By Tom Bier
Photo by Maddie McGarvey
In my new book, Housing Dynamics in Northeast Ohio: Setting the Stage for Resurgence, I lay out the case for why state officials hold significant blame for the decline of cities in Northeast Ohio. A state official could respond to my critique with, “Wait a minute, Bier, state government is not responsible for the condition of Cleveland, or Akron, or Euclid, or any city; they are independent self-governing cities.” Yes, that is true, but nothing in the law enacting home rule makes those cities solely responsible for their condition. It is state policy that makes them solely responsible.
Naturally, John Q. Public chimes in:
Cleveland, you have many thousands of derelict buildings that need to be demolished, you have a constant stream of properties being abandoned year after year, you have decline spreading from street to street, neighborhood to neighborhood, and you have large swaths of vacant land (with buried liabilities) in need of redevelopment. You have all that and more. Sorry, but it has nothing to do with me. I don’t live there. It’s your problem, you fix it.
Euclid, your property tax base was substantial when manufacturing was thriving but now you have thousands of 60-year-old homes that need upgrading and modernizing, you have residents moving out to newer and larger homes in Lake County, you have declining property values as new residents from Cleveland move in with incomes lower than those moving out (which weakens your tax base), and you have tax rates among the highest in the region. You have all that and more. Sorry, but it has nothing to do with me. I don’t live there. It’s your problem, you fix it.
This mindset assumes that independent cities, of whatever size, have the resources necessary to contend effectively with conditions that naturally arise as buildings and infrastructure age. But few cities have such resources.
By allowing urban renewal and redevelopment to be so limited compared with exurban development, the state falls far short of its guarantee of equal protection and benefit. It recognizes and supports those who prefer to live in new and newer communities and virtually ignores those who prefer to live in older places. It plays favorites.
When home rule was established by constitutional amendment in 1912, Ohio’s major cities were in a totally different situation than they are today. They were exploding with growth and had to address such problems as sanitation, utilities, transportation, construction, and education.
Imagine the impact as Cleveland’s population shot up from 92,000 in 1870 to 382,000 in 1900. Cities at that time were administratively entangled with their home county and the state. Clearly, the way forward needed to be through independent local government that was free to manage rampant growth as it judged best. Thus home rule.
No one in 1912 had any idea that the governmental adjustment being made would have a monumental and civically corrosive consequence that would not begin to matter seriously for 50 years. It eventually would put a growing number of local governments in the position where they were expected to do something (renew, redevelop) that was impossible to achieve at the scale needed with the resources available.
Following the implementation of home rule, Ohio’s cities grew and prospered. City halls did well in managing their jurisdictions as their real estate tax base generally was sufficient to meet needs. But in the 1930s, the Great Depression sparked fiscal stress. In 1934, the state responded by initiating “revenue sharing” with its cities when it established the Local Government Fund. The revenue source was the state’s new 3 percent sales tax. Later, when funds from the Local Government Fund and local property tax revenues were not enough to meet needs, cities began to levy an income tax, which Cleveland did in 1966. That tax has kept the city afloat. Suburbanites working in the city now pay 87 percent of the total collected. In November 2016, voters responded to Mayor Frank Jackson’s plea and increased the tax rate from 2 percent to 2.5 percent. Now, small suburbs that ring Cleveland from Euclid to Lakewood, suburbs that already have the highest tax rates in the region, are finding they are in the same boat; they have aged to where they have steadily mounting needs for maintenance, renewal and redevelopment but are hamstrung with inadequate tax bases.
In 2011, state policy changed course and undercut cities further. The Local Government Fund was substantially reduced to eliminate a projected state budget shortfall. State need for revenue trumped local need. That reduction greatly aggravated the situations of the worst-off cities as they struggled in DIY survival.
What Does the Rulebook – the Ohio Constitution – Say?
The Ohio Constitution states: “All political power is inherent in the people. Government is instituted for their equal protection and benefit … and no special privileges or immunities shall ever be granted.…” Since each city, because of home rule, is considered singularly responsible for its renewal and redevelopment, the state not only fails to further equal protection and benefit, it also promotes special privilege. Properties in communities lacking the resources necessary for renewal and redevelopment lose value as properties in new and growing communities gain value. Value is shifted from the old to the new just as the production of new cars lowers the value of old ones. That is, the way to keep the prices of used cars high is to stop making new ones. The way to keep the prices of existing homes high is to stop building new ones.
By allowing urban renewal and redevelopment to be so limited compared with exurban development, the state falls far short of its guarantee of equal protection and benefit. It recognizes and supports those who prefer to live in new and newer communities and virtually ignores those who prefer to live in older places. It plays favorites. In that respect, the state is anti-choice; it prevents a sizable portion of its citizenry from having its choice location of residence.
In 2010, when the Ohio Department of Transportation approved the I-90/Lear-Nagle interchange in the city of Avon (Lorain County), farmers in that area slept well as they were granted special privilege. The state caused the value of their land to increase from a few thousand dollars an acre to, in some places, more than $100,000 an acre. The state released the explosive power of well-placed real estate development. The wealth that can result is so substantial that the city of Avon and a major developer were willing to pick up the entire $24 million price tag for the interchange. ODOT’s contribution was to accelerate approval of the project.
But Avon’s gain means loss for others. Movers to Avon are coming mainly from Cuyahoga’s western suburbs and Cleveland’s West Side. Avon’s new homes offer the opportunity for moving up and out. I don’t blame people for doing that; why shouldn’t they? But as they do, economic strength and real estate value move with them. The state is promoting the shift of property value from some owners to others; it is taking from some and giving to others; it is failing to protect equally while granting special privilege. In effect, the state is saying to aged communities: We enable economic strength to leave you, but as you weaken, it’s your problem so you fix it.
The state endorses unconstrained, free-market housing production by facilitating — even encouraging — the development of farmland, but it accepts little responsibility for consequent depreciation and abandonment. And, when the state does provide niggling support for redevelopment and renewal (such as with tax credits for the reuse of historic properties), it acts not because of constitutional obligation to protect equally but because of political squeezing, jockeying, and bargaining. Cities and rural districts compete for resources from the state according to their political muscle in a contest where the legislature is, on balance, weighted toward rural districts.
Someone told me that ODOT’s investments in Cleveland demonstrate the state’s concern for the city’s condition: “The state is putting $650 million into the new I-90 George V. Voinovich Bridge over the Flats. $650 million!” As if to say, what more do you want? Yes, but how does a replacement bridge contribute to Cleveland’s renewal and redevelopment? It doesn’t. But the $24 million Avon interchange facilitates development across at least five square miles of farmland. Five square miles at an average increased value of, say, $25,000 an acre is $80 million. That’s just the land. Add (over years to come) possibly 3,000 new homes at $400,000 per. That’s another $1.2 billion. Then there’s commercial: Cabela’s, Meijer, Menards, Residence Inn, Levin Furniture, with more to come. The state is taking value from businesses in, say, Westgate Mall in the city of Fairview Park (Cuyahoga County) and giving it to businesses nine miles farther out in Avon.
“And thus was this poor church left, like an ancient mother, grown old, and forsaken of her children.… Thus she that had made many rich became herself poor.”
It is a deeply ingrained feature, a core driving force in our way of life, a drama involving the life and death of communities. In the big picture, over many decades, that is what is playing out. Yes, downtown Cleveland and some neighborhoods are finding new life, but other places, now including suburbs, are moving closer to their demise, some of which is inescapable. But as social order, as a vision of our future, surely we can do better.
Cities and rural districts compete for resources from the state according to their political muscle in a contest where the legislature is, on balance, weighted toward rural districts.
Particularly perplexing is the matter of oversupply, because it appears to be unpreventable in our free-market society. We must live with whatever the difference between construction and household growth happens to be, and with the consequent abandonments if construction greatly exceeds growth.
In the face of those realities and their impact, cities (central and suburban) are left grossly inadequate tax bases and DIY survival. Support provided by state government, federal government, and nonprofit organizations is marginal. Because little redevelopment and renewal are produced in and among old inner locations compared with the scale of need, most middle-income (and higher) households have little choice but to live somewhere else. We get what government permits and promotes.
Given the existing role of government, the possibility of slight job growth in the seven-county Cleveland-Akron region, little or no increase in households, and more homebuilding, what can we expect over the next decade or two if there is no change in public policy?
City of Cleveland: Some Gain, More Loss
Renewal and redevelopment will continue downtown and in some neighborhoods while abandonment also continues, probably at the rate of at least 1,000 units a year, mainly in the worn-out, market-bottom sections of the city’s East Side. Its residents are steadily moving to eastern suburbs and to the city’s West Side. While Cleveland cannot escape substantial depreciation and abandonment (as long as a serious oversupply of housing exists), it can grow in population; indeed, it will grow if more people move into the city than move out. Population growth and abandonment can, and are likely to, happen simultaneously.
Downtown’s population has reached 14,000 and should continue growing. A study I published in 2003 with Cleveland State University’s Center for Housing Research and Policy found that in the waterfront cities of Chicago and Baltimore, 2.2 percent of their region’s middle- and upper-income households lived downtown. The figures for Portland, Oregon, and Milwaukee were, respectively, 2.5 percent and 0.7 percent. If Cleveland’s downtown had 2.5 percent, it would amount to around 10,000 households containing a population of nearly 20,000, which would support more stores, restaurants, and services. Including downtown residents whose income is below mid-level means a total population of 28,000 is possible. That would be double the current figure, or a community the size of Shaker Heights. Space for that many, and more, certainly exists. As downtown’s population continues to grow, so will its attractiveness. I expect it to happen, as long as crime remains under control. But downtown alone will not be enough to offset citywide move-outs, which are likely to increase as regionwide homebuilding increases and enables more out-migration. (Around 4,000 homes were built in the region in both 2015 and 2016. A gradual increase to 7,000 or 8,000 units annually is likely.)
In recent years (2010-2016), the city’s population loss has been estimated to be around 2,000 persons a year while downtown growth has been around 500 new residents a year. Two thousand is close to balance compared with the incredible loss of nearly 18,000 a year in the 1970s. Balance and then increase can happen but require steady expansion of the islands of renewal and the start of new ones, which means more new construction and conversion of old office buildings, warehouses and factories to apartments and condominiums, and more streets “redone” as were West 25th Street in Ohio City and Waterloo Road in the Collinwood neighborhood. But with City Hall in its DIY straightjacket, production is likely to fall far short of potential.
The new Cleveland that is emerging involves mostly residents who can afford new and renewed housing. They are not low-income. At the same time, some new housing for modest- and low-income residents will continue to be built and/or rehabilitated. Arbor Park Village in the Central Neighborhood (near East 38th Street and Woodland Avenue) is an example of new construction of rental units (with Section 8 assistance). And an impressive new project to build 79 homes in the Buckeye neighborhood near what was St. Luke’s Hospital is about to get underway. It will offer the option to purchase (starting at $170,000) or to lease-purchase. But since that construction, as all in the city, will “feed” the region’s continuing oversupply, the 79 new units will result in some number of abandonments elsewhere in the city. It is maddening, but that is the way oversupply works: gain in one place means loss somewhere else.
Suburbs of Cuyahoga County: Buildout and Slippage
Cuyahoga’s outer suburbs that still have undeveloped land will see those properties steadily developed, culminating in complete buildout. Meanwhile, low-income residents from Cleveland will continue to move into inner suburbs, where properties are declining in value as stronger-income households go elsewhere, pushed away by obsolescence, deterioration, the lack of renewal, and by the crime that often accompanies economic transition. For the poor it is a move up; for the suburbs it is slippage. And just as Cleveland lacks a tax base sufficient to contend with its eroding conditions, so too do most of its suburbs — which leads to a crucial question: Over the next 20 or 30 years, will Cuyahoga County’s inner suburbs retain and attract enough middle-income residents to remain economically viable?
In 50 years, most of Cuyahoga County’s poor may live in its suburbs.
The question is crucial because decline among inner suburbs plus sparse renewal and redevelopment in Cleveland plus diminishing growth in Cuyahoga’s outer suburbs will add up to a perilous situation for county government. Indeed, that peril has arrived as evidenced by what happened to the value of residential real estate between 1994 and 2015.
- The combined value of residential properties in the suburbs that share a border with Cleveland declined $4.73 billion — more than double Cleveland’s loss of $2.27 billion.
- The rest of Cuyahoga’s suburbs gained $3.2 billion.
- The net change for the county was a loss of $3.8 billion. That bottom line is an ominous threat to the county’s well-being and bond rating.
Already, 41 percent of Cuyahoga County’s poorest residents live in its suburbs. Possibly within a decade or so, more will live there than in Cleveland. In another 50 years, most of the county’s poor may live in suburbs, leaving Cleveland with relatively few, with most of them living in public housing or otherwise subsidized properties. The rest of the city’s residents would be middle-income and higher, and would be living downtown and in neighborhoods that became islands of renewal. This brings to mind what a social observer noted in the 1960s when many of America’s major cities, including Cleveland, were in turmoil: “The indications are that we shall not have viable cities until we lure the chronically poor out of the cities and induce the exiled urbanites to return.”
I don’t think it is a matter of luring the poor out; how could that be done in any case? It is a matter of depreciation and the economic power of those who are far from poor. Middle-class rejection of some suburbs opens the door for low-income people to leave the central city. Also, if people with strong incomes want to live where people with less income are located, the stronger purchasing power will force those with less to go elsewhere. The leading cases today are San Francisco and New York. It is residential capitalism. Without some governmental protection, such as rent control, a bit of which exists in New York’s Manhattan, or rental housing provided and controlled by not-for-profit entities, those with deep pockets will get what they want.
And then there is the distinctive characteristic of cities around the world where the wealthy and powerful live in or near the center while the poor live on the city outskirts or least desirable land wherever located. The center of Paris is an island of wealth and elegance surrounded by low-class “banlieues” (suburbs) with the usual troubling conditions. In central London, the super-rich populate the Kensington, Chelsea, and Knightsbridge neighborhoods. In the world’s old cities, the elite were entrenched at the center for centuries if not millennia before the arrival of the Industrial Age and its jarring impacts. The new economic forces were not going to dislodge them. Industry had to fit in around them, as the lowly had always done. But in America’s original industrial cities, the economically weak were able to settle centrally because the elite were not immovably in place. In that respect, American cities have been an aberration.
But it seems the need to be at or near the center comes with wealth and power. Historically, the closer one lived to the king or queen, the more one might have access to and benefit from the crown. The resultant concentration was where deal-making, intrigue (and counter-intrigue), personal networks, and cultural activities functioned most efficiently. If so, American cities, at least the major ones, were bound eventually to fall in line with the rest of the world. That has begun, with New York’s Manhattan being prominent.
Obviously, Cleveland is in a completely different league than New York, but it is reasonable to expect its downtown to continue rising with better-off (and some well-off) residents. And because Cleveland has a secondary center in University Circle, return of some elite can be expected there as well. An apartment tower, One University Circle, is under construction in response to the growing interest in centrality. I’m not anticipating many of the upper crust to relocate downtown or in University Circle, but enough will to constitute an important presence.
Cuyahoga County: Continuing Decline
County residents will continue to move up and out to neighboring counties where most of the region’s new housing is located. Cuyahoga’s share of the new housing market, currently 20 percent, will continue to shrink. It was 40 percent 30 years ago and 70 percent 60 years ago. The exodus of families will result in fewer children, more elderly, and lower incomes. The need for classrooms will continue falling while growing on the other side of the county line. The pattern of recent years will continue: roughly 1.7 residents move out for each person that moves in; $1.88 of household income is taken out for each $1.00 of household income that comes in. The most recent estimates, 2016, have Cuyahoga annually losing 5,000 persons and 2,000 households. Fewer households mean more abandonment.
If those figures don’t shake every elected official to his or her core, I don’t know what will.
Property values will continue to shift to neighboring counties, as they did between 1994 and 2015, when:
- The value of residential real estate in Cuyahoga County lost $3.8 billion while eastern Lorain County alone increased $4.1 billion.
- The portions of the other five counties near Cuyahoga gained a combined $10.4 billion.
- $14.5 billion gained in neighboring counties vs. Cuyahoga’s loss of $3.8 billion!
If those figures (coupled with the findings of the NEOSCC project) don’t express the severity of Cuyahoga’s situation, if they don’t shake every elected official to his or her core, I don’t know what will. As Cuyahoga loses residents and tax base to neighboring counties, it faces fiscal erosion — notwithstanding Cleveland’s “comeback” downtown and in a few select neighborhoods.
In the big picture of the county’s tax base, downtown’s rise is slight. After 20 years of impressive recovery, the value of downtown apartments and condominiums is around $300 million, which amounts to just 0.4 percent of the county’s tax duplicate, and 2 percent of Cleveland’s. I don’t cite those figures to diminish what has been accomplished; I applaud it and shudder to think of the situation without it. But the big picture shows much more loss than gain, and while the scale of seriousness is sobering, appropriate corrective action can be taken. The pace of renewal and redevelopment in Cleveland and its inner suburbs can be substantially increased; the conditions that will attract growing numbers of middle- and higher-income households can be created. But state and local policies must first be adjusted.
Neighboring Counties: Development and Traffic
What development and the vicissitude of location can mean to a single community is currently exemplified by the Village of Boston Heights in northeast Summit County. This village of 1,300 residents happens to have at its center the intersection of I-80 (the Ohio Turnpike) and State Route 8. This junction meant little for the village until 2010 when the Ohio Department of Transportation modified the interchange and provided ready access to 160 acres of the former Boston Mills golf course. After a horrendous squabble among residents and village officials over how the land would be developed (residential or commercial? residents wanted residential), the zoning was changed to permit commercial and office. Stores are coming, including Arhaus Furniture (which is moving, with its headquarters, from Walton Hills in Cuyahoga County), Costco Wholesale, and Bass Pro Shops. Dominion East Ohio is locating its training center there.
With just 1,300 residents (and not likely to increase much), the tax base that comes with that kind of development means almost tax-free living. “We need the businesses here so we can maintain what we enjoy about living here,” said Mayor Bill Goncy. “To preserve everything else, we need to have tax base.” It is life where municipal independence is a blessing and DIY survival is far, far in the future.
Time and again, the Ohio Dept. of Transportation has made it its mission to build new communities and foster commercial development on farmland and green spaces at the expense of built-out older communities like Cleveland.
Mayor Goncy knows, as every official does, that the most important matter of all is tax base, the lifeblood of each of the 143 cities and villages in the seven-county region. All are focused on and compete for tax base. Basically, those that have vacant land can grow their tax base through development, while those that don’t tread water if not sink.
When ODOT launched the Route 8 project, it saw it this way:
“With its close proximity to Akron and Cleveland, the SR 8 corridor in Summit County has seen major economic growth. This once rural roadway has undergone significant improvements to meet growing traffic needs as the corridor has developed. Now it is time for District 4 of the Ohio Department of Transportation to put the final touches on the improvements to this major developing corridor.”
“Major economic growth”? Not in the big picture. That “growth” involves mainly economic activity that moved, aided by the state, from somewhere else. Time and again, ODOT has made it its mission to build new communities and foster commercial development on farmland and green spaces at the expense of built-out older communities. Thus does the state give property value to some owners while taking value from others. It fails to protect equally while granting special privilege. It plays favorites, in effect, saying to older communities, I enable economic strength to leave you, but as you weaken, it’s your problem, you fix it.
Thomas Bier is an Associate of the University at the Maxine Goodman Levin College of Urban Affairs, Cleveland State University. From 1982 to 2003 he served as director of the Center for Housing Research and Policy. His research focused on regional housing dynamics, population movement, and the effects of government policies on cities. He has a PHD in organizational behavior from Case Western Reserve University and a bachelor’s degree in mechanical engineering from the University of Dayton. For more from his new book, Housing Dynamics in Northeast Ohio: Setting the Stage for Resurgence, click here.