Dear Cleveland Councilman Blaine Griffin and Mr. Jeff Epstein, City of Cleveland Chief Integrated Development Officer,
The links below are to Senator Sherrod Brown’s recent remarks about private equity’s predatory practices in the housing market here and around the country and an excellent article that appeared today in Cleveland.com about outside investors that have been buying up houses in Cuyahoga County. You are likely also aware of the recent study ProPublica did on this issue and the forum next week at Cleveland State on the matter.
As city residents and taxpayers that have endured gentrification being forced into our neighborhood by well-connected developers against significant community opposition, we continue to be outraged at the degree to which powerful interests from outside our community continue to extract economic value from our neighborhoods across the entire spectrum of the housing market.
Many older residents we know are worried they will not be able to stay in their homes because their property taxes are being driven up by exorbitant rents escalated by speculative property development. Studies show conclusively that higher rents drive up property values and corresponding real estate taxes.
What is clear now to even the most casual observer of the avalanche of information coming out on the current housing market is that investors of all types from outside the community are buying up properties and driving up rents. New affordable housing to buy is highly competitive and hard if not impossible to come by. Developers preferentially build high end rental spaces, because there is so much money to be made as property managers.
So, who exactly is providing the equity or debt financing to secure the construction and operating loans for new high end rental construction? Investor partners from outside the community, outside the state or outside the country? And what exactly happens when investor partners want to cash out? Will rental properties be bundled and sold in the hot overseas property investment market?
The bottom line with the housing market here is that poor people are being made poorer. The middle class is being taken advantage of and can’t get a step ahead. Affordable housing either to rent or to buy is in crisis. The American dream of building even a little wealth through homeownership is dying, right here in Cleveland, Ohio.
And the posh, the powerful and the privileged just do better as a result, while Cleveland remains the poorest big city in the country. That’s shameful.
There are bright signs to be sure. There are a host of community advocates including yourselves that have been trying hard to drive development in a local direction. But we need a lot more of the local development with affordable housing we are seeing in places like Fairfax and Hough. A lot more.
And the City must create more incentives for locally financed development and do whatever we can to keep predatory investors from faraway places from getting richer at our expense. A great way to do that is to assure tax abatement favors homeownership and is granted to developers that actually live here.
Because the economic vitality of the neighborhoods, the city and the region is being siphoned off and is flowing up and out of the community to the already wealthy in the suburbs, outside the area and quite possibly outside the country. That needs to be stopped dead in its tracks. Every dollar paid for excessive rent to a landlord outside the community is a dollar that is not spent on goods and services provided by local business.
Ask yourself this question: what would Norm Krumholz do right now?
We hope the city can take bold action quickly to help make our housing market more ours. Any development is not necessarily good development. We need to generate and keep wealth here.
Arthur and Joan Hargate