Estimating the Effect of Demolishing Distressed Structures in Cleveland, OH, 2009-2013: Impacts on Real Estate Equity and Mortgage-foreclosure

Report by Griswold Consulting Group, Nigel G. Griswold, Benjamin Calnin, Michael Schramm, Luc Anselin, Paul Boehnlein
February 11, 2014

Center on Urban Poverty and Community Development   (Cleveland)

The Thriving Communities Institute has released the report "Estimating the Effect of Demolishing Distressed Structures in Cleveland, OH, 2009-2013: Impacts on Real Estate Equity and Mortgage-foreclosure" produced by Griswold Consulting Group. The report uses empirical data derived from the Center on Urban Poverty and Community Development's NEO CANDO (Northeast Ohio Community And Neighborhood Data for Organizing) system to econometrically model impacts distressed residential structures and vacant lots have on nearby property values. The report cites NEO CANDO as making the research possible by providing highly sophisticated parcel-level data.

This two-part empirical analysis focuses on the effect that residential demolition has had on real estate equity and mortgage-­foreclosure rates in the Cleveland, Ohio area between 2009 and 2013. Part 1 of the analysis uses a spatially dynamic economic model of land use change to estimate varying levels of financial impact from demolition activity on real estate equity across four housing submarkets. Just over 6,000 demolitions were completed over the study period, costing roughly $56.3 million. Findings estimate total demolition benefits at $78.9 million, suggesting a $22.6 million net benefit attributed to demolition activity. Benefits from demolition activity were shown to accrue primarily in high and moderately functioning markets. Conversely, findings suggest that little real estate equity return is available from demolition activity in weak real estate markets.

Part 2 of the analysis uses a pattern-based approach to investigate the relationship between demolition activity and mortgage-foreclosure rates. Findings show a clear trend of decreasing mortgage-foreclosure rates in areas where demolition intervention activity took place. This is true for the study area as a whole as well as in low, moderate and high distress neighborhoods.

The report was the focus of the opening presentation of the 2014 Cleveland City Council Community Development