Drastic Times Call for Drastic Measures?

Did anyone else catch CBC’s National last night? Paul Hunter reported from Cleveland on initiatives to demolish houses that have been foreclosed on and are sitting vacant, in order to reclaim the land and increase the value of the other houses in the neighbourhood—and, in fact, to improve the neighbourhood. The thought being that vacant, run-down homes bring down the overall value of a neighbourhood.

Cleveland alone has tens of thousands of homes in foreclosure and/or that are sitting abandoned, and millions of home owners across the United States are either behind on their mortgage payments or are in foreclosure proceedings. That means hundreds of thousands of properties, sitting vacant, not being taken care of.

Neighbours, worried about their own homes’ values, want something done, but whose job is it to step in and improve the value of a neighbourhood?

The National reported that Cleveland is performing surgery on its own housing problem. In 2007, Cleveland had the highest foreclosure rate in the United States and the economic decline in that city is still deepening. Enter the Cuyahoga Land Bank. The mission of the Cuyahoga Land Bank is to strategically acquire properties, return them to productive use, reduce blight, increase property values, support community goals and improve the quality of life for county residents.

The Cuyahoga Land Bank, is a non-profit corporation, funded by a variety of sources. Its primary funding comes from penalties and interest on delinquent property taxes and assessment. This primary revenue stream is supplemented by the Cuyahoga Land Bank’s sale of acquired properties to qualified rehabbers and housing developers, as well as by donations of property and funds from the Cuyahoga Land Bank’s partners.

The Cuyahoga Land Bank is convincing some financial institutions to donate their foreclosed upon houses/structures to the city and fund the demolition of those structures. In doing so, they can improve the value of the other houses in the neighbourhood on which they hold current mortgages. The thought being that empty lots are more valuable to a neighbourhood than eyesores. In addition to improving the value of the neighbourhood as a whole, it can be less costly for a financial institution to pay for the demolition and get the tax write-off on the donated land than to keep paying taxes and advertising the property for sale.

I’m sure all of us are thankful that the Canadian housing market hasn’t gone the way of many metropolitan areas of the United States, but what if it does? How would Canadian mortgage holders/financial institutions handle such large numbers of foreclosures? Is tearing them down the answer?

What do you think of efforts in Cleveland to improve neighbourhoods and increase the value of occupied homes? Do you worry that certain areas of the Canadian housing market could go the same way as the U.S.?