Voices from the Rust Belt

by Anne Trubek

  The functional elegance has run into some inelegant dysfunction in the Rust Belt, however, because for the filtering mechanism to work well there must be steady population growth. When population growth stops but building continues, two things start happening right away: the number of abandoned properties goes up as people “filter” out of the worst housing, and overall property values go down due to the market oversupply that outpaces regional demand. The depressed values further discourage investment in the upkeep of the lower-end properties, which accelerates the decline in real estate values.

  STRESSED TAX BASES

  Because schools and city services are typically funded through property and income taxes, a decline in relative property value and average income means either that municipalities need to increase tax rates to generate the per-household dollar amount needed to sustain services at historic levels, or those services need to be cut, or some of each.

  Some communities can deal with that—they understand that their higher tax rate still translates to a reasonable tax bill for a house of a given size when compared to the newer places (which charge a lower tax rate on a house that costs more per square foot to get a similar dollar amount). This is why people happily still choose to live in places like Cleveland Heights, Shaker Heights, and Lakewood in the Cleveland area even though tax rates have crept up over the decades: the total cost of a mortgage plus taxes is still favorable compared to that of outlying areas, and the inner-ring lifestyle simply does not exist out there. This isn’t specifically a Rust Belt phenomenon, but an age-of-housing phenomenon: nationwide, older homes tend to have lower per-square-foot property costs and higher property tax rates than newer ones. But in a high-mobility/low-growth scenario such has characterized the Rust Belt since the 1970s, some areas of a city lose so much value so quickly and so pervasively that there seems to be no way out of it except to let things crumble and start over.

  The inequities and waste are further exacerbated when the region is a patchwork of small, competing municipalities rather than one geographically big city. It’s hard to sell independent municipalities on the concept of some kind of regional cost sharing when many of them were created specifically not to share with their neighbors, but rather to keep their own costs low while enjoying the spillover value of being near an urban economic center.

  * * *

  Overbuilding is all the more of a drag in places like Cleveland or Detroit or Buffalo or Toledo where there is still ample and relatively inexpensive green space to expand into on the outskirts, because every new project saddles the region not only with excess housing and retail capacity but also with the long-term burden of sustaining exponentially more infrastructure. In geographically constrained places, people end up redeveloping underused spaces within the city because there is less blank space outside it to sprawl into.1

  PERSISTENT SEGREGATION

  When these mobility patterns are layered on top of a legacy of discrimination, we get typical Rust Belt racial and economic segregation. Recently a couple of items have made the rounds of the internet showing the geographic distribution of people by race and income in the U.S. By some of these measures, Cleveland is the most segregated city in the country.2 Notably, a number of the other most segregated cities on that list have similar histories of regional population stagnation or shrinkage since the late 1960s.

  Beginning in the 1930s or earlier in Cleveland and many other cities, properties were designated as the lowest investment quality, based, presumably, on age and location. This designation seems to have established a decades-long trajectory. A 2014 Belt feature showed that much of East Cleveland was designated as the lowest, “grade D” property many decades before the notorious years of white flight3 in the 1960s. Those old redlines set in motion a sequence of events that helped define the current segregation of Cleveland: in part because investment in upkeep was discouraged by the low rating, many grade D properties steadily lost value leading up to the 1960s. Wealthier residents moved out and were replaced by people of lesser means. Many of the new residents were renters because banks would not issue mortgages due to the low investment grade. Discriminatory renting, lending, and selling practices prevented black families from moving into any places except for these lowest-grade neighborhoods, which meant that even if a family managed to buy a home, often the property did not increase in value, so little if any wealth was accumulated, resulting in some geographic areas that were disproportionately populated by people with low wealth and dark skin.

  By the time black families were able to move relatively freely after the civil rights advances of the 1960s, the region had already entered its post-industrial population decline, which meant there was very little demand pressure for anyone of any race to move into the older, deteriorated neighborhoods. So most of the acres of land that were segregated and low-income fifty years ago have remained segregated and low-income. Meanwhile, the number of people living in those neighborhoods has declined precipitously. The Cleveland neighborhood of Hough claimed 72,000 people and was predominantly black in 1960; by the year 2000 it was still predominantly black but had less than 20,000 residents. (Granted, there is some upbeat news in that downward trend: many of the African Americans who moved out are now a generation or two into a more prosperous life in racially integrated places.)

  A fascinating visual data project by the Cooper Center plots the residence location of every single person in the United States, broken down in broad categories by race, and it shows this phenomenon dramatically. Looking at the entire United States, it’s clear that the relatively few people who live in vast, sparsely populated rural areas are overwhelmingly white (with the exception of some rural areas of the Southeast that have more black residents), while all other races are concentrated in urban areas. If you were to draw borders around those large areas where the very few humans are white, and then filled each entire area with a solid color indicating the predominant skin color of the residents, it would appear that the United States is 90 percent white. Many of the geographic segregation maps are drawn this way—this area is white, this area is Asian, this area is black, this area is Hispanic—but it doesn’t show if there are fifty people per acre or one person per square mile. Acres aren’t people. The dot map shows that some areas of greater Cleveland (especially the inner suburbs on both sides of town) are pretty well mixed in race and income, but the amount of land occupied by those places is modest compared to the amount of land occupied by population-depleted inner-city areas and especially the sparsely populated, mostly white outer suburbs and countryside. Because the actual number of people is so few, any influx of diverse population into these geographic areas would quickly change the picture of segregation—however, there has been no influx of anyone into those inner-city neighborhoods for a good sixty years.

  SCHOOL RATINGS AS REAL ESTATE MARKETING TOOLS

  Another realm in which the dynamics of mobility operate is in our schools and the tools we use to rate them. In Ohio, the primary effect of the state’s student-testing regime has not been to improve educational outcomes, but to encourage migration within regions. The test methodology is designed so that the reports don’t show which districts are making the most difference but rather which ones start off with the highest-achieving students.

  The design of a research instrument usually says a lot about the motivations of its designers, and it would appear from this example that the primary purpose of the state report cards is to spur economic development in some places at the expense of other places. Why else would you take the valuable precise individual student test data you have about how James is doing in reading and Jasmine is doing in math and then throw away the value by unscientifically lumping scores together to make contests between communities, unless the primary goal is to get people to desire one community over another? If your motivation were really to help those individual students, you’d use the individual test data to identify which students need what help, and help them.

  But the “school ve
rsus school” mentality promoted by the state report cards is pervasive. Currently in Ohio, some politicians continue to discuss plans whereby funding could “follow the student.” A kid who is doing poorly could go to a different school and state funds attached to that kid would go to the new school. This proposal plays right into the “fight or flight” mentality, too, as it presumes that the solution to every problem is for the individual to move.

  Given the system we have had, it is utterly unsurprising that we don’t see overall statewide improvement in student performance, but we do see families abandoning some communities to move to other communities in response to the school report cards. If getting people to move is our goal, we could save everyone a lot of trouble simply by telling those folks to look at income levels. Just go to Wikipedia and look up the wealthiest cities in Ohio. Pick out the top twenty wealthiest places in the greater Cleveland area. Now go look up the top ten highest-scoring Cleveland-area school districts. Those ten school districts cover all but two of the twenty wealthiest places.

  Clearly, using student test data to set up a contest among school districts does little more than magnify the advantage of communities that are already advantaged. Worse than that, it’s not telling us anything we didn’t already know decades ago. Wealthier kids have a starting gate that is much closer to the finish line. Everybody loves a horse race, but there’s no drama to this one. Just give them the roses at the beginning and don’t waste our time and money staging a rigged contest.

  FIVE STEPS

  Certainly there are other unintended negative consequences of easy mobility that merit attention, but these five—abandoned crappy retail space, too much housing, stressed tax bases, persistent racial segregation, and the use of schools as real estate marketing—give us plenty to chew on. It’s not surprising that our cities have run into unforeseen side effects of increased mobility: society has never encountered these conditions and possibilities before. But now that we’ve seen what’s going on, maybe we could make some adjustments so that the mobility-driven evolution of our cities isn’t quite so brutal to individuals and so disruptive to regional economies. The problems are complex, of course, but still, each of the five ailments above might respond to a fairly simple treatment.

  RETAIL: LEAVE NO TRACE

  There is a principle taught to every Boy Scout: leave no trace. No responsible camper would just leave a worn-out tent in the woods for someone else to clean up. But that is exactly the behavior of big-box retailers. This is frustrating because it comes so close to a sensible approach: why not just acknowledge that big-box retail is nomadic and build things in such a manner that they can be easily dismantled and either transported to a new site or recycled? Maybe the town where the retailer has built charges a deposit that would cover the cost of putting the land back the way it was and the occupant doesn’t get their deposit back if they don’t restore the place to the way they found it. If an old “box” is vacant for more than a year, it has to come down. Packing up camp is part of the process, just like setting it up.

  New construction on blank land enjoys a lot of subsidies, from the roads that literally pave the way, to the utility lines paid for by past customers, to tax structures that reward new construction over the maintenance or rehabilitation of existing houses. The people building new on the outskirts are among the most advantaged already, so they really don’t need the less wealthy people of the region to subsidize them. We can probably eliminate those discounts. If the lack of a new-construction discount leads someone to decide to stay put and upgrade an existing structure rather than building new, that’s a pretty good sign that building new was not really an economically sound idea in the first place. Over the years, the accumulation of such decisions would gradually mitigate the housing oversupply.

  TAX BASE: REDUCE OVERSUPPLY AND DON’T PENALIZE REINVESTMENT

  Broad-based regional tax and revenue sharing is probably unrealistic in an intentionally balkanized place like greater Cleveland, but it might be possible to assess a modest fee on new construction whose sole purpose is to fund the demolition of abandoned housing at the same rate that new units are added relative to population (that is, if housing occupancy is growing at the same rate as new construction, then there’s no fee). That would help keep a lid on the oversupply of housing, thus keeping real estate values up across the region, and it would rid older areas of dangerous, blighted structures, and prime those areas for quicker redevelopment.

  Americans are conditioned from birth to complain about taxes, but it isn’t necessarily a problem that older areas have higher tax rates, because the older real estate is more affordable in the first place. However, what if you want to build a new house at $150 or $200 per square foot in an old neighborhood whose higher tax rates assume a $75-square-foot value because most buildings have already depreciated for ninety years? Yikes! Older towns need to encode utterly predictable graduated abatements that make the effective tax rate on new construction or extensive renovation in inner-ring Cleveland Heights the same as it would be for new construction in exurban Macedonia (and they need to widely publicize this standard abatement). The city will do fine because the per-square-foot value of the new construction is higher than the typical older Cleveland Heights home, and thus roughly the same dollar amount will come in each year. Similar abatements should apply to any major investment in a home’s infrastructure that bring its systems up to “contemporary” standards. Measures such as these would encourage reinvestment in these older neighborhoods, where much of the highest-quality (if older) housing stock already exists. Such reinvestment would be a net gain for the region.

  * * *

  Finally, some real estate appraisers and bankers use a set of methods incorporating an assumed “rot rate” that can define entire neighborhoods as bad investments if they are over fifty or even thirty years old. Such formulas exist because they make it easy for lenders to make decisions—just like those property ratings from the 1930s made it easy. But easy isn’t the same as fair or smart. Lenders and appraisers need to account for the fact that houses originally built for middle- and upper-middle-class owners between about 1890 and 1940 have some of the highest-quality construction and materials even though some formulas might suggest they are past their economic lifespan. Nothing built since then can compete with the level of handcraftsmanship that went into a regular middle-class house. And those houses are tough—the structural wood in the pre-dimension lumber days was notably stronger than post–World War II product (just try to saw through an old joist). The scale of the neighborhoods built in that era was defined by the streetcar and the early days of the automobile: notably more spacious than earlier in the nineteenth century and designed to allow for cars, but still compact enough to comfortably get around on foot or by bicycle. These are the authentic neighborhoods upon which “New Urbanism” is modeled, and these factors of craftsmanship and neighborhood form should enhance investment value—not only for those houses built 80 to 120 years ago, but for any new construction that embodies high craft, quality materials, and efficient site design.

  SEGREGATION: REIMAGINE IDENTITY

  Round one in the growth of Cleveland’s population was usually a story of ethnically homogenous groups coming here and setting up ethnically homogenous enclaves (by choice or not). Yes, the city contained diverse cultures, but at closer magnification one could see that these groups did not mix a whole lot at the neighborhood level.

  But that seems to be changing now—as downtown, Ohio City, and University Circle attract new investment and new population, property values are climbing in those areas and in nearby neighborhoods.4 The demographic makeup of those growing core areas tends to be fairly diverse, and one can expect that as population growth spreads outward from those centers, the people occupying the formerly segregated adjacent land will be increasingly mixed in race and culture as well. Places like these can provide a model for how empowering it is for a community to see itself not just through a monocle of common heritage, b
ut through a multidimensional sense of community and shared values. If the coming years show significant population growth in the city, it will be the first time in Cleveland’s history that city neighborhoods have grown without an official framework of racial segregation, and we ought to make the most of that opportunity.

  It’s worth noting as well that for every Shaker Heights that successfully integrated in the 1960s and ’70s, there are also places that “flipped” from white to black well after the civil rights era, not because of any racist legal framework, but because of the prejudices and fears of individual home- and business owners. As long as we continue to see each other and ourselves mainly through the lens of race, then we will continue to sort neighborhoods by race. The only way to get beyond that is to cultivate other senses of shared identity that we decide are more important.

  SCHOOLS: LOCAL CONTROL WITH STATE SUPPLEMENT

  For more than a century, schools have been strongly identified with the communities they serve—not only in the rah-rah sense of cheering for the hometown sports team, but also in the civic significance and permanence that is signaled by stately architecture and the usually prominent location of the high school in a spacious setting at some kind of focal point of the town. This is all great, but it poses a problem in the context of statewide standards: this local tradition can sometimes confound the state’s avowed interest in providing something that approaches fair opportunity in education for all students.

  Shifting the way tests are used could not only help improve educational outcomes but at the same time allow each local district to retain some local flavor. First, let each district fund itself as it chooses, and let each substantially control its methods to best match its local community. Second, the state should use its test data to improve education where the need is greatest, on a student-by-student basis. That could be as simple as having state-employed specialists trained in remediating particular kinds of learning deficits—in reading, writing, math, science, history, arts, and so on—come in to supplement the local school’s own teaching corps. Certainly that’s a more effective response than saying, “We’re going to publish school district report cards that reflect where the rich and poor kids live and you can try to move to a wealthier place—and good luck with that.”