“Fix it up, pay it up or give it up.” That’s how Frank Alexander explains how land banks work. Land banks are public authorities formed to raze or rehabilitate foreclosed properties
Alexander, a law professor at Emory University in Atlanta, wrote land bank legislation for Ohio as well as Georgia, Illinois, Michigan, Missouri and New York. He visited Lorain on Thursday to advise city officials on dealing with blighted properties. Alexander said he tries to simplify solutions to extensive problems like the foreclosure crisis because complexity turns people off.
“Most of us think of property taxes and multiple mortgages and abandoned property as not interesting and not important, but my whole message is we can’t afford to ignore it,” he said. “In the face of complexity, seek simplicity. In the face of simplicity, seek creativity.”
Nonetheless, Alexander acknowledges there are no simple or one-size-fits-all solutions to the crisis created by Wall Street bundling mortgages as part of complex debt repackaging that expanded and eventually burst the housing bubble. The ramifications were felt nationwide, but Lorain, where homeowners were already losing their homes as they lost their jobs due to deindustrialization, was hit particularly hard.
One of every 234 homes in Lorain was in foreclosure last month, according to Realty Trac, a website that tracks foreclosures. The rate is higher than the Lorain County rate of one of every 319 and significantly higher than the Ohio rate of one of every 508 or the national rate of one in every 666.
Factor in an understaffed city government — just three building inspectors for a city of 64,000— absentee landlords, bad tenants and banks reluctant to properly maintain foreclosed properties, and city officials have their work cut out for them.
To deal with the problem, Lorain County commissioners in May approved a county land bank with a $600,000 budget. It will be funded with 5 percent of the fines and interest levied on homes that have delinquent property taxes.
Alexander said a recent study by the Federal Reserve Bank of Cleveland showed that abandoned, foreclosed properties cause an average property value decline of 9.1 percent of all properties within 500 feet. On the flip side, he said there is an up to 30-to-1 return on every dollar spent on land bank demolitions.
In Flint, Mich., a city ravaged by the loss of auto manufacturing, Alexander helped create the Genesee County Land Bank in 2004. In its first year, the bank spent $3 million on demolitions. Within two years, Alexander said values of properties within 100 feet of demolished properties increased $113 million.
“Higher valuation resulted over time in increased tax revenue which exceeded the $3 million investment,” he said. “Simply taking on 10 percent of your inventory is a huge step forward. We find that every demolition that we do increases not just the adjoining property values, but results in the private market beginning to address the problem.”
Mayor Chase Ritenauer invited Alexander to Lorain — Alexander met with Cuyahoga County land bank officials in Cleveland before visiting Lorain — after hearing him lecture in April in Columbus.
“A lot of the things he had to say, and just his background, to me really lent itself to what Lorain is seeing and going through,” Ritenauer said.
Besides land banks, Alexander advised on code enforcement, point of sale ordinances and vacant property registries. Ritenauer hopes to create a registry by year’s end to increase accountability among property owners.
Registries, known as VPRs, require property owners, lessees or parties in control of vacant homes to pay annual registration fees and be responsible for keeping properties in good condition. Registries can also include escrow accounts, fines and the blocking of title transfers to ensure properties are brought up to code before sales occur.
However, Alexander cautions that registries only have leverage with owners who have properties worth more being rehabilitated than razed. He said registries must be tied to strict code enforcement.
Alexander cited improvements in the last 15 months in New Orleans where he helped advise city officials on developing data driven, streamlined code enforcement that relies on computer mapping and better coordination among city departments.
“Code enforcement really is the engine and the tires really are VPR,” he said. “Receivership action is another tool.”
Ritenauer, who said he expects to get future advice from Alexander, said Alexander praised the newly formed Lorain Nuisance Inspection Task Force comprised of four health inspectors and two building inspectors. Task force members make twice weekly code enforcement walks in Lorain’s most blighted neighborhoods.
Alexander said bad actors will get the message through code enforcement liens.
“Your mortgage interest is going to disappear daily if you don’t do something affirmative,” he said.
Alexander said it’s no coincidence that banks have been shedding inventory in response to stricter code enforcement and registries. He said this year banks have done more short sales — sales for less than what is owed on the mortgage — than they have in the last five years.
Alexander said the federal government could also help cities like Lorain. He testified before Congress in 2007 in favor of principle reductions at current market values to keep underwater owners in their homes.
Edward DeMarco, acting director of the Federal Finance Housing Agency, acknowledged in April that reductions could save taxpayers $1.7 billion on the 60 percent of mortgages controlled by Freddie Mac and Fannie Mae, the government financing agencies that back private lenders with taxpayer money. But DeMarco contends write downs could lead to costly “strategic defaults” by homeowners.
Alexander, 59, acknowledged Lorain is unlikely to get federal help, but said the city has a lot going for it despite daunting challenges. Driving from Cleveland, Alexander said he found the city “phenomenally beautiful” despite its blighted housing stock because of its location by the Black River and Lake Erie.
“Yes, you’ve got a weak economy. You don’t have retail, commercial (assets), but you’ve got so many assets here,” he said. “Coming in as an outsider, I had a false vision. So I’m so glad I came.”
Contact Evan Goodenow at 329-7129 or firstname.lastname@example.org