Landmark Deal Will Force JPMorgan To Help Fight Blight
MELISSA BLOCK, HOST:
We're going to focus now one small piece of today's record settlement. As Jim mentioned, JPMorgan Chase will get credit for demolishing foreclosed homes and reducing blight in distressed neighborhoods. Well, Jim Rokakis hopes the deal will send the bank his way. He's director of the Thriving Communities Institute in Cleveland, Ohio and has been at the forefront of the anti-blight movement there in Cleveland. Mr. Rokakis, welcome to the program.
JIM ROKAKIS: Thank you for having me.
BLOCK: And let's start with the scope of the problem in Cleveland. How many homes do you figure you have that - in Cleveland that simply need to be torn down?
ROKAKIS: Well, if you look at Cleveland and the inner-ring suburbs, the number is somewhere between 13 and 15,000 houses awaiting demolition.
BLOCK: Well, how do you decide when a home needs to be torn down? What goes into that decision?
ROKAKIS: Well, it's a decision made by local building authorities. But it's a pretty easy decision to make when a house has been either damaged by fire or stripped of all its mechanicals - windows broken, doors removed. It's not a tough decision. And there are many of these where the question is not, does the house need to come down? The question is, where are we going to get the money and how soon can we do it?
BLOCK: How much do you figure it cost to tear down a house?
ROKAKIS: It's an average of about $10,000 a home. So in a state like Ohio where there's still around 85 to 90,000 vacant, abandoned, never-to-be-reoccupied houses, it's an 815, $900 million problem.
BLOCK: I've read that it's not uncommon - once a home has been foreclosed upon - for somebody to swoop in, flip the property, and then it might cycle through two, three or four new owners. And you've been trying to fight this. Why? Why isn't that better than demolishing the home?
ROKAKIS: Well, if somebody is willing to come in and repair the home and find the next buyer in line, that would be great. But that's not happening in most of these distressed neighborhoods. Once the home goes vacant, it is quickly stripped and quickly made demolition-ready. We're talking about rehab costs here that can be quite substantial. But this crisis has so lowered the value of housing in many Cleveland communities and inner-ring suburbs, it makes no economic sense to go in and spend 50 or $60,000 to rehab a house when you can buy a habitable home in this community for as little as 15 or $20,000.
BLOCK: What do you hear from the neighbors of these vacant homes that have been, as you say, stripped?
ROKAKIS: Well, they're the true victims. You know, they didn't take out a bad loan. They didn't, you know, falsify their income. They didn't get a no-down-payment loan. But they woke up one day and the house next door to them was vacant. And a year later, there were two more down the block. And before they knew it, their house had lost all of its value. These vacant properties not only destroyed their value but they're crime magnets. And there are statistics all over the country that show the relationship between the two. So they are thrilled when these properties come down. I think they'd prefer neighbors. But given the current circumstances, that's not likely to happen.
BLOCK: Well, once these properties do come down, the big question then, of course, is what do you with that land once the house is gone?
ROKAKIS: Well very often, the property just goes to the next-door neighbor. But there are more complicated strategies being put into place. You heard talk of urban farming and community gardens. That really is only a small percentage of the property. I think all strategies have to be examined but in the short term, we've got to get these properties down.
BLOCK: Well, when you think about the settlement with JPMorgan Chase, what would it mean to Cleveland to have JPMorgan Chase calling you and saying, we're going to work on this blight problem?
ROKAKIS: Well, it would mean a lot to the city of Cleveland, which has so little money in its general fund. They have virtually budgeted nothing for demolition in 2014. And trust me when I tell you, they had their eye on this settlement this morning as a potential source of revenue to help them with this problem. They desperately need it.
BLOCK: Jim Rokakis is director of the Thriving Communities Institute in Cleveland. Mr. Rokakis, thanks so much for talking with us.
ROKAKIS: And thank you.