Story Of Unequal Recovery Pt 2

Two Cleveland Houses Tell a Story of America’s Unequal Recovery Pt II

We continue with the Tale of Two Cities within a city moving to the subject of successful recovery normally for those who are considered upper middle class.

Zach Germaniuk, a housing lawyer at a nonprofit in Slavic Village, a neighborhood near Mount Pleasant, says investor-driven churn in deprived communities has perpetuated both the decline of some neighborhoods and Cleveland’s race-based economic inequality. “We’re one of the most heavily segregated cities in the country,” Germaniuk says. “Real estate is really the centerpiece of that tragic history.”

Schulstad and Hodge outside 17527 Daleview Drive.

Ten days before Gathings got on the Zoom call that would decide her fate, Hodge and Schulstad closed on their house at 17527 Daleview Drive. The two tech company employees—he’s a software architect, she’s an engineer—met at work and were married in July. They toured the house for the first time three hours after the listing went online and found it had almost everything they were looking for, including a front porch that could house the swinging couch they had been hankering for since Reese Witherspoon posted pictures of hers on Instagram in 2019.

They made an offer an hour later and followed up with a letter pleading their case and saying they would add $10,000 to the asking price. They won the bidding over a half-dozen other buyers just days before their wedding and closed on the deal Aug. 25. “We were racing, racing, racing,” Hodge says. “We didn’t want to miss this opportunity.”

The price of the house was more than double the $143,500 the previous owner paid in 2011. That’s a testament to the value of suburban economic stability and of how a recovery fueled by the Federal Reserve and low interest rates is inflating the price of assets such as suburban homes and the stock market.

The median sales price of homes in Lakewood was up 11% in July from the previous year, to $227,000, with houses on the market for an average of 26 days, down from 39 days in July 2019, according to data provided by property site Redfin. In Gathings’s 44105 ZIP code, the median sales price in July was also up 11%—though to only $36,000. In other predominantly Black ZIP codes nearby, prices have tumbled 20% or more over the past year, according to Redfin.

Julie Weist, a Cleveland real estate agent, says the rapid drop in mortgage rates this year, driven by the Fed’s response to the crisis—along with a shortage of properties—has turned the city’s western suburbs into the hottest seller’s market she has seen in three decades in the business. “The pandemic really has not slowed anybody down,” she says.

Mitch Bihuniak outside his new home in the suburb of Rocky River.

Weist helped tech entrepreneur Mitch Bihuniak sell a three-bedroom colonial in the suburb of Rocky River in August for $457,500, almost twice what he and his wife paid for it in 2013. She also helped them trade up to a five-bedroom, Tudor-style house closer to Lake Erie, bought for $560,000. One motivation was finding a quieter street for his daughter, who turns 5 in October. Another was that they were able to get a mortgage at 2.85%. “It’s insane,” Bihuniak says.

The disparity in house prices on the two sides of the city reinforces Cleveland’s wealth gap. People such as Bihuniak and the newlyweds are doing fine. Hodge and Schulstad both work from home, and the pandemic has had little impact on their professional lives or incomes. “We’re fortunate to be relatively safe in our work environment,” Hodge says. “It’s weird that the housing market is so crazy, but people want more space, and interest rates are so low.”

But for renters on the east side, the pandemic has been crueler. At least one-third of tenants who inhabit the 900 affordable housing units managed by the Famicos Foundation in the neighborhoods of Hough and Glenville are behind on their rent, says John Anoliefo, the nonprofit’s executive director. Almost two dozen haven’t paid any rent since March, he says.

That has cast a shadow over long-term efforts to address the area’s glut of abandoned properties, aging housing stock, and homeownership rates of only about 30%. It also presents a conundrum for an organization helping people secure long-term housing. “My goal is to work with my tenants to avoid even going to court,” Anoliefo says.

Neither the volume of eviction cases nor the number of people receiving rental assistance reflect the true scale of what’s happening, says Hazel Remesch, who oversees Legal Aid’s housing team in Cleveland. Remesch says lack of knowledge and representation are not uncommon. That makes her worry about what comes next. “We are absolutely looking out at a crisis,” she says.

For Don Fenderson, a retired guidance counselor who started investing in rental properties in the east side neighborhoods of Glenville, Collinwood, and Mount Pleasant in the early 2000s, buying them at sheriff’s auctions, that crisis is already visible. One-third of his 21 tenants are behind on the rent, he says, and “one person hasn’t paid for three months.” The only ones who aren’t behind are those whose rent is paid by the federal government as part the Section 8 subsidized housing program for low-income Americans. Even those tenants, Fenderson says, are struggling to come up with the small amount of rent they contribute, and the houses that he bought two decades ago are worth less than he paid for them.

“I’m okay for now,” Fenderson says. “But long term, it’s definitely curtailed some of the way that I am used to living. It was so easy to buy houses, and I probably jumped in too far.”

Gathings declined to comment when a reporter knocked on the door of her Clarebird home after her court appearance. She moved out before the Sept. 25 deadline, which means the eviction won’t be logged on her record or affect her credit. She later texted to say she found a new place to live.

On the housing court Zoom call, Gathings made clear she was hoping for some help and a new start. “I tried for everything,” she said, “and I wasn’t getting approved for anything. It’s out of control.”

At 11410 Clarebird, the search for a new tenant is already underway. Gueant says the house is one of about 20 managed by his firm that have been involved in eviction proceedings this year, a number that increased as a result of the pandemic. The evictions are taking longer to move through the courts, he says, but it’s a cost of business his investors are willing to bear. Finding a new tenant shouldn’t take more than a couple of weeks. “The market is very dynamic,” he says. “We still have a lot of opportunities there in Cleveland. It’s just a matter of transitioning back to normal.”

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