Middle Neighborhoods
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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 Baltimore, MD Erie, PA Detroit, MI Buffalo, NY Chicago, IL Plano, TX Akron, OH Pittsburgh, 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 Suburbs Luxury Neighborhoods Solon: $139 Ohio 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) 300 250 200 150 100 50 0 Cleveland Housing Market 350 Neighborhood Price Sq/ft (2019 Q4) 300 250 200 150 100 50 0 Regional Housing Market 350 Neighborhood Price Sq/ft (2019 Q4) 300 250 Middle Markets 200 150 100 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 200 150 100 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 Streets & 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 Old Brooklyn 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.