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CLEVELAND HOUSING WATCHDOGS RELEASE REPORT ON OUTSIDE INVESTORS, OFFER BLUEPRINT FOR CRACKDOWN
A NEW IN-DEPTH ANALYSIS
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of outside investor influence in the Cleveland housing market, one of the largest citywide studies of its kind in the past decade, includes more than two dozen clear-eyed policy recommendations to address what many advocates have called a growing problem.
“It’s a new day,” said Frank Ford, Senior Policy Advisor with Vacant and Abandoned Property Action Council (VAPAC), the think tank that published the study. “It’s the right time to put some bold, creative proposals out there.”
The culmination of two years of presentations and studies of 16 years of housing data, the report’s findings confirm long-held suspicions about Cleveland’s rental market since the U.S. foreclosure crisis ended in 2012: Business buyers—that is, corporations or limited liability companies—have been increasingly adding one-to-three family homes once bought by individuals to their portfolios. (They’ve tripled, to 21 percent, since 2004.) And a growing percentage of these investors are throwing bids down from out-ofstate, often in New York, California, or outside the country.
The effect of which has been undeniable on the American and local housing market: Up to 46 percent of all home purchases on the Black-majority east side were made by investor buyers.
“We believe that such activity is part of the larger legacy of continued racial bias in the American housing market,” the report reads, “insofar as households of color are offered an inferior product—substandard housing—at a higher price.”
Though the report clarifies that the deluge of returns-focused buyers aren’t entirely bad actors, the effect is inevitably harmful. Fewer and fewer first-time home buyers are landing houses while being swiped away by cash-wielding brokers. With a dwindling housing stock exacerbated by Wall Street hedge fund bulk buying, the VAPAC writers paint the current zeitgeist as “a highly competitive, highly speculative rental real estate market” where “investors are free to play as many games of Monopoly across state lines and national borders as they can afford.”
Spearheaded by housing data guru Timothy Kobie, a business process analyst at Building & Housing, the report’s findings are stark. Most vacant, boarded-up homes purchased are not formally rehabbed. Only about 20 percent of business buyers registered their new rentals from 2017 to 2019. And for landlords that were actually repairing roofs or faulty staircases— bringing homes up to city code— they were only requesting city permits to do so around 10 percent of the time. (For building repairs, only 6 to 8 percent of the time)
Kobie, along with VAPAC’s 15 other committee members, urged the city to rethink how code violators are punished. “Misdemeanor criminal proceedings mean little to an out of state investor,” the report says. “A business does not fear jail time or a criminal record.” Instead, impose, like Franklin County does, $100 fines daily until the owner fixes the drywall.
“We don’t necessarily need to take a strictly criminal approach to code violations,” Kobie said. First, it’s just “making sure we’re identifying everyone with the responsibility to maintain the property.”
Such identification is what Sally Martin, the former South Euclid housing director who Mayor Justin Bibb hired in late January to lead Cleveland’s Building and Housing department, seemed to do well in her prior role. Knowing that negligent owners in Seattle or San Francisco would not fly 2,200 miles to pay $200 fines for annual rental late fees, she and her department lobbied in 2018 to have a “local agent-incharge” clause added to South Euclid’s housing code. That is to say to the landlord: If you’re not in town, you need to find a surrogate to go to court for you.
Martin’s local agent rule proved effective. During her time heading South Euclid’s department, she prosecuted roughly 80 negligent landlords per year. (Martin did not respond to calls for comment in time for publication.)
Also a key figure in VAPAC’s consortium, it is very likely that Martin will succeed in actualizing some of her previous success in her new role handling Cleveland’s bad actors. (VAPAC’s investor-focused committee was previously called “The Bad Actors Working Group.”) The recommendations to alter city policy—literally from A to Z, 26 of them—read like a progressive housing advocate’s wish list, including South Euclid’s local agent requirement, a recommendation to add civil forfeiture to the tool belt of city punishments, a call to modernize Cleveland in line with cities like Chicago or Philadelphia by adding Pay to Stay and Right to Counsel legislation.
And a plea to simplify the rehab process. “The City’s website is outdated,” it reads, “and navigating to find information on permitting is daunting.”
While VAPAC’s blueprint for the Bibb administration could make use of the mayor’s proposed $8.9 million 2022 budget for the Dept. of Code Enforcement, it is also possible that tightening up the rental registration process—tougher than it had been during the risk-averse Jackson era— could have unforeseen consequences.
“‘Investors’ is a confusing (term)” in the first place, said Jayme LucasBauer, development project manager at the Old Brooklyn Community Development Corporation. “We (just) want to encourage people who really want to invest and discourage people to come who really want to be abusive.”
For Ford, who has been studying the double-edged nature of outside investing since the early aughts, being clear in VAPAC’s policy recs is just as important as getting the data exact, or lobbying for an added, say, $300,000 to Building & Housing’s pay band.
“Their bad actions reflect on good investors that are trying to do the right thing,” he said.
As for those who’ve skirted the letters in the mail from 601 Lakeside? “I anticipate there’ll be pushback from those investors,” he said, chuckling. “If you don’t want to comply with Cleveland’s ordinances, then go somewhere else.”
Former Mobster Who Scammed Flats East Bank With Rascal Flatts and Toby Keith Restaurants Sentenced to Five Years in Prison
Frank Capri, a former mobster turned government witness turned developer who scammed the East Bank of the Flats with Toby Keith and Rascal Flatts-branded restaurants that never opened, was sentenced last week to five years in federal prison after pleading guilty to charges of conspiracy to commit wire fraud and tax evasion.
Capri’s scheme, which began in 2011 and continued through 2015 in Cleveland and around the country, involved inflating revenue projections for the planned restaurants to convince developers to hand over tenant improvement funds for the properties. Capri’s company would then reduce actual construction costs — including creating fake contractors, acting as their own contractor, creating false documents, submitting fake invoices — to pocket the difference between the developer’s outlay and their costs.
Twenty to 40 franchises were sold to developers, but most never opened after lengthy, intentional construction delays. Capri’s company (Boomtown) failed to pay taxes, racked up hundreds of thousands of dollars in tax liens and faced some $30 million in lawsuits. (That number had climbed to $65 million in judgments by 2017.)
The Feds say between 2011 and 2015, Capri collected some $12.9 million for Toby Keith restaurants that never sold a thing. Meanwhile, Capri transferred millions from Boomtown’s bank account to his personal one, spent at least $2.7 million of the illegal funds on jewelry alone, and underreported his income to the IRS by more than $3 million over the course of three years.
Once he’d taken the developers for all he could with Toby Keith’s restaurant, Capri went back to the well after securing another deal to open Rascal Flatts-branded bars and restaurants around the country, deploying a similar scheme, and in many cases, deploying it on the same developers he had just bilked.
Cleveland was one of those cases, as the East Bank announced in 2016 it would be welcoming the Rascal Flatts Bar and Grill.
Because Capri hid his ties to the new company so well, few were any the wiser, and Capri managed to collect more than $5 million in tenant improvement funds from developers for another batch of restaurants that once again never opened.
The developers of the East Bank of the Flats eventually found out they were dealing with Capri again when a man named Ray Rostho, who owned an Arizona construction company and who was hired by Capri to front the Rascal Flatts project here and in other cities, told them at one point that they really ought to just talk to Frank Capri if they had concerns, because it was his project.
“I said, ‘You’re going to have to call Frank Capri,’” Roshto told the Arizona Republic. “He was totally surprised. He shouted out, ‘Frank Capri!’ Then he said it again: ‘Frank Capri.’ And I said, ‘Yeah.’”
He was indicted by a federal grand jury in January 2020 on 16 charges. He pleaded guilty to two of them last August.
-Vince Grzegorek
Bibb Proposes Legislation to Replace Public Square Jersey Barriers with Retractable Bollards
Cleveland Mayor Justin Bibb has proposed legislation to authorize spending $1.5 million in city funds to remove the ghastly jersey barriers on Public Square and replace them with retractable bollards.
The estimated all-in cost of removing the barriers on Superior Avenue, repairing the streetscape that they’ve reportedly scuffed up and otherwise damaged as for five years they’ve imbued Public Square with all the charm and urban effervescence of I-480 near Transportation Boulevard, and installing a new bollard system will be $3 million. The city’s contribution will, per Bibb’s hopes, leverage additional private and philanthropic contributions and an investment from RTA.
“Public Square should be the people’s park,” Bibb said in a Friday news release, “but for too long, jersey barriers have got in the way. Today, my administration is taking the first step towards removing these barriers and restoring Public Square to its original intent – to serve as a meeting place in the heart of our city.”
Public Square has always been that. The problem was that the jersey barriers were unsightly. A brand new $50 million Square was deliberately brutalized by mayor Frank Jackson, who many presumed was pouting because local activists succeeded in getting buses back on Superior after they were blocked during and after the Republican National Convention in 2016. Jackson and his benefactors viewed buses on Public Square the way everybody else views the jersey barriers: as eyesores.
The concrete barriers have served, therefore, as enduring evidence of Jackson’s pettiness and vindictiveness. They were premised on his alleged fears of lone-wolf terrorists driving into crowds, fears thoroughly debunked or otherwise reclassified by local experts and the federal government. And Jackson said he would not remove them until a permanent solution, (bollards), could be paid for. In five years, Jackson never bothered to try to find funding, something Bibb has evidently done in less than two months.
The Group Plan Commission, the nonprofit created by Jackson to develop downtown’s signature public spaces, will be tasked with the bollard update, a “redesign” in the language of the news release, and will have authorization to do so as soon as city council gives them the green light. Downtown councilman Kerry McCormack is fully in support. So is Group Plan Commission Chairman Tony Coyne.
“Group Plan Commission applauds Mayor Justin Bibb’s expedient introduction of legislation
to improve the safety, security and aesthetics in Public Square by removing the jersey barriers in Superior Avenue and planters at the corner entryways into Public Square with an attractive, removable bollard system,” Coyne said.
-Sam Allard
Cleveland to Chicago Hyperloop is Still Just a Stupid, Extremely Expensive Dream
In 2019, the Northeast Ohio Areawide Coordinating Agency (NOACA) and the Californiabased Hyperloop Transportation Technologies announced the results of a feasibility study that assessed the costs and benefits of an imaginary Hyperloop corridor between Chicago, Cleveland and Pittsburgh. It came to the astonishing conclusion that such a corridor would be worth it.
“I am sold to move to the next step,’’ Grace Gallucci, president of NOACA, said at the time. “I think there’s enough evidence in the feasibility study to suggest we should move forward as a region in order to leverage the work that we’ve already done and to capitalize on the momentum of hyperloop nationally and internationally.”
That momentum, stalled by the pandemic, screeched to a halt last week when Virgin Hyperloop announced that it was abandoning its plans for passenger transport via hyperloop tech and laying off roughly half its staff. Transporting freight (instead of humans) along vacuumsealed tubes at high speeds, the company concluded, would entail far fewer regulatory and safety burdens. Even so, the government of Saudi Arabia appears to be Virgin’s only client for such transport. Everyone now seems to acknowledge that the technology is simply too costly to be practical, especially when high-speed rail is sitting right there.
In Cleveland, the buoyant hyperloop atmosphere in 2018 and 2019 is a distant memory. Back then, local leaders up to and including Democratic U.S. Senate Candidate Tim Ryan were credulously praising the hyperloop as a revolutionary technology with the potential for thousands of jobs and a commute to Chicago so painless (30 minutes or less!) that it would be possible to live in Cleveland and work in Chicago and vice versa, an outrageous proposition.
The feasibility study advised that the project could cost north of $25 billion but would make up those costs via huge upticks in the labor market and enhanced property values along the route, among other things. The study itself cost $1.2 million and included a $200,000 contribution from the Cleveland Foundation. All sorts of public and private institutions leaped to be a part of a “Great Lakes Consortium” on the hyperloop and released a vortex of press releases about how over the moon they all were.
Hyperloop technology even seemed to be gaining ground in its quest for legitimacy in November, when it was included by name in Joe Biden’s Infrastructure Investment and Jobs Act. That bipartisan bill authorized huge investments in bridges, freeways and sustainable transportation modes nationwide and allowed Hyperloop companies like HyperloopTT to apply for federal grants that other transportation modes already have access to. After its passage, HyperloopTT’s CEO Andres de Leon said that the construction of a domestic hyperloop system “just got a lot easier.”
Tim Ryan himself gushed, “I am proud to have helped cement the future of hyperloop travel with the passage of the Infrastructure Investment and Jobs Act. This groundbreaking technology will be revolutionary to Ohio and the entire country — opening the door for more job opportunities, higher economic growth in our cities, less time in traffic, more chances to see loved ones, and so much more. I look forward to continuing to work to get the Hyperloop built and up and running.”
HyperloopTT’s Andres De Leon, when reached via email by Scene, said he was not deterred by the Virgin Hyperloop news last week. He said, in fact, that the company’s transition to freight was “highly expected,” given that its primary investor, DP World, is a cargo logistics company.
“This shift aligns them better with their current revenue streams,” he wrote. “As for HyperloopTT, we remain committed to building a sustainable adaptable system that includes both passenger and cargo. Interest in hyperloop around the world is stronger than ever. Since our unveiling of the Great Lakes Hyperloop Feasibility [study] in late 2019 we have continued to make advancements in the region. We’re working to advance the project and expect to announce next steps this year.”
Who knows what those next steps might be? But it’s hard to imagine that investors, who in spite of De Leon’s prognosis have been skittish about the incipient and overblown tech, will pony up in the wake of Virgin’s transition, a move interpreted by some as a surrender to reality.
Thankfully, the Infrastructure bill is also providing enormous investments in regular-old rail. The news couldn’t come at a better time for RTA, whose rapid transit trains are spontaneously bursting into flames on what feels like a daily basis. The regional transit agency announced last Thursday that it was receiving $20.3 million as part of its first tranche of funding.
For Clevelanders who actually use public transit, the prospect of safe, frequent, reliable buses and trains— and hell, maybe a couple of Amtrak trains departing during waking hours—is still far more intoxicating than the magical sci-fi super tube dreamed up by Elon Musk.
-Sam Allard
DIGIT WIDGET
89.7
The FM radio station that, on March 28, will become the exclusive provider of National Public Radio programming in Northeast Ohio. 90.3 WCPN will become the new home of WCLV, the classical music station now on 104.9.
$250
Amount the Cuyahoga County Board of Elections is offering poll workers who work the May 3 primary election, a hike from the $173 offered last year.
20%
Percentage of Cleveland kids ages 5 to 11 who are vaccinated against Covid-19, a low rate that convinced CMSD to keep its masking requirements in place.
$179 million
Revenue collected at Ohio racinos and casinos in February, setting a new record for the month. Across the state, gambling revenue was up nearly 13% relative to February, 2021, with MGM Northfield Park posting a 16.7% gain.
Former East Cleveland Mayor Eric J. Brewer is Running for Congress in 11th District as a Republican
Former East Cleveland Mayor, Cleveland mayoral candidate and veteran journalist Eric J. Brewer announced last weekend that he has filed to run for the 11th District Congressional seat currently occupied by Shontel Brown.
Brewer, who placed eighth out of nine candidates in the 2017 Cleveland mayoral primary and whose most recent professional adventure has been a militant personal news website, will run as a Republican. He wrote that the GOP is the party of Abraham Lincoln and his grandparents.
“Our civil rights as Americans are at stake and under attack by the un-Americans who control the Democratic Party,” Brewer wrote. “My family’s roots exist here long before the Civil War and American Revolution. Someone needs to fight for our shared history and values as Americans in our Congress.”
Brewer said that he is running specifically to provide constituents in Ohio’s 11th District with a “detailed and knowledgeable report” of Russia’s invasion of Ukraine. The announcement of his candidacy consisted largely of his interpretation of the current conflict there.
The 11th District, in the revised congressional map, includes the city of Cleveland in its entirety and many of the eastern suburbs. The district no longer includes its southern tendril that encompassed some of the city of Akron. In the revised map, the 11th is one of five districts projected to be won by Democrats. Overwhelmingly so.
As such, the Republican primary is without a great deal of consequence. But Brewer will run against James Hemphill, a general contractor and real estate investor. In the Democratic primary, incumbent Shontel Brown will face a rematch against challenger Nina Turner. If the 2021 special election is any indication, that race is likely to garner boatloads of financial contributions from outside the district and national media attention.
