Editor’s note: The foreclosure crisis is reshaping cities and towns across America. Planners are taking note of contributors to the current problems and are taking action to address the crisis while avoiding such massive fallout in future real estate market downturns. This three-part series focuses on the how the foreclosure wave has hit suburbia, urban communities and rural communities, and how they are responding to the challenge.

Thinking small isn’t easy — not when growth is the politically hip thing to do.

For struggling Rust Belt cities like Cleveland and Detroit, civic leaders need to buy into the idea that it’s hip to be square and transform their communities into smaller, greener and healthier metropolises, experts say.

Their future depends on it. But experts warn that making a successful transition will require a vision that breaks with tradition, a new political will, and smarter spending of financial resources currently strained by the mortgage crisis and steep economic downturn.

"What we’ve got to do is take the long view — to begin to think about us as a smaller city. It is very hard to transform shrinkage with budgetary (limitations)," said Norman Krumholz, a planning expert at Cleveland State University and a member of the city planning commission.

Cleveland has little choice — and so do other urban centers that have been wrestling for decades with thousands of vacant properties triggered by declining populations and a dwindling tax base. The avalanche of foreclosures has piled onto these woes.

"We were talking about urban renewal in the ’60s. The question now is, ‘Do we use that land for other purposes?’ " said Casey Dawkins, co-director of the Metropolitan Institute at Virginia Tech University in Arlington, Va.

These days, all eyes are on Cleveland as the forerunner for reinventing a city that has lost half of its population since 1950 — a decline fueled by the post-World War II march to the suburbs and vanishing manufacturing jobs. In December, the city planning commission backed guidelines that advocates say will serve as a framework for future land use and zoning decisions and counter the economic devastation caused by widespread foreclosures and a growing inventory of vacant properties.

Called "Re-Imaging a Sustainable Cleveland," the plan pictures a smaller, green city with larger parks, cleaner watersheds, and burgeoning urban farms and community gardens. Urban forests could be planted to leach soil laced with toxic chemicals.

"The foreclosure crisis has been Cleveland’s trial by fire. This is a time we can repair mistakes of the past. Big chunks of the city can’t redevelop back to the 1950s," said Theresa Schwarz, a senior planner for Kent State University’s Cleveland Urban Design Collaborative.

Krumholz agrees.

"The powers to be are going to have to take this into consideration. They have to. They are facing a crisis of vacant land," he said.

Cleveland has 3,300 acres of vacant land with an estimated 15,000 empty buildings. Every year, the city demolishes about 1,000 buildings to lessen neighborhood blight and the risk of fire and vandalism. The city plans to use more than half of its $25.5 million in federal Neighborhood Stabilization Program money to tear down 1,700 homes.

Other cities are razing dilapidated buildings as well. Minneapolis, Youngstown (Ohio), and Detroit are earmarking at least a third of their federal money for demolition.

In Cleveland, the number of vacant properties is expected to climb even higher as homeowners face a new round of interest-rate resets over the next two years.

"It’s not over yet. We’re expecting another wave of foreclosures," Schwarz said.

City leaders aren’t sitting back. Cleveland is suing nearly two dozen Wall Street banks and mortgage companies, accusing them of predatory lending practices. "We want relief. We have a lawful duty to deal with vacant houses that we weren’t responsible for (creating)," said Chris Warren, the city’s economic development director.

On the plus side, Cleveland and other shrinking cities have long resumes in dealing with distressed properties. They also have developed a staple of experienced nonprofit housing organizations that have launched numerous neighborhood rebuilding projects. …CONTINUED

Moreover, Baltimore, Cleveland and Washington, D.C., have developed sophisticated evaluation models to determine the number of properties entering the foreclosure pipeline. Cleveland, for example, uses an assessment tool to calculate the probability of foreclosure based on various loan characteristics.

Once pillars of industrial progress, Cleveland and Detroit now suffer some of the highest foreclosure rates among the nation’s major cities. In the past two years, Detroit recorded more than 110,000 foreclosures while Cleveland posted more than 77,000.

"The subprime lending that led to the avalanche of foreclosures exacerbated the multigenerational … weakness in the housing markets. We’ve been hurt as if a tornado came through our town," Warren said. He acknowledges there are parts of Cleveland where there are signs hanging in front of some houses that read, "You can buy me for $200."

The mortgage crisis literally washed away two decades of progress in Cleveland, say some. "There was significant recovery in Cleveland and northeast Ohio in the 1990s," Warren said. "Cleveland led the region in new housing permits year in and year out in the ’90s."

During those years, civic boosters hailed Cleveland as the comeback city. The rebirth centered on enormous public investment in the construction of three new sports complexes for professional baseball, football and basketball teams. The city also built the Rock and Roll Hall of Fame and other attractions, including an aquarium and science center. Investments totaled about $700 million.

"Cleveland was making progress. A lot of euphoria was built on these very large public investments," said Krumholz, the city’s planning director from 1969-79. Special nonprofit community development companies developed hundreds of affordable housing projects, including Slavic Village, a 19th-century neighborhood that underwent a dramatic renaissance.

Foreclosures, though, "ended up weakening the city very, very substantially," Krumholz said. Slavic Village, one of the best community development corporations the city had, was slammed by the mortgage crisis.

Historically, national and local urban policies treated big-city ailments as an affordable housing problem and pushed for revitalization programs that focused on more building, especially subsidized housing.

However, some experts today argue that renovating dilapidated buildings may be counterproductive to neighborhood health. Instead, they favor razing obsolete buildings to shrink neighborhoods and put the vacant land to other use such as parks and greenbelts. They say cities should rebuild the market with a block-by-block review to select those neighborhoods that will benefit by future investment.

Cuyahoga County, which includes Cleveland, is taking that long view by establishing a new state-approved land bank to acquire distressed properties in stable neighborhoods and also to acquire vacant land, holding the properties for future development.

County officials want lenders to give up some foreclosed properties in the suburbs, which the county would renovate and resell to first-time homebuyers.

Cleveland has a long-established land bank, but it holds only vacant property. The new "Sustainable Cleveland" plan calls for initiatives to improve water quality; plant trees that can restore toxic-laden soil; and add new farms, parks and community gardens. More than $600,000 has been earmarked for pilot projects over the next 18 months.

At the same time, Cleveland is considering new zoning rules to allow installation of wind turbines to generate electricity.

"Most cities have not considered alternative land use," Schwarz said. "Cleveland might become a bellwether for all depopulating cities."

The key, Krumholz said, is persuading city leaders to accept the economic realities, including a further exodus of people from Cleveland. The city population is projected to plunge from 483,000 in 2007 to 387,000 by 2016.

"We’re very hip on growth," Krumholz said. But "you have to comfort yourself that smaller is beautiful."

Gilbert Mohtes-Chan is a freelance writer in California.


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