In today’s dismal market, cities are struggling to bring new life to abandoned, often foreclosed, structures that have cast dark shadows on neighborhoods.

By Margot Carmichael Lester

When you fly over Cleveland at night, the number of bright spots are few. In neighborhoods across the city many homes—and sometimes entire blocks—are dark. In the light of day, the scene is equally gritty. Street after street is lined with boarded up homes and untended lawns; shuttered businesses hide behind unkempt storefronts.

“The Cleve” has become the poster child of the foreclosure crisis and the financial troubles that follow in its wake. Th e depression is as much emotional as economic. And it’s spreading. You’ll find a similar scenario in neighborhoods across the country. Cities are struggling under the burden of lost revenue, blight, and crime, especially as foreclosures add an unprecedented number of vacant properties to the community.

Estimates vary, but foreclosure listing company RealtyTrac approximated 261,255 homes in foreclosure in May of this year, almost double the number in May 2007. The Brookings Institution estimates that vacant and abandoned properties of all kinds— whether from foreclosure or not—occupy about 15 percent of a typical large city, an average of 12,000 acres.

“The first wave [of abandoned properties due to foreclosure] has probably landed, but if we use the tsunami metaphor, it’s the second and third waves that are larger and more dangerous,” says Joe Schilling, professor of urban aff airs and planning at Virginia Tech’s Alexandria Center. “They may not hit for six months or a year from now, but the cumulative effect is going to put communities in crisis mode.”

The best way to fight the tide, he says, is for each community and neighborhood to develop its own strategy based on the local economy and housing market. Schilling recommends that the redevelopment of large numbers of abandoned buildings happen in three phases. First, cities must stabilize neighborhoods by either demolishing vacant properties or acquiring them for redevelopment. Next, officials must establish a plan that focuses on how to reclaim vacant properties at the neighborhood level. Finally, cities must offer incentives—perks such as tax credits or expedited permitting—in order to lure back private developers and investors who would otherwise be disinterested.

“It takes serious intervention and strong government action to handle this kind of crisis,” he explains. “Everyone’s anxious to start building new stuff on [the site of] these vacant properties. When local government is controlling the property, it has a say in making sure the city stays stable.”

Developer identified five cities that are putting such forward-thinking plans into action. These governments are working with the real estate community to turn around abandoned sites—and off ering incentives to entice developers to enter these troubled and neglected neighborhoods.

Margot Carmichael Lester is a freelance writer based in Carrboro, N.C.

Buffalo, NY - Shrinking City

Upstate New York fights back against declining populations, growing dereliction.

There have been some dark days in America’s City of Light. Vacant and uninhabitable housing in Buffalo has reached a crisis point. The numbers speak for themselves: The city has approximately 10,000 abandoned commercial and residential structures and 22,000 vacant housing units. About 2,700 units are related to foreclosures.

“Since 1950, huge losses in industry and manufacturing contributed to an economic downward spiral that ultimately resulted in a loss of more than 50 percent of Buffalo’s population,” says Peter Cutler, director of communications for Mayor Byron Brown. Frighteningly, the city’s current population of 282,700 residents is the same as it was in 1890, based on the 2006 Census estimate.

To deal with the abandoned sites, Mayor Brown launched the “ 5 in 5” program last year, which calls for the demolition of more than 5,000 structures in five years. Each property is evaluated by various city departments prior to auction. If there are no successful bids, the city will demolish buildings that are abandoned and/or a nuisance to the community.

The program has a $100 million price tag, funded by the city, state, federal government, and a city-community matching fund program. To date, $4.5 billion of public and private investment has been announced in Buffalo since 2005. One notable project is the $72 million 200 Delaware, the redevelopment of the former Dulski Federal Building into an office-hotel-condo mixed-use project that will come online in 2009.

“As the city reinvents itself for the next hundred years, we have the advantage of an abundance of infrastructure and architecture and the disadvantage of limited resources,” says Michael Montante, vice president of Buffalo’s Uniland Development Co., which owns and operates more than 1.5 million square feet of commercial property in the city. “The challenge of addressing what should be preserved, what can be adapted, and what simply has to be removed is daunting. By addressing these hard questions directly, the mayor and his staff are removing a significant barrier to development.”

[ at a glance ]

■ Challenge: Shrinking population numbers exacerbated by the mortgage crisis

■ Solution: Creation of a chief economic development officer to drive business recruitment and redevelopment efforts; brownfield remediation and development; demolition of substandard structures for new infill housing construction; and general housing rehab efforts

■ Development Opportunities: Historic preservation/adaptive reuse in the city’s core where there’s a pent-up demand for housing and Class-A office space; brownfield redevelopment along the waterfront and in other industrial areas

Carbondale, PA - Hard Times

The city’s office steps in and offers tax incentives to developers who bring new life to abandoned properties.

The downfall of the local coal mining industry in the early 1950s bruised Carbondale, Pa., to the core. Not long afterward, competing development in neighboring cities, a low birth rate, and a high out-migration had this small town of about 10,000 people down for the count.

“The City of Carbondale struggled since the main industries closed shop,” says Justin Taylor, mayor of
the northeastern Pennsylvania town. “The population spiraled from 30,000 to 10,000 in about 60 years, the tax base remained flat, and labor contracts depleted city coffers, leaving no resources for aggressive marketing, business development, or community reinvestment.”

As a result, today there are about 30 abandoned commercial and residential properties in the city, 10 of which are due to foreclosures. But the mayor is determined to restore life to the city. Taylor, the former director of economic development in neighboring Susquehanna County, drafted two pieces of
legislation to establish tax incentives for developers. The local Redevelopment Authority, after a 25-year hiatus from operation, is updating a citywide redevelopment plan. Taylor also reinvigorated the city’s Code Enforcement Division, the agency responsible for tackling run-down or abandoned structures.

“Once the property is in our possession, the Redevelopment Authority often offers it for $1 plus legal costs to an adjoining property owner as an incentive to raze the site,” Taylor says. “This tactic has worked successfully to return approximately 45 properties back to the tax rolls in the past four years of my first term.”

The city also is helping to revive vacant commercial properties. “We are developing major real estate tax incentives for developers, cooperative agreements available for utility installation, incentive financing, direct staff support, and no-cost marketing services,” the mayor adds.

[ at a glance ]
■ Challenge: Homes vacated because of poor economy

■ Solution: The city will acquire properties and sell for development; revitalize the Redevelopment Authority; create tax and other incentives for demolition and reconstruction

■ Development Opportunities: Commercial property available for redevelopment; tax incentives and other inducements for both residential and commercial properties

Cleveland - Problem Child

Vacant commercial space joins the landscape of empty homes in America’s heartland.

The single-family foreclosure disaster in Cleveland repeatedly makes national headlines. What we’re hearing little about is the large amount of vacant commercial and industrial space. Estimates of the number of abandoned structures range from 12,000 to 25,000, depending on who you ask.

“The sheer volume of vacant properties is a blighting influence that undermines the vibrancy and vitality of the city,” says Terri Schwarz, senior planner with the Cleveland Urban Design Collaborative at Kent State University. “Vacant buildings and land are a costly burden that impact residents, businesses, and property values throughout the region.”

Northeast Ohio, and Cleveland in particular, was a hotbed for predatory lending that is virtually unregulated. According to federal data, almost $1.6 billion in subprime loans were originated in 2005 in Cuyahoga County, where Cleveland is located. As rates rose, homeowners couldn’t pay, and foreclosures were common. More than 15,000 foreclosures were filed in the county last year.

To mitigate the effects, the city demolished about 800 houses last year, with a goal of 1,000 more in 2008. That will create about 120 acres of vacant land, but mostly in small parcels dispersed throughout the city that aren’t conducive for reuse by developers.

The redevelopment of these properties will be coordinated by the Connecting Cleveland 2020 Citywide Plan, which outlines the strategic building of strong, vibrant, and diverse neighborhoods. On the industrial side, the city created an Industrial-Commercial Land Bank in 2005 to entice developers to redevelop the vast number of abandoned properties for a variety of uses.

“Since 2005, the city has invested nearly $10 million in redeveloping properties targeted by the Industrial- Commercial Land Bank,” says Nate Hoelzel, the city’s brownfield programs manager. “Two properties are on the market and two more are in various pre-development [and] cleanup stages. We’ve seen private investment in areas surrounding all the properties, too—a sign that strategically investing public dollars in marketable sites can leverage a larger return to the community.”

[ at a glance ]
■ Challenge: Rampant foreclosures and abandoned industrial properties, mostly brownfields

■ Solution: Demolition of abandoned homes and establishment of an Industrial-Commercial Land Bank to revitalize vacant business properties

■ Development Opportunities: Land Bank properties ready for development; job-ready sites at an affordable price; loans partially forgiven per Hoelzel for the reuse of obsolete manufacturing buildings; and a Neighborhood Development Investment Fund for large-scale developments

Flagstaff, AZ - Deserted Desert

Flagstaff is struggling to get it kicks on Route 66. Though not yet overburdened by foreclosures, the city does have about a dozen abandoned industrial and commercial buildings. Several old manufacturing or distribution hubs, closed during various economic downturns or consolidated to other locations, line the railroad tracks and historic highway that form the city’s commercial core.

One of the most prominent is the Copeland Lumber facility. The circa-1890 property, vacant since the mid-1990s, is the last remaining building from Flagstaff ’s lumber era and is listed on the National Register of Historic Places.

“The city will be issuing an RFP for private developers to bid on the building,” says Jacki Mieler, the city’s business attraction manager. “It will be offered at a reduced cost because of the Rio de Flag [drain] and the historic preservation.”

The Rio de Flag flood plain pipe— a culvert designed to divert the river toward its original course farther south of the downtown area—will eat up most of the property’s large parking area. Despite that, there’s been a tremendous amount of interest from local companies and developers, Mieler says.

Other abandoned properties, many on brownfield sites, are dotted throughout the city. Th e EPA awarded $200,000 to the City of Flagstaff Brownfield Land Recycling Program to assess lands impacted by the release of petroleum products along the Route 66 Central Corridor. The fund will develop an inventory of properties ripe for development, perform environmental assessments, and develop a geographic information system database.

The $100 million Aspen Place at the Sawmill project is one brownfield site that’s back on track. “It’s an amazing project because of the fact 42 acres sat vacant in the heart of the city for so long, and now it will be a community anchor,” explains Michael Kerski, director of the city’s Community Investment Division. The former saw mill will become a retail-residential center developed by Phoenix-based Aspen Group.

[ at a glance ]
■ Challenge: Abandoned commercial property in the historic downtown and along industrial corridors

■ Solution: Strategic municipal purchase of valuable commercial properties; remediation assistance through the Brownfield Land Recycling Program

■ Development Opportunities: A 20-percent historic investment federal tax credit and substantially reduced property taxes for the redevelopment of the Copeland Lumber site; federal and city incentives for brownfield redevelopment along the rail corridor

Los Angeles - Golden Opportunity

Los Angeles may be nicknamed the Land of Dreams, but finding affordable housing can be a nightmare. Only 10 percent of homes sold in the first quarter of 2008 were affordable to buyers earning the area median income of $59,800, according to the California Building Industry Association.

When interest rates were low and mortgages easy to get, many buyers purchased homes that they couldn’t afford or bought second or third homes as investments. When payments dramatically rose, many lost their property because they couldn’t pay the bills. To deal with the challenges caused by abandoned buildings and ultimately create more housing, the city attorney’s office established the Citywide Nuisance Abatement Program (CNAP). “CNAP handles properties which are open to unauthorized entry and are the sites of criminal and/or nuisance activity, or have been fire-damaged,” says Mary Clare Molidor, deputy chief of the Safe Neighborhoods Division of the Los Angeles city attorney’s office.

As of May 27, 2008, 951 vacant residential, commercial, and industrial properties were scheduled for abatement by the city. CNAP is involved with 551 of these projects. In the last 10 years alone, CNAP has abated 2,025 vacant nuisance properties.

“Demolition is a last resort,” Molidor says. “We want to rehab existing property and get it back into active use.” Only 564 of the 951 were demolished, 106 by the city and the balance by the owners.

The city also recently launched another program, American Dream, which deals with nuisance properties on which the city has placed a lien to recover L.A.’s costs of clearing and fencing vacant lots and demolishing dilapidated buildings. Currently, the program is redeveloping 94 properties around the City of Angels.

“City Attorney Rocky Delgadillo set up American Dream to revitalize the neighborhoods and get developers together with residents,” says Rosemary Anaya, director of economic development for the city attorney’s office. “We want to get these properties back into use as affordable or special needs housing.”

[ at a glance ]
■ Challenge: Creating additional affordable housing inventory and reducing the number of nuisance properties—particularly abandoned buildings frequented by criminals

■ Solution: Aggressive city-based programs to demolish and redevelop abandoned buildings

■ Development Opportunities: Development and rehab opportunities available through the American Dream program and community redevelopment programs; expedited permitting and tax incentives