The Value of Reducing Vacancy

The first time Adam Kutcher beheld his future abode on a once elegant street of nearly all abandoned row houses in Baltimore’s Station North neighborhood, it was missing its roof and had a tree growing out of the back portion.

But where most people would have seen worthless pieces of real estate — worthy, perhaps, of only being bulldozed — Kutcher saw potential. All he had to do was convince his wife that they should restore the property and move there to raise their children.

“It wasn’t her idea,” said Kutcher. “But eventually she came on board.”

Fast forward five-plus years: The Kutchers, both in their 30s, ended up buying two side-by-side row houses for $3,000 each, hiring an architect and builder to create a unique, 3,100-square-foot dwelling that they call their “forever home” on what has become a revitalized street.

And the Kutchers aren’t alone. From Baltimore, Md., to Philadelphia, Pa., to Youngstown, Ohio, and beyond, public and private organizations are working to save abandoned properties from destruction and turning them into homes and neighborhoods where individuals and families want to live.

Alan Mallach, a senior fellow at the Center for Community Progress who has been dubbed the “Yoda of Shrinking Cities,” said there are more than a million abandoned homes in former industrial hubs from the East Coast to the Midwest, as well as in small towns in Appalachia and the prairie states.

He said the urban cities were hit by what he calls a “triple whammy” that started after World War II when families began moving to new suburbs. Or they left the region entirely, often moving West and South to the Sunbelt states on newly built interstate highways. In the 1960s, many white residents fled cities as schools were integrated, and by the time 1970 arrived, the manufacturing economies that supported jobs in many cities were eroding and beginning to disappear.

Baltimore, for example, had more than 900,000 residents as recently as 1970. In 2019, that figure stands at around 622,000.

“In the 60s and 70s, you saw a real erosion of the country’s traditional, old-time manufacturing base, which is what drove cities like Detroit and Cleveland,” Mallach explained.

“The biggest single collapse occurred in the 70s, when big steel went under. Up into the 60s, the United States was still a manufacturing powerhouse. At its height, the steel industry employed hundreds of thousands of workers. Pittsburgh might have had 100,000 steel industry jobs at its peak. Youngstown alone, a relatively small city, would have had around 30,000 to 40,000 steel jobs.

“The Bethlehem Steel plant in Bethlehem, Pa., might have employed 25,000 to 30,000 and provided good paying union jobs that allowed families to buy a home and send their kids to college. The total number could have been in the millions, even, nationally. But most all of that is gone.

“The upshot is that there is now a huge excess of supply over demand of older homes,” he said. “In Detroit alone, there are more than 100,000 vacant lots where homes and businesses once stood, with another 40,000 vacant buildings that they keep knocking down.”

Mallach, a former planning director of Trenton, N.J., praised Baltimore for its Vacants 2 Value (V2V) effort, which encourages people to restore abandoned homes and aids them with $10,000-closing grants and other incentives. He said the program is most successful in neighborhoods that are close to thriving areas, such as those near Johns Hopkins University.”

Baltimore officials put the number of vacant homes at around 16,500; a number that Mallach said is staying relatively stable and may even be declining.

“The problem is that outside the neighborhoods that are doing well, homes continue to be abandoned, but they appear to be getting ahead somewhat, which is a great thing,” he said.

Kutcher said his family’s new home is about a mile south of the Johns Hopkins campus and only blocks from an Amtrak station, which some neighbors use to commute to jobs in Washington, D.C. He works as a management consultant, while his wife is a marketing manager.

Kutcher said an acquaintance who is an architect showed him the street on which his family now lives, which then had six empty row houses out of a total of seven dwellings. Across the road were nine houses, three of which were vacant.

“I was attracted to what were once beautiful Italianate row houses with marble steps and marble windowsills. Even though they were in terrible shape, we saw a lot of potential for the neighborhood to come back and look like it did more than 100 years ago,” he said.

“The architect drove me around the neighborhood and pointed out not so much what was there, but what was coming. The important thing was that while it may have looked one way in 2013, I could envision the area’s revitalization. That made me more comfortable about moving my family to a block that had so many abandoned houses.”

Today, he said, only two of the houses on his street are vacant. But they’ve been sold and are in the process of being restored. By the end of 2019, the block should be fully occupied, something he calls a “real milestone.”

The Kutchers ended up investing about $440,000 in their new abode, which has four bedrooms, 3.5 baths and a full basement. It was recently appraised at $425,000, a figure Kutcher said they are “super happy with.” They also got 10-year historic renovation tax credits, which reduces some of their costs.

“This is not a short-term flip; we bought this as our forever house. We were hoping to be at the break-even point in five years, so as far as we’re concerned, we’re ahead,” said Kutcher, who noted that there is a public charter school within walking distance for their children. Unfortunately, he added, it has a long waiting list.

“People are moving in from other Baltimore-area neighborhoods because they like the energy here and want to be part of building a community. We have amazing neighbors, some of whom have been here for 50 years and others five months. Some stayed through thick and thin and others who say ‘this is where I want to plant my flag and raise my family.’ That’s what I love about this neighborhood.”

In Youngstown, Ohio, Ian Beniston, executive director of the Youngstown Neighborhood Development Corporation (YNDC), said his organization is working to stabilize sections of this former steel town by restoring homes, many of which have been abandoned. His city’s population peaked in 1930 at 170,000. It now has about 65,000 residents.

“Youngstown was a much different place then,” he said. “We were a steel town with 40,000 to 50,000 jobs in the mills. Now, we have one, highly automated, billion-dollar facility that was built about eight years ago and takes many fewer people to operate.”

Beniston said all of the counties in the five-county region surrounding Youngstown are shrinking, as people move to other areas of the country where economies are growing. He said his aging parents recently sold the house in which he grew up on the north side of town for $25,000, less than they paid for it in the 1970s.

But Beniston and others who care about Youngstown aren’t giving up on their community. He said the YNDC was conceived in 2008 and started in 2010 to deal with abandoned and dilapidated homes “because there weren’t any organized neighborhood stabilization efforts at the time.”

“That’s not to say that there weren’t programs here and there prior to us,” he said. “In fact, from the 1990s to 2005, there was quite a bit of construction of housing in the most distressed neighborhoods of the city using Low-Income Housing Tax Credits. Unfortunately, most of those were done in absence of planned efforts. We attempt to address all the property conditions on a block. That approach was not utilized back then.”

Since it started, Beniston said his program has renovated nearly 120 abandoned properties, most of which have been completed in the past five years, as well as fixing up another 350 occupied homes. The YNDC, which also counsels prospective home buyers, is supported by 50 different Youngstown-area organizations, including local foundations and banks. One is the Raymond John Wean Foundation, a major backer since the YNDC’s inception.

The organization also receives private donations, competes for city and federal grants and generates revenue from sale of houses, though Beniston said most are break-even propositions.

“Generally, our approach for the vacant homes we sell is to renovate them to create market-rate product,” he said.

“Our thinking is that there is already too much concentrated poverty in Youngstown, so adding more affordable housing in the poorest neighborhoods of the city and region is not a long-term recipe to increase neighborhood health.

“That said, we do develop some affordable housing, but we restrict the sale to certain income levels. We want to have as broad a market as we can and attract all kinds of people. We have started to develop more rental housing. There isn’t a shortage there, but there is a quality issue because we have thousands of people living in what I’d characterize as slum housing that doesn’t meet basic quality standards.”

Beniston said the YNDC gets the majority of houses it renovates through the Mahoning County Land Bank, which typically acquires them through tax foreclosures.

When the YNDC got one of those single-family homes, a nearly 100-year-old brick structure, a few years back, Beniston said it had been abandoned for more than a decade and was filled with trash and personal belongings.

“We took 100 cubic yards of stuff out, which is the equivalent of a tractor trailer load,” he said. “It was in rough shape, so we redid everything, put in a new boiler, new bathroom, new windows, new kitchen and we refinished the hardwood floor to keep as much of the character as we could. We also cleaned up the woodwork, which was fairly intact and still had nice french doors. It shaped up nicely.”

When finished, the YNDC sold the once-again attractive, single-family house for the modest price of $55,000. The residence next door, which was also vacant, is being fixed up by a private investor who has torn out its innards, replaced the roof and windows and is now putting it back together. The YNDC is also renovating a house across the street.

“We don’t just do one house at a time,” he said. “We have neighborhood action plans that address all of the area’s issues. It doesn’t make much sense to fix up one home on a block where everything else is in terrible shape, though you’d be shocked to learn how much of that is still going on in cities around the country. To us, that doesn’t make sense.”

In Philadelphia, developer Jim Levin and his partner Scott Mazo have been renovating abandoned and decaying homes and turning them into rentals for low- and moderate-income tenants since 1989 through Neighborhood Restorations/West Philadelphia Real Estate, a private company.

Since the start, he said his firm and its clients have invested $160 million and rehabbed nearly 1,100 homes on 900 different blocks in West Philadelphia. He uses a “scattered sites” approach to improve a street by finding “one, three or seven vacant houses,” and restoring them by turning a neglected property into someone’s home, which helps stabilize a neighborhood and make it safer.

“Moving people onto a block where you already have homeowners and renters who have lived there for decades is a great formula. Living in a house in an existing neighborhood — rather than an apartment — the new residents become part of a community. It’s something different than many of these folks have ever experienced.”

Properties his company has worked on have — in some cases — been roofless, used as dumping grounds and had shrubs growing in them. He prefers working on existing homes, but Neighborhood Restorations has also built new homes on empty lots where houses were torn down.

He said the rehabs and new structures — financed mainly by federal Low-Income Housing Tax Credits (LIHTC) — have resulted in significantly boosting the market value of all homes in the 2.5-mile area of West Philadelphia, where the company has focused, with one published report pegging the increase at $500 million. LIHTC provides a dollar-for-dollar reduction in federal taxes to investors for a decade after units are rented.

Levin said his company usually buys vacant homes or duplexes in a sheriff’s sale — from anywhere from $1 to an average of $25,000 — guts the properties and then rebuilds them using high standards “because we learned that the smartest thing to do is build the best house you can so you have the least problems in the future.” He estimated the cost to restore a property is usually around $120,000.

Levin touts the “scattered sites” system of rehabbing blighted properties as not only a proven way to stabilize neighborhoods, but a better program for low-income tenants.

“One of the things we should have learned, and did learn to some extent, is that concentrating poor people isn’t in their best interest or in anyone else’s,” he said.

Levin, a native of Philadelphia’s suburbs, said the city is one of the poorest in the country. “What I knew of West Philadelphia was what I heard on the news,” he recalled. “I learned quickly that like a lot of other places, 99 percent of the people who live there are trying to make a living and have a decent life. But, West Philadelphia has a significant population that is living at 60 percent or below of the median area income. It has some desirable places to live such as University City, but like any other urban area, much of it needs a lot of work.”

Levin said the rents in the restored homes typically range in price from $975 for a three-bedroom dwelling down to $725 for a one-bedroom house.

Though there have been difficulties, including problems clearing liens on properties obtained from the city, Levin said restoring neighborhoods in West Philadelphia has been among his favorite endeavors.

“I can’t tell you how much fun this truly has been,” he said. “I’m convinced that what we do is really good for the neighborhoods that had blighted homes, as well as the people who move into them.”

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