Epicentre of the Great Recession: what happened to Cleveland's Slavic Village?
When Anthony Trzaska hears the words “Slavic Village” in news reports, he knows what is coming next. “It’s almost like when the media reports anything on Slavic Village, it’s followed with: ‘Comma, where the foreclosure crisis in America started,’” says the 31-year-old resident. “It’s not like the foreclosure mess didn’t happen. But it didn’t just happen here.”
Cleveland’s Slavic Village is widely perceived as the epicentre of the Great Recession. In 2007, when the media finally realised that the housing bubble was bursting wide open (about two years after 48 states had sued subprime lender Ameriquest for fraudulent loan practices), a few journalists decided to run some zip codes to see where the most foreclosures were happening.
The zip code 44105 popped up at the top of the list. And with that, the great international financial crisis of the 21st century was centred in an old neighbourhood in Cleveland, Ohio – one that had been declining since the 1970s. At the time, few reported that foreclosures were also hitting cities like Miami, Las Vegas, Detroit and Phoenix far worse than Cleveland. Instead, some claimed that what was happening on Fleet Avenue, home to Polish sausage makers, was influencing the International Monetary Fund’s economic policy.
A boarded-up house in Cleveland. Many foreclosed homes were gutted by thieves. Photograph: Timothy A Clary/AFP/Getty
But what happened in Slavic Village – about five miles south of downtown Cleveland, on the eastern edge of the industrial valley – was symptomatic of greater issues across the cities of the American rust belt. For decades, old neighbourhoods had lost their economic reason for being; their factories were closing, their populations rapidly declining. They had too much housing in very poor condition, high poverty, high crime and little outside investment. When the housing crisis hit, many of the houses were abandoned, boarded up and left to rot.
After 50 years of decline, however, Slavic Village – named after the Polish and Czech immigrants who once settled there, with a current population of 22,000 that is now about half black and half white – is trying to crawl out of the wreckage. Never hip or trendy, it was, nevertheless, once the biggest retail district in Cleveland outside of downtown.
Anthony Trzaska, 31, a property developer who is betting that small retail can be brought back to Slavic Village. Photograph: Daniel J McGraw
Trzaska is working to bring that back. The property developer is a native: his family still operates a funeral home in Slavic Village. Now he is buying up property to market to small businesses. The focus is on Fleet Avenue, which is currently being torn up as part of a $9m renovation project to be completed this year. His firm, Sonny Day Development, is hoping to encourage small businesses to take root in the old neighbourhood, with retail on street level and housing above – an old model that has fallen out of favour.
“Slavic Village is playing the cards it has been dealt,” Trzaska says. “But I can see millennials approaching [local life] more in the way our grandparents did. It’s not just that they want things close together – their work and social life, and stores they support – but they want to be a part of a neighbourhood. They didn’t have that growing up in the suburbs.”
The neighbourhood has a lot of natural advantages: it is 10 minutes from downtown, with solid housing stock. And part of the reason for Slavic Village’s success in the fight against blight is the Slavic Village Recovery project. The private, for-profit entity has succeeded in fixing up decent, affordable housing for sale on the market – and has found that bypassing government subsidies to do so can actually make the houses cheaper.
The company is run by Robert Klein, CEO of Safeguard Properties, which manages foreclosed properties for banks. Klein, 62, knew from experience that banks just want to get rid of abandoned properties. But government regulations for non-profits trying to fix up foreclosed homes made the process too expensive – in short, taking public money meant you had to fix up homes too nicely.
“We find we can do the basic refurbishments for about $40,000 to $50,000 and then sell a three-bedroom, 1,200 sq ft home for about $65,000,” he says. “We can make a small profit of about $7,000 on the house, and then put that money into doing more houses. We don’t take a cent in public money.”
Recently renovated houses in Slavic Village, Cleveland. Photograph: Daniel J McGraw
Taking public money can make properties difficult to finance through bank lending. For example, to be eligible for tax breaks and other funding grants in Cleveland, a property must meet Leadership in Energy and Environmental Design (LEED) standards: green regulations that exceed what is required by the Cleveland city building code. Meeting LEED can often require tearing all walls down to the studs – an expensive prospect. Third-party contractors must also supervise and certify parts of the refurbishment, which can further drive up costs. The difference can be big: about $100,000 total cost for a home certified under LEED guidelines versus about $60,000 for one that meets city building codes. Banks are less willing to lend $100,000 for a house with LEED certification in a neighbourhood where comparable homes are selling for $40,000, but will be more willing to loan up to $65,000 for a renovated home in that same neighbourhood that meets city building codes.
Because Slavic Village Recovery does not meet the full government green standards, its houses are not eligible for the city’s 10-year tax abatement for refurbished houses. But, even without the tax break, the average monthly mortgage payment for a $65,000 refurb in Slavic Village comes in at about $450 – whereas for a $100,000 home it would be $625, even after the $100 tax break.
“It is pretty simple,” Klein says. “We can get people into a three-bedroom house in a neighbourhood that is coming back for less than most rentals in the area. And the buyers are not getting tax breaks, so the city isn’t getting shorted, either. We found the government programmes were very slow, and didn’t really help the neighbourhood much because it was one property here and another there. We work with the community development corporation to pick out houses we want to do, and try to concentrate on one neighbourhood first before we move on to other streets.”
The community development corporation performs a sort of triage on the neighbourhood: those houses that don’t make the grade are slated for demolition. About 150 homes – two-thirds of the ones they’ve assessed so far – have been demolished in the past two years. These are usually houses with structural issues, especially ones that have been gutted by thieves stealing plumbing pipes and kitchen and bathroom fixtures.
Cleveland city councillor Tony Brancatelli in front of a foreclosed house that was renovated under the Slavic Village Recovery programme. Photograph: Daniel J McGraw
This month, after two years of operation, the Slavic Village Recovery project will celebrate its 25th homebuyer. Another eight are under contract, with 30 houses total in the inventory and about 10 in the process of refurbishment. Klein says he has heard from other communities – in Columbus, Chicago and Atlanta – who want to do what Slavic Village is doing. “Getting rid of blight isn’t as complicated as it is made out to be,” Klein says.
Eight years since it was written off, the housing market in Slavic Village seems to be on the up. Owning a three-bedroom home, 10 minutes from downtown, has practical market value. And retail follows rooftops that have people underneath them – shops and housing are each one half of an equation, both dependent on the other. “I’m pretty optimistic the worst is over for Slavic Village,”says Trzaska. “This neighbourhood has value, and that’s what it was based on historically. I’m seeing people realise that part of it once again.”
This is an edited version of a piece that first appeared in Belt magazine