The Role of Investors in the One-to-Three-Family REO Market: The Case of Cleveland
A team of local researchers, including the Center on Urban Poverty and Community Development, Thriving Communities Institute, Poverty Center Affiliated Faculty Member Robin Dubin, and others, have released a report on the effects of investor-ownership on foreclosed properties, convened by the Joint Center for Housing Studies at Harvard University and the What Works Collaborative.
The report, The Role of Investors in the One-to-Three-Family REO Market: The Case of Cleveland, shows that nearly one out of every three Cleveland homes sold by banks after mortgage foreclosures end up condemned, abandoned, boarded up or demolished. Hazard-rate analysis shows that the failure rate for these transactions is five times higher for larger investors and out-of-state buyers than for small investors. Properties that ended up in the hands of land banks, community development corporations and governments, when compared to small investors, were three times more likely to succeed.
The study is the first to take a long-term look at the impact of foreclosure in Cuyahoga County. "We analyzed data from more than 73,000 post-foreclosure transactions in the County between 2000 and 2012," stated April Hirsh, Research Assistant at Poverty Center. The study found that the manner in which foreclosed houses were disposed and traded compounded the problem of blighted homes, resulting in $46 million in uncollected property taxes and creating a "disproportionately negative impact" on African-American neighborhoods.