Wednesday, January 4th, 2012

60 Minutes: There Goes the Neighborhood

A few weeks ago (I think, based on the date of the page), 60 Minutes did a segment on the housing crisis and especially how it is affecting Cleveland. The video is embedded below, but for those of you in Google Reader or a similar platform, it probably won’t show up, so if it doesn’t, click here to watch it.

What I find most disturbing about this video is how banks and institutions have walked away from these homes at the same time that whatever residual value is left in the neighborhoods is provided by those families who are underwater and financially struggling, yet see paying their mortgage as a debt of honor. In other words, just how everyone else used to look at things.

I’ve seen a lot of writing about how the financial crisis, the Ponzi schemes, the insider trading deals, the special favors and cronyism are eroding the “high trust” nature of our economy in ways that could affect its functioning for a long time to come. It isn’t hard to see this happening. Sooner or later the people who operate on traditional good faith principles of deal making are going to realize that such a high percentage of America operates on purely the personal cost/benefit calculus of the now that anyone who does things “the old fashioned” way is a chump. I hope it doesn’t come to that.

Topics: Public Policy, Urban Culture
Cities: Cleveland

5 Responses to “60 Minutes: There Goes the Neighborhood”

  1. Bob Cook says:

    Aaron, sadly, in a lot of places, it will come to that. On purely financial terms, a lot of people would be better tossing their keys in the mailbox and walking away — especially because in so many places it takes so long for an actual foreclosure to be processed.

    The situation, I think, makes neighborhoods even more important, because I bet for many people what stops them from walking away (besides figuring out where they’re going to live, any disruption of family life, or personal issues) is the thought of screwing their neighbors, people they know.

  2. Would-be Occupier says:

    Once again, government bears the cost of the banks’ shenanigans. If the banks walk away from these properties, the city should sue them for the cost of cleanup.

  3. One thing that wasn’t clear from the CBS report–who is paying for this?

    Is the government condemning properties and/or buying them at auction (taking advantage of really low prices) and then demolishing the structures on them? Or using nuisance laws to order demolition of structures which have been vandalized or are in a state of disrepair?

  4. the urban politician says:

    In Chicago they have passed a “Vacant Building Ordinance” for these types of properties. The owner (usually a bank) is required to board up the building and post a watchman for the building every night to prevent vandalism, of course at their own expense.

    Fannie Mae has sued the city over the law

  5. Chris Barnett says:

    EngineerScotty, in general, many such properties eventually revert to city ownership through non-payment of property taxes. In most states, that takes a couple of years. In the past, there were “vulture investors” who would buy the properties at tax sale and either rent them out or flip them. But that market has dried up as “better” suburban foreclosures and tax-sale properties have become available.

    By the time the city gets a property, the houses are often so degraded that demolition = blight removal.

    Some cities have been using NSP (HUD money) funds for demolition.

    This is just the “Cliff Notes” version.

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