The growing attention placed on clearing out or cleaning up vacant and abandoned properties in Greater Cleveland is welcome and encouraging, as both remedies are necessary. But I would like to emphasize the bigger picture and the need for a broader set of solutions.
A key fact about Cleveland and other weak housing markets in Ohio is that we face more than a regional housing problem — we face a regional economic growth problem that stems in part from long-term population loss.
Since 1990, Cuyahoga County has lost 10 percent of its residents. During that same period, the number of housing units rose by about 2.5 percent. The result: our supply of housing exceeds the demand for homes.
A useful insight about urban decline is that it is not a mirror image of urban growth. When cities grow, new construction and rising home prices follow. But when cities shrink, the housing stock remains intact, like a ghost of better times. With fewer people seeking homes, we usually see the prices of homes decline.
So what can we do to restore vitality to our neighborhoods?
We are already doing a lot on the housing front. For example, Cuyahoga County’s land bank is aggressively reducing our supply of low-value housing, through both demolition and rehabilitation. Other efforts center on stabilizing individual streets by rehabbing abandoned houses. But as important as these efforts are, the truth is that eliminating or improving some of the housing stock is at best an incomplete solution. We also need to focus on the demand side of the market.
Research at the Federal Reserve Bank of Cleveland has found that since the 1950s, rising property values have been driven more by land values than by the values of the structures themselves. Demolishing or improving low-value housing stock may not have a lasting or significant impact on property values, unless there is a strong, ongoing interest in the land itself.
I believe that our land values will rise only when our neighborhoods and communities become more appealing places to live and work. We need to offer a variety of amenities such as good schools, access to transportation, safety, and green spaces to retain our existing residents and attract new people to our neighborhoods. Communities that can attract residents with the skills to earn good incomes should see an increased demand for housing, and in turn, neighborhood revitalization. To accomplish this, however, we must look beyond the narrow topic of housing to the broad topic of human capital.
I have said it before and I say it again: addressing educational issues is critical to reversing the decline in our city and our region. Research has repeatedly shown that with higher levels of education, people are able to earn higher incomes. Yet area employers tell us that they are having a hard time finding highly skilled workers to fill open positions. The educational attainment levels of Cleveland residents are far below the state average, and Ohio itself falls well below the national average. We have some serious work ahead of us.
The good news is that we have a solid foundation in place already. Greater Cleveland is blessed with a number of excellent universities and community colleges. At the K-12 level, the Cleveland Municipal School District has adopted an education transformation plan that will help to position Cleveland students to be competitive in our global economy.
We also have a history of forming broad coalitions with the expertise and commitment to address the region’s challenges. These coalitions span government, private enterprise, financial institutions, foundations, and community development organizations.
But we cannot hope to achieve a turnaround through a single program or through the efforts of a single organization. We will need many organizations, with people exhibiting passion and creativity and collaborating in new ways. We will need patience and commitment, as the successful outcomes we seek may take years to become evident. Above all, we will need to think beyond housing if we want to revitalize our neighborhoods.
Sandra Pianalto is president and CEO of the Federal Reserve Bank of Cleveland. The views expressed in this article are hers alone and do not necessarily reflect those of her colleagues in the Federal Reserve System.