Easy Prey, Indeed
Dear Mr. Daprile,
I am writing to thank you for your excellent article headlined “Easy Prey” in today’s Plain Dealer and cleveland.com. The article is well-researched, well-written and very important to residents of the City of Cleveland struggling with the affordable housing crisis in this city and those disenfranchised with the brutal inequity of that crisis.
I would also like to share the following observations on predatory real estate investing with you and those copied on this email.
I’d like to say the article is timely, but unfortunately it’s not. Your article, to its credit, does come on the heels of the recent study “The Tale of Two Markets” that delineates Cleveland’s racially stratified and inequitable housing market and the discussions in city government regarding “housing for all” and the use of ARPA money to facilitate that end in Cleveland. However, the trend of predatory real estate practices like the ones you reference in your article is not new and certainly not unique to Cleveland. Many residents at ground level here have been observing and complaining to city officials for years about the tragedy you write about.
Predatory investments in underserved neighborhoods is a practice witnessed in cities like New York and perhaps most pertinently Detroit, documented well in the excellent book “How to Kill A City” by Peter Moskowitz, published in 2018. A key takeaway from this book, which seems clear to me that applies to Cleveland, is that we need not be surprised at all that investors take advantage of opportunities to make money the way they do. They are capitalists and act as capitalists do. Capital, like the river flowing without fail to the sea, will flow to the place at which it gets the best return.
And while we may despise the effects and the methods by which these investors are making their money, they are simply doing what they do well, even if on the edge of or actually breaking the law. We should not be surprised, and blaming them misses the point and ignores root causes. In fact, the situation that has developed on predominantly Cleveland’s eastside was entirely predictable. A more important question is whether people in positions of authority were paying attention and grasped what was going on. If so, why did they not act sooner to stop and prevent it? If they didn’t understand it, why the heck not?
Where exactly was the oversight? The understanding of the ownership structures and the threat? The code compliance enforcement? The diligence to listen to what the community was saying? Do our elected leaders have the intuitive sense to act on what they can see before their very eyes and what is happening elsewhere, or do they wait until all the exhaustive studies and data are finally prepared years into a crisis and the press reports it to determine that average people are getting taken to the cleaners?
The conditions that led to the attractive spread between property purchase price and rental rate were varied and did stem in some measure from the subprime mortgage fiasco. As well, as Mr. Moskowitz clearly documents in his book, cities (like Cleveland) struggled for decades to replace lost revenues from discontinued federal funding, manufacturing disinvestment and flight from their densely packed neighborhoods to the suburbs.
As such, Cleveland became panicky to draw investment to the city and has provided generous inducements in the form of taxpayer funded subsidies and abatements and has essentially embraced gentrification as a good thing in its downtown area, University Circle and certain hot neighborhoods like Tremont, Ohio City, Little Italy and Detroit Shoreway. Business, government and non-profit philanthro-capitalists united to focus resources to attract young, affluent professionals and retiring boomers to these areas by providing ample market rate and luxury rental housing (tax abated of course to the developers) and build up city attractions such as providing lavish tax breaks to billionaire professional sports franchise owners, all the while letting the bulk of the city’s neighborhoods of color languish and deteriorate, proving dramatically that “trickle down” is an obscene and painful joke.
By focusing resources in some areas to build them up, and allowing other areas to crumble, these leaders then created the conditions that were ripe for predatory investing. The deteriorating conditions of these areas drove prices down, but taxes, utilities and maintenance remained high for residents, as did endemic poverty. And where exactly were the living wage jobs for these people? Not anywhere close to them, and they certainly couldn’t get to jobs with affordable public transit. Investors then were able to scoop up properties from people in this economic vice grip, buying low and then renting high, a capitalist’s dream.
The point here is that markets by themselves have no compassion and will always seek the highest return, which they have done. Without a watchful and strong regulatory presence, people will get hurt. The “public private partnership” is by design a Faustian bargain, because the private sector by its very nature must take their cut and will be drawn to the best deal, whether it is here, Columbus or outside the country.
It is also not just this slice of the real estate market that is experiencing these excesses, but the entire spectrum, as witnessed by the feeding frenzy of luxury apartments being built, with developers and investors of all types, many from outside the area, gorging themselves on tax abatements and opportunity zone tax breaks. And in those gentrified neighborhoods, long term residents, especially those on fixed income, are being driven out as their property values balloon and they can no longer afford their tax bills.
This is what happens then when gentrification is at the core of a city’s business model. That said, it appears as if this administration and this City Council is sensitive to Cleveland’s failed housing and economic development policies of the past 50 years that have made the rich ever so much richer in Northeast Ohio, while the middle class has not been able to catch a break, and the poor just get that much poorer. Attracting the stability of family homeownership, while delivering affordable housing, living wage jobs, high performing schools, safe streets and cultural diversity in every Cleveland neighborhood could deliver the oft-promised “vibrancy” that has yet to return to this City. We’ll see if our current civic leaders have the courage to bring that to be.
Thank you,
Arthur Hargate
Cleveland, Ward 6
