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CLEVELAND MIDDLE NEIGHBORHOODS

Strategies to stabilize CLEVELAND MIDDLE NEIGHBORHOODS Middle Neighborhoods Field Jason Powers, Project Director Cleveland Middle Neighborhoods Initiative

 Alan Mallach, Senior Fellow Center for Community Progress

 Paul Brophy, Principal Brophy & Reilly, LLC

 Charles Buki, Principal czb LLC

PARTNER/PEER CITIES:

Rochester, NY , MD Erie, PA , MI Buffalo, NY , IL Plano, TX Akron, OH , PA Des Moines, IA CLEVELAND MIDDLE NEIGHBORHOODS Presentation Agenda

. What is a Middle Neighborhood?

. What is a Middle Neighborhood in Cleveland?

. How do we identify a Middle Neighborhood?

. How do we stabilize and grow Middle Neighborhoods; develop policies?

CLEVELAND MIDDLE NEIGHBORHOODS Baseline Understandings & Strategies

• Public subsidy is scarce & subsidies alone cannot create a market

• We must create conditions for investment to occur and leverage that private investment

• In distressed markets, build from strength by investing near strong assets

CLEVELAND MIDDLE NEIGHBORHOODS Baseline Understandings & Strategies

• With limited resources we must concentrate efforts in places where we can see the greatest impact.

• The best decisions are based on the sound and objective analysis of quantitative and qualitative data

CLEVELAND MIDDLE NEIGHBORHOODS What is a Middle Neighborhood?

What is a Middle Neighborhood in Cleveland?

How do we identify a Middle Neighborhood?

How do we stabilize and grow Middle Neighborhoods?

CLEVELAND MIDDLE NEIGHBORHOODS What is a Middle Neighborhood?

“Not in deep distress, but not thriving either.” - Paul Brophy

“Middle neighborhoods are neighborhoods that have retained a respectable measure of both their physical and social fabric, are not or not yet areas of highly concentrated poverty or hyper vacancy, and where stabilization and gradual improvement remain realistic strategies.” CLEVELAND -Alan Mallach MIDDLE NEIGHBORHOODS Distressed Luxury Middle Neighborhoods Neighborhoods Neighborhoods

Market Inefficiencies, Federal Funding and Deteriorating Housing Private Capital & Programs Market Rate

CLEVELAND MIDDLE NEIGHBORHOODS Strong Market Declining Value Activity Minimal Investment Private Investment Redevelopment Equitable Strategies Needed Development Needed

Weak Demand, Limited Investment CLEVELAND Targeted Support can Spark Recovery MIDDLE NEIGHBORHOODS Defining “Neighborhoods”

CLEVELAND WARDS

CLEVELAND MIDDLE NEIGHBORHOODS Defining “Neighborhoods”

CLEVELAND CDCs

CLEVELAND MIDDLE NEIGHBORHOODS Defining “Neighborhoods”

CLEVELAND CENSUS TRACTS

CLEVELAND MIDDLE NEIGHBORHOODS What is a Middle Neighborhood?

What is a Middle Neighborhood in Cleveland?

How do we identify a Middle Neighborhood?

How do we stabilize and grow Middle Neighborhoods?

CLEVELAND MIDDLE NEIGHBORHOODS 2019 Regional Property Sales ($/ft2) Data: NST, Zillow (non-estimates) Cleveland Average: $74 Regional Average: $111

Select Luxury Neighborhoods

Solon: $139 City: $190 Shaker Heights: $108 Tremont: $226 Beachwood: $154 Detroit Shoreway: $305 Lakewood: $144 Strongsville: $113 Distressed Neighborhoods Chagrin Falls: $154 Union Miles: $30 Lee-Seville: $24 CLEVELAND MIDDLE NEIGHBORHOODS Regional Housing Market 350 Neighborhood Price Sq/ft (2019 Q4)

300

250

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0 Cleveland Housing Market 350 Neighborhood Price Sq/ft (2019 Q4)

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250

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0 Regional Housing Market 350 Neighborhood Price Sq/ft (2019 Q4)

300

250 Middle Markets 200

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50

0 Vibrant Neighborhood Growing Stable Market Rate

Stagnant Market

Vulnerable (Middle Neighborhoods) Threatened Neighborhoods

Deteriorating, Subsidized

Severely Distressed Critical Majority Vacant

CLEVELAND MIDDLE NEIGHBORHOODS What is a Middle Neighborhood?

What is a Middle Neighborhood in Cleveland?

How do we identify a Middle Neighborhood?

How do we stabilize and grow Middle Neighborhoods?

Next Steps CLEVELAND MIDDLE NEIGHBORHOODS Regional Housing Market 350 Neighborhood Price Sq/ft (2019 Q4)

300

250 Middle Markets 200

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50

0 Edge Communities 120 Neighborhood Price Sq/ft (2019 Q4) 100

80

60

40

20

0 Cleveland Neighborhood Demand Index – (14) Indicators to be used to define clusters

Category Indicator Geography Time frame

Housing sales and transfers Median arms-length sales of residential properties Block groups - County 2017-2019

$/SQFT2 (median) Block groups - County 2017-2019

Variation in median arms-length sales price of residential properties Block groups - County 2017-2019

Mortgage, tax, and BOR foreclosures on residential properties Block groups - County 2017-2019

Velocity of sales- how often properties turn over Block groups - County 2017-2019

Other housing attributes % probable rental, of residential properties Block groups - County 2017-2019

% vacant residential structures Block groups - County 2017-2019

% privately held rental properties with HCV, of residential Block groups - County 2017-2019

% subsidized housing/ project based section 8, of residential Block groups - County 2017-2019

% CMHA housing- housing estates owned by CMHA Block groups - County 2017-2019

Land use % Commercial (non- apartment) Block groups - County 2017-2019

% residential vacant land Block groups - County 2017-2019

Housing Demolitions Block groups - County 2017-2019 investment/interventions CLEVELAND Permits >$10k, new construction, and/or "rehab" permits Block groups - County 2017-2019 MIDDLE NEIGHBORHOODS Neighborhood Demand Index (NDI)

CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS Potential Middle Neighborhood Targets

CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS Homes Sold Over $150K (Since 2014) Homes Sold Over $100K (Since 2014) Homes Sold Between $60K - $100 Homes Sold Between $0.01 - $60K CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS Middle Neighborhood CLEVELAND Strategic Focus MIDDLE NEIGHBORHOODS CLEVELAND Commercial Properties MIDDLE NEIGHBORHOODS CLEVELAND No Canopy (<5%) MIDDLE NEIGHBORHOODS Lee Harvard

CLEVELAND MIDDLE NEIGHBORHOODS Bellaire Puritas

CLEVELAND MIDDLE NEIGHBORHOODS What is a Middle Neighborhood?

What is a Middle Neighborhood in Cleveland?

How do we identify a Middle Neighborhood?

How do we stabilize and grow Middle Neighborhoods?

CLEVELAND MIDDLE NEIGHBORHOODS Policy Examples

Market Type Public Action

Regional Choice Asset Promotion High Value

Steady Transitional Asset Preservation

Stressed Reclamation Asset Development

CLEVELAND MIDDLE NEIGHBORHOODS R Connecting Policy & Programs to Markets

Regional Strong Steady Transitional Distressed Reclamation ChoiceA B C D E Demolition of Dangerous Properties

Targeted scale Acquisition/Rehab

Tree Plantings/Dead Tree Removal

Land Assembly for Redevelopment

Tax Abatement/Construction Subsidy

Quality of Life Code Enforcement (HHI)

Abandoned Car Removal

Nuisance Abatement

High Priority Medium Priority CLEVELAND Low Priority MIDDLE NEIGHBORHOODS Limited Activity Tax Abatement Strategy

CLEVELAND MIDDLE NEIGHBORHOODS HousingNOLA (70 Neighborhoods – 5 Typologies)

2015 Market Value Study 459 Census blocks – 9 Market Clusters

CLEVELAND MIDDLE NEIGHBORHOODS 4 1 Overlay Market Analysis with Housing Study

160 6 14 140 19 120 5 8 27 5 100 4 # of 23 13 Census 80 4 9 37 Blocks 60 29 1 7 25 44 40 21 5 24 20 11 29 29 6 12 23 0 2 21 5 7 Obsolete Distressed Limited Updates Renovation+ Modernized A B C D E1 E2 F G H CLEVELAND MIDDLE NEIGHBORHOODS 4 2 Comprehensive Middle Neighborhoods Tool-Kit

High LTV Loans Capital Access for Non- Great & Acquisition Rehab Profits Infrastructure Refi-Rehab Model-Block Investment Targeted Economic Development Construction Gap Storefront Renovation Subsidies and Commercial Public Services Tax Abatement/Credit Beautification CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS

CLEVELAND MIDDLE NEIGHBORHOODS CLEVELAND MIDDLE NEIGHBORHOODS Challenge for Developers: Rehab and Construction Gap

Sales Price $135,000

Acquisition REHAB PROFIT

$10,000 $80,000 $45,000

Acquisition REHAB GAP

$65,000 $80,000 $10,000

CLEVELAND MIDDLE NEIGHBORHOODS Competition Cycle of Decline from Suburbs

Decline in Neighborhood Appeal Decreased Demand

Deferred Maintenance Stagnant Market

Reduction in Homeownership Decline Property Values CLEVELAND MIDDLE NEIGHBORHOODS Investors in the Middle

MIDDLE MARKETS (NEO) EDGE MARKETS (CLE)

For Profit Developers Non Profit Developers (Rehab and New Construction) Limited Income Homeowners New Homeowners

LLC Investors LLC Investors CLEVELAND MIDDLE NEIGHBORHOODS Naturally Occurring Affordable Housing

Family of Four Maximum Debt $ 1,905.34 (2017 ACS) Student Loan Debt $ 400.00

Car Payment $ 380.00 Gross income $ 57,160.13 Min. Credit Card Payment $ 50.00 After Fed Tax $ 46,808.00 Housing Debt X

Monthly $ 3,900.67 Total Debt $ 830.00

CLEVELAND MIDDLE NEIGHBORHOODS Naturally Occurring Affordable Housing

Maximum Debt $ 1,905.34 Housing Cost Student Loan Debt $ 400.00

Loan Amount $ $135,000.00 Car Payment $ 380.00

Annual Interest Rate 0.0425 Min. Credit Card Payment $ 50.00

Life Loan (in years) 30 Housing Debt $ 1,047.99

Payment per Period $664.12 Total Debt $ 1,877.99

Tax Estimate $313.88

Hazard Ins. $70.00

Monthly Housing Payment $1,047.99 CLEVELAND MIDDLE NEIGHBORHOODS Challenge for New Homebuyers: Obsolete Housing Stock

Home Detail Market Demand Cleveland Avg. Supply

# of Bedrooms 4 3

# of Bathrooms 1.5+ 1

Size 1,900 Sq Ft 1,200 Sq ft

Kitchen Newly Renovated Needs Renovation

Yard/Lot .25 acre .11 acre

Systems Recently Updated/New Most need updates

Garage 2+ Car – Built post 1970 2 Car – Built 1950s

Electrical Updated/Romex Knob & Tube CLEVELAND Windows/Doors Vinyl, Eco-Value Pulley, Wood, Lead issues MIDDLE NEIGHBORHOODS Housing Market Supply and Demand Supply Demand

Structural Substantial Homeowner New Construction Rehab Updates “Fixer-Upper” Fully Renovated CLEVELAND MIDDLE NEIGHBORHOODS