The Obama Administration has its eye on Cleveland, where foreclosed and vacant homes are being razed to the ground. While bulldozing sounds like a radical idea, the premise behind it is to clear away the least-saleable homes in areas with a surplus of foreclosed inventory, thereby stabilizing property values. Some argue that there’s a market for rehabilitated land. In Cleveland, the soon-to-be vacant lots are managed by a land bank (a government-controlled agency that buys foreclosures). The properties are donated to churches, neighbors, and other organizations. If neighboring home values go up as a result, homeowners can refinance more easily and affordably.
In July 2011, Bank of America announced plans to bulldoze 100 foreclosed properties in the Cleveland area, according to Time (“Bulldoze: The New Way to Foreclose”). By the close of summer, the financial institution had already given away 100 homes in Detroit and 150 in Chicago with plans to demolish in possibly nine other cities by the end of the year. Fannie Mae, Wells Fargo, and JPMorgan Chase have also participated. For banks, bulldozing has its benefits. Once they donate properties, banks no longer bear the tax burden or upkeep costs and may even receive a write-off. In some cases, demolishing properties is more cost-effective than repairing and getting them up to code. Local governments are often in favor because they receive free land to develop or use for public space.
In the long-term, do homeowners benefit? If bulldozing helps clear inventory faster and home values go up as a result, the answer is yes. But not everyone is a fan. In the Atlantic, columnist Danny Indiviglio writes that banks may use the measure as “an easy out to minimize their loss with little concern about what’s best for the U.S. economy.” Rather than demolish properties, the focus should be on converting them into rentals. While the dilapidated, vacant eyesores that hold nominal value might be bulldozed, there are many other properties that simply need rehab. To raze or not to raze? In some hard-hit areas of the nation, that remains a lingering question.