Tag Archives: Real Estate

Gaming the Economic Development System

Once again, it appears that “build it and celebrate it” no matter the past sins (or future consequences) reigns supreme among economic developers. While hyping an announcement of more jobs and new construction in Greater Lansing, the fact that the insurance company in question challenged its property taxes using the “functionally obsolete building” scheme in 2010 was conveniently overlooked (see article in City Pulse).

Source: freep.com

If you are not familiar with the “functionally obsolete” tax game that is being employed most often by big box retailers, the claim that is made is their building is “functionally obsolete”  because it was specifically designed and built for their purpose and no other entity could possible adapt it. Needless to say, the whole argument is rather sketchy, but unfortunately, state tax tribunals have been swallowing it hook, line, and sinker. This argument might be plausible or reasonable if the structure was 20+ years old, but it is also being made for newly/recently constructed buildings. The story in the May 8, 2013 edition of City Pulse is an example of the same scheme being used for an office building. Exactly how hard is it to move cubicles, desks, and partitions?

The professional planning community needs to address this issue and fast. If a building is to become so dysfunctional (or functionally obsolete) so quickly, should it be approving for construction in the first place? And if it means the local property taxes are going to soon take a backhanded hit in the process, even more reason to deny the project unless the applicant certifies the building will be erected In an manner that is not dysfunctional (a.k.a. functionally obsolete).

Most special use (or conditional use) permit approvals require a community to determine whether the use “will not be detrimental to the economic welfare of neighboring properties or the surrounding community.” If the proposed building is to become “functionally obsolete” within ten years, no realistic or reasonable decision maker should approve its construction. Otherwise, all they are doing is losing badly at a zero sum game.

– Rick Brown

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Filed under architecture, Economic Development, Editorial, Featured, Headline, Politics, Real Estate, The Media, Urban Planning

The Newest Rust Belt Investor…China?

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Take a look at this CNN article about a Chinese firm with plans to build a “Chinese-style mega shopping mall” in Milwaukee.

“The cost of doing business there is very low,” Wu Li, president of Toward Group told CNN. “The people are friendly, the environment is peaceful and the pace of living is slow. It is a good place for Chinese enterprises to go abroad.”

The story explains Wu’s company recently purchased a dormant shopping complex in northwestern Milwaukee that was built in the 1970s, for $6 million. It will  open the mall, renamed AmAsia, in August, according to CNN, part of a growing trend of Chinese investment in US real estate. That trend has mostly been in cities outside the Rust Belt –until now.

But not so fast- according to the story. Japanese investors did the same thing a few decades ago and it didn’t work out very well.

Why not?

“You go into a place like Milwaukee, and you have a country that has no clue what people in Milwaukee want in a mall and when they buy it the first thing they do is change it to run like a Japanese mall or a Korean mall or a Chinese mall,” according to an international business attorney quoted in the story. “Well nobody wants to go and then they bail.”

While the firm does plan to have a US company run the mall, it the story says it is recruiting retailers from China. “Two potential candidates include Beijing Wu Yu Tai Tea Company Ltd. and Tong Sheng He, a shoe shop. The goal, he says, is to help Chinese brands boost their image in America while enabling American businesses to connect directly with Chinese wholesalers without having to go through a middleman.

‘It is only a matter of time for the U.S. to recognize Chinese products are high quality,’ he told CNN. ‘[The mall] will represent the highest levels of Chinese manufacturing.'” The mall will also have Chinese cultural exhibits like painting or dancing.

Is this a concept that could succeed in your city?

I’m skeptical. The Milwaukee Journal-Sentinel points out that this mall is not near a highway interchange, as most malls are. The city had planned to demolish the site and put homes there, according to the paper.

Furthermore, while I know we as a country buy billions of dollars worth of Chinese-made products, I just can’t imagine people really embracing this concept.

On the other hand, if they want to invest here…why not?

What do you think?

-KG

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Filed under Economic Development, Headline, Politics, Real Estate

Alyssa Katz: Reconsidering the American Dream

Author Alyssa Katz called on concerned individuals to play an active role in shaping new federal policies toward homeownership in a speech today at Cleveland State University’s Levin College of Urban Affairs.

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Katz, author of Our Lot: How Real Estate Came to Own Us, spoke as part of the CSU’s ongoing “Building Our Future Beyond Foreclosure” speaker series.

“History has handed this country and all of us this great tragedy and this great opportunity,” Katz said. “In the throes of this national trauma, the idea of community development really has to go mainstream.”

Federal invention in the housing market has a long history in the United States, Katz said, beginning following the Great Depression with the creation of the Federal Housing Administration.Government sponsored housing lenders Fannie Mae and Freddie Mac followed. Later, during the white flight of the 1970s, the government enacted the Community Reinvestment Act to hold lenders accountable for supplying credit in low- and moderate-income neighborhoods.

Now, following the devastation of the foreclosure crisis in Cleveland and elsewhere, our regulatory and housing subsidy environments are in need of another overhaul, Katz said.

She recommended retooling the Community Reinvestment Act and overhauling the banking regulatory structure to meet the challenges of the 21st Century.

“How can a global investment system that pools resources from all over the world remain accountable to local communities?,” Katz implored. “This question is one of particular urgency for Cleveland and Ohio.”

Building stable communities with lasting value will take the cooperation of bankers, community development officials and city planners in addition to average citizens that demand sensible policy solutions, Katz said.

“If the federal commitment to supporting home ownership is not in question. The terms on which it will operate are still in question,” she said.

“How can [banks] underwrite not just the value of an underwrite on one home but on the total community in which it sits?”

Prior federal interventions achieved meaningful results, drastically reshaping American neighborhoods and giving birth to suburbanization and later urban renewal, she said.

But special interests are using the housing crisis to attack successful government housing policies like CRA, despite overwhelming evidence that CRA lending did not contribute to the housing crisis, Katz said.

Moving forward, we need an “explicit government framework for community reinvestment,” Katz said. “Those of us who know how important government policies are to giving communities access to credit have to be pretty specific.”

Katz’s speech was followed by a panel discussion including Robert Curry, director of The Cleveland Housing Network, Christine Henry, director of the WECO Fund and Ruth Clevenger, Community Affairs Officer at The Federal Reserve Bank of Cleveland.

Addressing potential changes to the CRA, Clevenger recommended expanding the legislation to include more financial service providers, outside of traditional “brick-and-mortar” banks.

Secondly, she said, despite CRA’s benefits, it hasn’t been enough to address the current vacancy and abandonment problems being seen across the region.

-AS

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Buying my First House in Youngstown, Ohio

This article was contributed by Megan Reed, a late-20ies Youngstown resident and software salesperson.

As many young adults do, I recently took upon the endeavor of buying my very first home. I began my search after many years (almost ten) of renting apartment after apartment, and then renting an entire house. I always enjoyed the freedom that comes with renting. An apartment felt like an over extended stay in a hotel room, it really wasn’t my place to begin with, I just stayed there for a while-I can leave anytime I want, or that is, when my lease ends. After some time, I started to see and hear the value of ownership from friends who became proud home owners.

I began my search in Youngstown, focusing on both the North and south sides of the city. I first moved to the north side of Youngstown in 1999 for college, stayed mostly in the city for the majority of my time in college, and then found an amazing job in downtown Youngstown. Being familiar with living in the city, especially the north side, I had no apprehensions about moving back. I grew up in downtown East Liverpool, in a house from the 1890s my parents completely restored- and I knew I wanted something similar to the big, old house I loved so much as a child. The suburbs-Boardman, Poland and Canfield-had none of the architecture or price range I was looking for. Youngstown became my only answer.

One of the first sources of opposition I faced during this time was convincing my colleagues, family and some friends that buying a house in the city was not going to be such a “terrible mistake,” as one family member put it. I listened, nodded and then explained my theory- “If you want to make the city better, don’t sit back and wait for it to happen, do it.” I feel one of the greatest problems plaguing Youngstown has been the deterioration of our beautiful and historical homes run down by numerous slum lords, blight and abandonment. Yet regardless of how anyone felt about Youngstown, I received constant lectures about my safety, property values and of course- school districts.

After a year or so of searching, going on multiple home tours throughout the city, many times walking into homes whose next visitor is probably a wrecking ball, I found my house!
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It is a grand, all brick, 2600 square feet Craftsman style home from 1927. The area I live in is the South Side, a neighborhood as described by the appraisal as “stable.” The neighborhood has its own bright and dark spots- many of the houses surrounding me are well taken care of, and many are empty. (The house next to us is empty and has been for over a year)

Now that I determined which home to purchase my next step was to get the loan. I went through a brokerage agency- who took the best care of me. However that care came with a price- I worked non-stop for thirty days to provide every document ever created from my financial life. The experience is not one I want to relive anytime soon- constant time spent on the phone with the agency, working non-stop to save every penny to put for the down payment and working with my realtor to make sure every precaution necessary was in place to ensure this was a good house.
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After one month of signing the contract, working to produce everything but my first born to the brokerage agency, we moved into our house. Now that I’m here there have been a few additional surprises I was unprepared for.

Insurance: Finding home owner’s insurance involved trying to wrap my head around their system. The cost for my home’s insurance was through the roof- why? Because of the “rebuild” value. It would take X amount of dollars to rebuild this old house, and then factor in the city’s crime rate. This has also impacted my car insurance- why? Because the insurance companies feel living in the city of Youngstown increases my chances of theft, damage and bothering them for a claim.

Stigmas: First- i will state it is not my family who really has fears for me living in the city, they are very supportive and not from here- but our other family, colleagues and some friends expressed great concerns of us living in Youngstown. I’m not certain where their fears lie. Perhaps from the news, statistics or just the general stigma the suburbanites have against Youngstown, but it is prevalent. They have stated numerous times, “Are you sure you want to live there? Do you know how bad it is? You’ll never be able to get any money out of that house.”

So far yes, we have heard noises that I question to be either fireworks, cars back firing or gun shots. Yes- there is an abandoned home next door to me and many in the neighborhoods behind our home (about two on the block directly behind our house) and many across the street. There are occupied homes with great neighbors that I have met. They are proud people, taking care of amazing homes built to last for centuries. My neighbors were elated to meet us, relieved a young couple bought the home on their street- keeping out landlords, blight and protecting the integrity of the street. We have many homes around us who are kept up by proud homeowners such as myself. We have more than a purpose than home value- we are keeping the value of the city alive come hell or high water. My goal is not only to live in Youngstown, taking great care of my house but also my street, block, and city. There are many good people and homes left in our city, still many great neighborhoods with architecture unknown to the modern contractor, yet to be discovered.

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Filed under architecture, Featured, Real Estate, The Housing Crisis

Left to Rot

By now, we’ve all seen these. Half-finished condominum complexes, shopping centers, homes, abandoned and left vulnerable to the elements.

This $5.8 billion complex was to contain 5,000 hotel rooms on the Las Vegas strip.

This $5.8 billion complex was to contain 5,000 hotel rooms on the Las Vegas strip.

The New York Times has catalogued some striking examples in a slide show called The Ruins of a Second Guilded Age.

“The sudden shift in the economy has unmasked such excess,” said photographer Edgar Martins.

Says Michael Olivares, a 30-year-0ld accountant who bought his Bakersfield Calfornia home for $410,000 in 2006, “We get a lot of tumbleweeds rolling through.”

Nine homes on his street have been foreclosed on this year.

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Why One Man Wanted to Buy A House in Flint, Mich.

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This Slate piece was written by a Flint native returning to his hometown in search of affordable housing, driven out of San Fransisco by obscenly high housing costs.

It’s an interesting and well-written story.

Thanks to Rust Wire reader Claudia Raleigh for bringing it to my attention.

-KG

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Filed under Featured, The Housing Crisis, U.S. Auto Industry

Banking on Foreclosures

A Cleveland based for-profit company is looking to establish a “foreclosure clearinghouse” to deliver bank-owned properties to government entities and nonprofits.

ideastream in Cleveland reports REO Clearinghouse is planning to streamline the purchasing process for local agencies that have been endowed with stimulus money to address the housing crisis. Continue reading

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