is this flip a flop?

Flipping less-than-desirable / foreclosed homes in the hopes of turning a profit is not a new concept. In fact, both Bravo and TLC networks have hosted one or more shows on the topics, spurring a mini-revolution of sorts in a period when there are more renters than homeowners and more properties than people able to fill them.

The flippers are usually upwardly mobile real estate developers or handymen who know the value of hard work and quality materials (of course, there exist those people who insulate your walls with bargain-brand batt, hoping the buyer will never realize…).

It’s difficult to find fault with an individual who scoops up a property on the cheap, pours a great deal of sweat equity in the place and then puts it on the market for personal gain; but when the flipper is your local government, when the seed money is federal dollars that could be put towards other programming, and the profit is less than half of the dollars poured into the rehab, big, bold, burning red question marks arise.

Such is the case in my idyllic community of Cleveland Heights, as reported by the Patch: “The City has rehabilitated 12 homes using money from a federal program created to help cities tackle the foreclosure crisis.”

“The city received about $2 million through the Neighborhood Stabilization Program, which grants money to local governments to buy abandoned, vacant and foreclosed homes, repair them and turn them around for sale. The dollars also can be used to demolish homes that can’t be saved.

“The city has sold eight [of the twelve] homes so far. [It costs] on average, about $140,000 to repair each home. Once the homes are sold, the money goes back into the fund to continue to rebuild homes or demolish those that are dilapidated. The homes sell for about half of what it costs to renovate them, including Delmore [pictured above], which is listed at $76,000 [which is on the high end. Other properties unsold as of publishing are listed for $64,000 and include a vacant side lot].”

My very many questions:

Who determines which homes should be vetted for the $140,000 facelift and which homes are destined for the wrecking ball? What are the instruments in place to measure a structure’s value? Do residents truly have a say? Would the people authorizing the expenditure move into one of these homes after all is said and done? What do the neighbors think? Would they rather have a community garden on their street as a result of a demolished, under-performing structure or a refreshed (but still empty) home? (FYI: only certain people qualify to purchase these homes.) Should flipping be a hobby left to the “professionals”? Shouldn’t city government be more invested in what’s best for the whole, not taking on housing for 12 families? Shouldn’t these federal dollars be spent on demolishing the over-abundant vacant, unsafe housing stock and focused on urban, public interventions that the whole community can use as a resource?

This is a prime example of why transparency in government is so crucial.

……

What is Patch?

It’s a “new way to find out about, and participate in, what’s going on near you”. They’re “a community-specific news and information platform dedicated to providing comprehensive and trusted local coverage for individual towns and communities”. Find out more, here.

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4 thoughts on “is this flip a flop?

  1. I like how they say that the money from the sale goes back into the program, as though the program is making money, and not taking a 50% hit on every renovation.
    i suppose the devil’s advocate argument that I would make here is that targeted renovations might help to stem falling property values. In a real estate sense, one bad apple can spoil the bunch. A dilapidated property can bring down values on a whole block, an dilapidated block can start to impact the neighborhood, and so on. But private investment does a good job of keeping this from happening, and it also might be treating the symptoms, not the disease. If a neighborhood is really starting to go downhill, are a few unimproved lots to blame? or is it crime? a struggling main street? The government has tools to fix the latter two, which fix the first without ever owning private real estate.
    Incidentally, there’s a reason you don’t see shows like Flip My House on anymore; the market doesn’t support that kind of investment. It’s telling that the government would get involved only after there’s money to be made.

  2. Ray! You’ve just become by “most frequent” commenter! I feel you deserve a prize! I’ll work on it 🙂

    You’re right – one bad apple can spoil the bunch; unfortunately, on these 12 streets where the city has revived these homes, there are other begging to be torn down or rehabbed similarly, which makes me question how this house was chosen over it’s neighbor two doors down?

    When so many apples are spoiled, what to do?

    In Cleveland, the issue is a tough one – so many houses have been knocked down on some streets, that it looks as though the ones standing are in the middle of rural farmland. Other streets still have the building density, but the people aren’t there (or the people are squatters).

    Neither situation helps anyone’s property value.. I think the demolishing only works when there is someone to create something valuable from that land (in one project my firm is adding a sledding hill) – other neighborhoods have created excellent children’s playgrounds that they built themselves and they’re lovely, well-cared for and may even raise property value!.

    Is there a similar occurrence in Pittsburgh?

    • I think in general around Pittsburgh things are on an upswing, or a no-swing. The housing boom and subsequent crisis did not peak or crater to the extent that it did in the rest of the country. I’m trying to think of a particular neighborhood that might have done some individual lot improvement and I’m not really coming up with anything. I do know that many of the individual neighborhoods around Pittsburgh have their own steering committees (Lawrenceville Corp. comes to mind), where volunteer representatives for the community get together and make those kinds of decisions. This I think has obvious benefits over just going in and flipping houses without gathering community input.

  3. From all appearances, Pittsburgh is on an upswing! I’ve told so many people this and I do believe it’s true, people who live in Pittsburgh live there because they love the city. I think with that mindset, it’s much easier to form community-based orgs and help the city prosper. I think that Cle and Pitt are SO similar is so many ways (we both have ample water that is minimally safe to swim in, lots of bridges. big name architecture, endless steel mill remnants, thousands of acres of green space and the name Carnegie and Rockefeller everywhere) and small, community-based ventures are shaping both cities, but residents of Pitt just seem happier and more apt to take their neighborhood’s destiny into their own hands. Teach us how!

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