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How to Beat the Shrinking City Syndrome

Roberta Brandes Gratz / Apr 29 2011

For Release Friday, April 29, 2011
Citiwire.net

Roberta Brandes GratzNEW ORLEANS — Attention shrinking cities! New Orleans recently held an auction of blighted houses. More than 1,000 people showed up to bid on approximately 100 vacant houses and empty lots with an average of seven bidders per property. Officials were astounded. This stunning success has relevance beyond this beleaguered city and may offer a new clue about how to approach the shrinking city syndrome that is hollowing out other beleaguered cities with demolition-based strategies.

Before the New Orleans Redevelopment Authority (NORA) auction, the city’s blight policy emphasized demolition on the assumption that people were not coming back, not enough new people were coming in, and that vacant property would sell better than damaged homes. Sound familiar? Detroit, Cleveland, Philadelphia, Buffalo and others use government funding to follow this path, assuming there is no other way.

Yet, in New Orleans, which experts erroneously thought would stay shrunk after Katrina, anecdotal evidence has long pointed in other directions. But since the city keeps no real records on renovation permits for blighted properties, and since, as well, there are more hurdles to property reclamation here than getting to the moon, this auction speaks volumes about a scenario different from official assumptions.

First-time home buyers, small local renovation contractors, current residents seeking an investment opportunity — there are all manner of buyers. Prices range from $5,000 to $175,000 for the mostly single family homes. Prior auctions required sealed bids, minimums that would not undermine neighborhood values and commitments to live in the house for five years. No such requirements were present this time.

This auction, however, was more broadly marketed and gave hope to many people either unable to take advantage of other processes, or denied bank financing for pricier properties. The only obligation here is to show substantial remodeling completed within a year of closing. The city’s permitting process will have to move uncharacteristically swiftly for this to occur.

Most significantly as a lesson to other cities, properties with deteriorated houses sold better than vacant lots. This contradicts the assumption common elsewhere that the best way to deal with blight is to clear existing structures — no matter how architecturally significant they might be — and bank the land for other uses or future development.

That policy assumes that the only future hope is with builders of whole developments — not individual buyers looking for an affordable way to either buy or build a property for their own use, or for small renovators who buy and fix up one property at a time. No evidence exists that any of the rustbelt shrinking cities have tried the approach just witnessed in New Orleans.

This turn of events may wind up having a game changing impact on the policy of both NORA and the city. NORA still owns countless storm-damaged properties. Significantly, NORA officials and aides to Mayor Mitch Landrieu discussed possibly stepping in to supplement the tight mortgage and construction financing market.

The New Orleans auction could mark a dramatic and positive shift in government policy at all levels and a potential alternative for other cities as well. Why wait years for big developers to buy big swaths of land for redevelopment with the usual generous assortment of subsidies and tax incentives? Why not let the market reemerge slowly with small help offered to individual buyers? This happens to be the way regeneration has occurred in the many once-deteriorated-but-now-revitalized neighborhoods across the country. Developers are never the first ones into challenged neighborhoods; they follow the small investors who take the risks and prove that the market exists.

In reality, American cities have been shrinking since World War II, long before the demise of such smokestack manufacturing as cars and steel, or other big industries. Urban renewal, highways, federal subsidies for suburban development, redlining of urban neighborhoods — all combined with Madison Avenue’s promotion of the American dream of home ownership to “shrink” cities.

Density was made the big bugaboo. The false notion was promulgated that de-densifying neighborhoods would diminish crime. Today, we understand the reverse is true. Urban renewal and highways destroyed more residential units and small and large businesses than were replaced by towers-in-the-park and industrial parks.

Yet the theory these days is that the salvation of distressed cities is to once again “shrink,” as if shrinking had not been tried before and succeeded somewhere but who knows where. And who knows that people can’t be lured back? It is happening in many places and not just in New Orleans, where experts are continually surprised by neighborhood resiliency at the grass roots level.

Endless examples of gradual regeneration — not theory — do exist elsewhere as well. Top examples included the dollar houses Baltimore initiated in the ’70s, a practice begun recently in such cities as Syracuse. They include the regeneration of the South Bronx by community efforts that successfully fought the then popular approach of “planned shrinkage.” There are parallels in current neighborhood efforts in Buffalo, Pittsburgh, Houston, Portland. All these efforts represent innovative strategies to bring people back, to nurture new business formations, to build on observable successes instead of following simplistic theory. It only happens in small step-by-step doses by adding something positive instead of removing the negative.

The lessons of how and why are never learned.

The real challenge is to overcome the state and federal regulations and funding opportunities that make this revitalization direction so difficult. Demolition money is easier to come by. Big demolition contracts are easier to give. Mayors love the photo-op that gives the impression of cleaning up blight. Lenders don’t like the look of dilapidated old buildings, even if they are historic or just solid old construction. They do, however, understand demolition and formula building projects. And even though preservation, restoration, conservation and renovation have saved more neighborhoods than urban renewal ever did, the money to do more of it is the most complicated to get.

Obliterating whole areas of deteriorated housing is just another way of giving up on the past and the future. Nothing can be gained from this path; true innovation and creativity can be found in following the regeneration path instead.


Roberta Brandes Gratz is an urban critic and author of the newly published The Battle For Gotham: New York In the Shadow of Robert Moses and Jane Jacobs, 2010, Nation Books.

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7 Comments

  1. Posted April 30, 2011 at 7:09 am | Permalink

    The idea that planned shrinkage is impossible because it’s never been done is like saying in 1900 that heavier-than-air flight is impossible because it had never been done. History moves on and disproves the doubters.

  2. Neal Peirce
    Posted May 1, 2011 at 8:13 pm | Permalink

    Comment from Richard Layman:

    it’s true that someone’s problem is someone else’s opportunity. But as (the article) points out, not that those of us who deal with urban settings don’t know already, the way most city landbanking problems work don’t give provide much in the way of ground up opportunities.

    I was talking with someone about this once about Albany, and he started telling me about a similar project in Albany, how the city assembled properties and gave them to one owner, etc. and I cut him off, ’cause I didn’t need to hear it.

    I told him that you can’t blame the city per se as large organizations are more accustomed to dealing with large organizations, they don’t work very well with small projects and ground up ways of thinking.

    Then again, neither do most CDCs.

    So you need to build different kinds of initiatives to deal at the ground up. The article mentions some of the classic older examples, such as Baltimore’s Fells Point housing homesteading program.

    The newer examples are Baltimore’s Healthy Neighborhoods project (there is a new program in Philadelphia modeled after this program, now housed at the Preservation Alliance), various resident attraction programs including Baltimore’s Live Baltimore program, and the neighborhood improvement programs modeled after the Main Street program but focused on residential properties–Pennsylvania did it first, with its “Elm Street” program, Maryland has since copied it as the “Pine Street” program.

    But yes, it’s frustrating that a lot of the same old same old persists in government policy, and cities and neighborhoods languish in the meantime.

    Richard Layman
    http://urbanplacesandspaces.blogspot.com

  3. Posted May 2, 2011 at 3:30 pm | Permalink

    I have written to Neal, in the past, of Michigan’s Home Improvement Act of 1976 and of it’s tremendous success in Saint Joseph, MI. 30 years of neighborhood revitalization, based upon that tax legislation, with a recent sale to a bank executive, having been the son of the former City tax assessor, paying $1.4M for a lot. Tax evaluation is based upon what you start with and doesn’t penalize one for rehabbing a deteriorated old structure. I returned to my home town to begin this work because most folks need to see progress not able to visualize change.
    I am a 35 year veteran of real estate and knew, back then, I couldn’t buy and flip property for this to happen. I did, though, inspire many to follow my lead to the extent our local employer, Whirlpool Corporation, seeing this change occurring before theirs eyes, commit to founding a not for profit redevelopment corporation and building a Jack Nicklaus Signature Golf Course called Harbor Shores. I’ve been quoted, “it takes a long time to raise a village, especially when you’ve got to do it over.”
    Our private banking system is chartered to fund growth. Not maintainance or preservation. FHA has a rehab funding source known as 203K. Other lenders have made an attempt to fund rehab, as well, but it’s tough and isn’t for home owners, just for licensed contractors.
    The Michigan Compiled Law is at the bottom of my home page for anyone interested.

  4. Posted May 2, 2011 at 8:03 pm | Permalink

    Thank you so much for expressing this so eloquently. Gradual, small scale regeneration is a good, solid solution in many settings.

    There are times that functional obsolescence is an issue that requires removal – whether it’s the shape of a lot or the building itself. Still, often, the solutions remain small in scale. It’s site by site – district scale at most.

    What happens when the market disappears? Prices adjust downward. Perhaps it can invert to the point there’s no reason to reinvest. How much do some of these “shrinking” solutions protect the downward property pricing that could affect other properties in the region? The tax base? I won’t speculate, but it is a good research question.

  5. JRM
    Posted May 2, 2011 at 10:56 pm | Permalink

    I don’t think you looked hard enough for the evidence. I know that in Detroit, there have been several property auctions held by Wayne County. (http://www.bid4assets.com/storefront/index.cfm?sfID=546) Thousands of homes go unsold.

    I don’t know the particulars of the available New Orleans properties; maybe there is more interest from local buyers than there is here. I tried to get into the 2009 auction but out-of-state speculators snapped up all the available bidding paddles (one of the reasons they moved to an online system, IMO). But many of these homes that were auctioned in Detroit are worthless. Absolutely worthless. They are not worth the materials in them, much less the money required to bring them up to a livable condition. Just because New Orleans had a successful auction doesn’t necessarily invalidate the demolition strategy elsewhere. And it’s not like demolition and regeneration cannot go hand in hand, either.

  6. Sarah Duda
    Posted May 3, 2011 at 4:03 pm | Permalink

    Thank you so much for discussing this important topic and for bringing NOLA’s particular approach to vacant properties to your reader’s attention!

    I think that while it is great that these properties are getting back on the tax roll, a property purchased without the requirement that it is occupied does little to counteract the destabilizing impact that vacant properties have on blight-filled communities.

    I live in Chicago and am a researcher on community development topics and have seen that there is very little demand for housing in communities with significant numbers of vacant properties – which is why there are swaths of vacant houses in the first place. If costs are low enough, people (mostly investors) do purchase properties but it is rarely to put them back into productive use. I am curious what “substantial renovation” means – what financing requirements were – and I am also curious to see how purchases and prices ranged across geographies in the City before I consider this type of unrestricted policy an option for revitalizing communities. I think that as practitioners we should always think about what policies provide the best outcomes for communities in the long run, not just to the City in the short run. I do not believe that transaction costs are at issue here (and if there are barriers for purchasers who are owner-occupants there are other ways to address the problem), and my experience suggests that a city would not chose to demolish a perfectly safe building in a community filled with viable owner-occupants. Demolition is incredibly costly for a municipality, and as the NOLA policy demonstrates, a city would do most anything to pass that cost on to others.

    I think that these concerns could be addressed by simply requiring that properties be occupied or by pairing such a program with structured disincentives for holding a property vacant. In Chicago, property owners are required to register a vacant property every six months it remains unoccupied – with increasing levels of security and fines. In communities with significant blight and very low housing demand I still believe that deeding a property to a local nonprofit or a coordinated effort to deal with an oversupply of housing through land banking, are more appropriate options (although admittedly subsidized to work).

    Thanks for the opportunity to share my thoughts!

  7. Posted May 17, 2011 at 12:43 pm | Permalink

    I’m a community organizer in Youngstown, OH who works with over 20 neighborhood groups throughout the city. I’d like to know who the 100 of the 1,000 people who bought the homes / lots are…and would like to see a review of what the 100 houses / lots look like in 3 or 5 years.

    Selling homes in Youngstown is not a problem. It who is buying them. If you were serious about purchasing a home and living in it and are of ANY kind of means (I’m talking about decent homes for $10-20K), you can do it. But we just lost another 18% of the population over the past 10 years.

    This author always seem to base her arguments on the broad-based assumption that demolition is the only approach cities like Youngstown are taking regarding the “shrinking city” urban redevelopment philosophy. A neighborhood development approach like that of the Idora neighborhood here in Youngstown is more the actual strategy – adopting community-drive neighborhood plan which includes a blend of demolition, vacant land repurposing (urban agriculture, pocket park, side lots), housing renovation with home buyer grants and/or low to no-interest loans and a strong neighborhood association willing to stay on top of issues (as best they can) while establishing a sense of community. It has been a great success here in Youngstown…so much so that EVERY neighborhood wants some piece of this approach.

    In addition to that, it also helps when you have a government that has your back (rental and vacant property registration, land bank, code enforcement / citizen inspection programs, neighborhood project grant programs) but that’s the subject for a whole other conversation, of course.