach, and you can do a lot with a boardwalk and a view.
I live in Cleveland, and Crafty’s point about the waterfront is spot on. In Chicago they have huge parks along the lake; in Cleveland there’s junk. Looking out my window right now I see a huge pile of salt, some rusted industrial equipment, an abandoned coast guard station, a vacant warehouse, etc.
The local government is completely incompetent. They’re corrupt too, but Chicago’s corrupt as well and it seems to work. I can deal with either corruption or incompetence, but not both.