The Price is Right? Danny Klingler

Over-the-Rhine is seeing a tremendous resurgence, with huge amounts of investment triggering ever-greater demand for real estate in the historic downtown neighborhood. Where once the conversation revolved around blight, disinvestment, and open-air drug markets, the script has quickly flipped to fears of displacement, over-speculation, and the impact of market forces on affordable housing and diversity.

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This vacant building on Republic St. recently sold for $235,000, then sold again for $260,000 two days later.

The speed with which this shift has occurred is astounding. Buildings that only four years ago weren’t attractive enough to warrant someone paying $1, are now selling for $150,000 or more. Investors who for years avoided Over-the-Rhine, preferring to keep their money parked in tried-and-true markets like Clifton and Pleasant Ridge, are now scouring the neighborhood, sending out mailers to every last property owner, offering cash on the spot for their buildings. Of the 1,500 buildings in the historic district, less than ten have not already been snatched up by investors, developers, owner-occupants, or neighborhood nonprofits.

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A marketing email the author received in September from an investor that has been aggressively targeting OTR

Much of this resurgence has led to undeniably beneficial outcomes – the elimination of blight, the return of vibrancy, the reduction in crime, etc. But the near frenzied state of the Over-the-Rhine real estate market also raises questions — questions that, as the executive director of a real estate focused nonprofit, I have become keenly aware of. These questions strike at the core of the capitalist economic system and can be summarized as follows: If one owns an asset (building), should one always sell/rent that asset for as much as one possibly can? Should one extract the maximum possible amount of money out of that asset? Should any consideration be given to the potential (negative) impact such a sale would have on the community?

In Over-the-Rhine, there are hundreds of rational economic actors faced with these decisions on a regular basis. Certainly no one can be blamed for selling something for its market value. But how does it impact the community? What if everyone behaved this way in Over-the-Rhine from this point forward?

The easiest example is affordable housing. When someone sells a vacant building for $200,000, it places a very strict limitation on what that building can eventually become. The pool of potential buyers at that price point is likely to be limited to developers who want to build higher-end condos, or couples who have the means to spend $500,000 for a rehabbed home in Over-the-Rhine. If everyone from this point forward sold their property for its market value, Over-the-Rhine would, socioeconomically speaking, become very un-diverse.

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These 3 new townhomes on Republic St. have gated parking. ‘Unit A’ is selling for $598,000.

I am reminded of David Throsby and his discourse on different types of value. Certainly there is economic value and it has a very important place in our society; but there are other types of value — artistic value, cultural value, historical value — that don’t necessarily reflect economic value. My fear is that it is these types of value that are not being adequately represented with the fevered pitch of real estate speculation in Over-the-Rhine. When an investor comes to Over-the-Rhine and buys and sells property based solely on the prospect of individual/familial financial gain, the best interests of the neighborhood are given short shrift.

My raison d’etre in Over-the-Rhine is to help it become a model for other places.  It can become a community in the truest sense of the word, where social cohesion is elevated by breaking down superficial barriers and differences between neighbors and where artistic, cultural, and historical values are appreciated as much as the almighty dollar. When rational economic actors place economic value above all else, it limits the space available for these values — limits the potential for small local businesses to open up shop, for working class people to walk to the symphony, for the beauty of Over-the-Rhine’s architecture to be fully appreciated, for the exchange of ideas among people of diverse backgrounds. Here’s to hoping the new property owners of Over-the-Rhine are willing to make a small sacrifice for a more balanced approach to development in the neighborhood — a sacrifice for a greater good.

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11 thoughts on “The Price is Right? Danny Klingler

    1. Mary

      Thanks for this, Danny. I’ve heard it called the Economics of Well Being. What is the return on Well Being? (paraphrasing Dr. Walter Brueggemann). Many won’t want to participate in this type of economy but others will. Check out the Economics of Compassion http://econofcompassion.org/ . Worker owned co-ops are part of this movement. I needed this piece this morning and the fact that Kathy praises your position gives me hope.

      Reply
  1. Paul Willham

    I predicted back on my blog between 2109-2010 that OTR would not resemble a multi income, multi cultural, artsy, small business community, but rather it would be upscale, mostly white suburbanites who wanted the convenience of a short drive to work, and will be populated with high end eateries and boutiques. This based on my experience being involved in the Urban Renaissance in Indianapolis. I was told that wouldn’t happen in OTR, it was too “unique”, that the poor would be an active part of the community. By all matrix of measure I have been correct.. I also predicted that those early pioneers and the hipsters and millennial would find themselves priced out of the market and as we approach finished construction at 3-500 a sq ft it becomes apparent that they too will soon be gone. This has been evidenced by those people coming over and restoring in Knox Hill and two properties I’ve sold have gone to OTR refugees, priced out of OTR. Personally I’m tired of gentrification and decided to settle in a small town in Northern Indiana where I live in a multi income, multi cultural town with cool restaurants and shops. I just wait for updates from my realtor to sell the remaining properly left in Cincy probably to more OTR refugees. As I said and as I predicted so accurately OTR=Only The Rich.

    Reply
  2. Marc Raab

    Danny is fighting the good fight, and I appreciate that. But with this council- and specifically our mayor- he better come with some friends ready to throw down with him.

    This administration may just be the most developer-friendly group that this city has ever seen. While it is great to see so much interest in investing in the urban core, I would not expect the city to turn away any developer for the “greater good.”

    I am reminded of John Cranley’s actions back in the mid 2000’s, when Crap Developer Vandercar Holdings presented a plan to redevelop the former Milacron site in Oakley.

    Originally conceived as a Rookwood Commons type of lifestyle center, it eventually changed to a terrible sea of parking lots and big box stores. The Oakley community council fought this project change, and was met with fierce resistance from none other than councilman John Cranley, who basically said “you don’t understand how this works, we are not going to turn away this amount of investment.”

    Fast forward to today, and another example comes to mind nearby in Madisonville. That community fought a development change where Circle Development originally planned to build offices and retail. Instead they attempted to change the zoning to residential, a change the Madisonville Community Council, and subsequently the Cincinnati CIty Council Neighborhoods Committee, denied. Said Cranley: “I don’t know why we’re turning down tens of millions of dollars.”

    He eventually put the proposal into a different committee, with more Cranley-friendly members, and got the zoning change approved.

    Circling back around to what this has to do with OTR and the development going on there- We like to think we have a say in what happens in our neighborhoods. But in reality not only do we not have a say, we don’t even have a voice. Real Estate Developers nearly funded all of John Cranley’s campaign for mayor, and he won’t stand in the way of letting them do what they want in the city, even if their investment is not to the benefit of the neighborhood.

    Here is hoping that OTR doesn’t lose it’s character by selling out to the highest bidder. If the only folks who can afford to live there are doctors and lawyers and investment bankers, you will have lost. And OTR will have lost its soul.

    Reply
  3. Bill Collins

    What is happening in OTR — extremely rapid change in land values and dramatic changes in the racial/ethnic/class composition of the neighborhood — is unusual in Cincinnati.

    However, in coastal cities in the USA, these kind of rapid changes in neighborhoods have been happening for years. [Perhaps it’s because, when a City is located on a coastline, it can only sprawl in one direction (the land side) and not out into the ocean — thus cutting the amount of developable land in half.] Anyway…

    Here’s an example cited in the excellent article the NY Times posted yesterday entitled: “New York Schools Wonder: How White is Too White: Program Aims to Keep Schools Diverse as Neighborhoods Gentrify”
    at http://www.nytimes.com/2016/02/17/nyregion/program-aims-to-keep-schools-diverse-as-new-york-neighborhoods-gentrify.html?_r=0.

    In this article, it reports: “In Bedford-Stuyvesant, Clinton Hill and Fort Greene, the white population rose 120 percent from 2000 to 2010 and the black population fell by 30 percent, according to the Center for Urban Research at the Graduate Center of the City University of New York.”

    HOUSING IN CINCINNATI IS CHEAPER, SO THIS LEVEL OF RAPID GENTRIFICATION AS WE ARE SEEING IN OTR IS NOT LIKELY TO HAPPEN OUTSIDE OF THE BASIN COMMUNITIES
    In OTR and in other city centers in Midwestern cities, there seems to be little doubt that what we are seeing is rapid gentrification in those small urban pockets. Hopefully this can be restrained by forcing developers to design a set-aside number of affordable housing units in their developments. Even so, rapid change is happening, and is likely to continue to happen in OTR and Downtown and in the city centers of Cleveland, Detroit, Milwaukee, St. Louis, Chicago, etc.

    However, the City of Cincinnati is full of other neighborhoods — not as walkable and not as “cool,” as OTR, of course — that are much more affordable and that are infinitely less likely to rapidly gentrify. For example, here in Madisonville the kinds of trends that the Times mentioned in Bed-Stuy, Clinton Hill and Fort Greene are happening, but they happening much, much slower, to the degree that nobody is being driven out or priced out of Madisonville. Far from it.

    Still, the population numbers suggest that the number of blacks living here has dropped about 15% during the 2000-2014 period, and the number of whites has increased by around 20% during this same period. [Among children ages birth to age 4, Madisonville is now predominantly white again, as was the case prior to the 1970s.] Because housing is still affordable here, it would not be appropriate to call this “gentrification,” but in OTR I think it’s fair to describe what’s happening as the G word (gentrification).

    THE CITY IS CHANGING, AND OVERALL IT’S GOOD
    As this audience probably knows, the Business Courier recently reported US Census data that shows that in Cincinnati today, the percentage of whites living in the City is now rising again here in the 2010-2016 period, for the first time since before the Civil War (the 1860 Census, some 156 years ago).

    That trend is likely to continue as more white young people who grew up in the suburbs grow tired of suburban sprawl and move into the City. As the suburbs grow more diverse (and that’s a good thing), young suburban white people today are not as racist as their parents tended to be, leaving them open to returning to the City. Plus, professional and white collar jobs are now re-concentrating in the cities again, because what white-collar professional *really* want to work in a cubicle far in . . . for example, Springdale, or Florence.

    The challenge, as I see it, it for us in Cincinnati to continue to attract black working people and middle-class people, especially in the neighborhoods *outside* of the Basin communities. Census data and common observation tells us that black working people and middle-class people are leaving this City for the suburbs at a rapid rate, almost always by choice (ie, they are not being “forced out” as sometimes happens in expensive Eastern cities like NYC). We should pay attention to this.

    Reply
    1. Paul Willham

      Anyone who thinks Blacks were not forced out of downtown/OTR doesn’t know any city history. After the riots blacks were given their “walking papers’ i.e. housing vouchers and OTR slumlords looked to Fairmount, Knox Hill, Price Hill and Westwood as the land of cheap housing they could cram people into essentially decimating strong middle class neighborhoods with crime, prostitution and drugs, low income hsouing in OTR was merely short term landbanking of buidings and once those HUD requirements run out those will move market rate. Thanks to mostly out of state preservationists who moved in to near west neighborhoods and fought back against the city efforts at ‘slumification” of those communities, these areas are coming back and the slumlords (with the poor in tow) are headed to the townships. As for the Black middle class? They long escaped the city and headed for the townships and are now headed to the far burbs as the townships are filled with section 8 housing and those areas begin their decline.

      Reply
      1. Nina Johns

        Very accurate. And also underscores the real issue: an economic underclass which needs either 1) to brought educationally and otherwise into the middle class, or 2) leaving room for individual failure or inability, a different social protection than slumlords taking the HUD handout. As to the migrants themselves, who wouldn’t want to move to a place where your children could play on some grass or you could have a barbecue? So it probably seemed like a blessing, but without a way up and out of the social ills, the problems tend to migrate too. Too bad so many jobs have been farmed out of the country, which also undercut payroll taxes contributed to Social Security, etc. etc

  4. Johnny

    I spent the last four years looking at real estate in Cincy. OTR was my first choice, but I ultimately decided against it. Costs had simply become too high. I also saw the scale of institutional and corporate development moving forward and I felt a bit like a mouse in a heard of wildebeests.

    Instead, I bought a $15,000 uninhabitable single family home in Northside this June. In order to bring it up to a respectable standard it’s going to take about $100,000 of work. And in the end I’ll probably spend closer to $150,000. The property will go from having zero occupants (like half the buildings on the block) to having a new family living there. But to justify the cost of the rehab, the rent or resale of the place will necessarily be in the middle class (not “affordable”) range.

    Inner cities all over the country are reviving and costs are rapidly rising. Comments about how the poor are being pushed out to other neighborhoods and ultimately to the townships are accurate. This is part of a long term national trend. Aging suburban municipalities everywhere are losing their luster and seeing declining tax bases and increasing legacy costs for infrastructure and pensions. They are ripe to become the next slums. I have no control over this process. But I can identify the larger pendulum swings and place myself in a position to enjoy a high quality of life at a good price point if I enter the market in the right spot. What’s the alternative? Not fixing the place up? Letting the house in Northside cave in on itself? That was the trajectory just a few years ago.

    The real solution to the problem of poverty is to invest in the people. High quality public education for poor kids would be a very good start. But as a society we really don’t want to do it. So we won’t. Sad. But that’s where we are culturally.

    Reply
  5. Bill Collins

    Paul Willham: Where in my comment above did I say that black people are not being forced out of OTR and Downtown? I did not say that.

    Also, Johnny’s comments above are helpful in this discussion. Based on his real-estate experience (note: I am NOT in the real estate business or the restoration business, and have no desire to work in either field professionally) he essentially makes the point that the housing market in Northside has reached the price point where few black home-owners are now moving there.

    So, based on his comments, I checked the Census data — http://statisticalatlas.com/neighborhood/Ohio/Cincinnati/Northside/Race-and-Ethnicity — and found what appears to be confirmation of that point. Specifically:
    * the overall population in Northside is 59.5% white, 36.7% black, and an extremely small Latino population of 0.7% [in Cincinnati, a tiny Latino population is a sure sign that a community is becoming much less affordable.]
    * In the 25-29 age group (Millennials) only 12.9% of the Northside population is black and 75.1% of that age group’s population in Northside is white,
    * In the 30-34 age group (again, Millennials) only 23.9% of the Northside population is black and 74.3% of that age group’s population in Northside is white.

    Assuming that all these young whites in Northside can afford to stay there as they get older, it’s clear what the trends are and will be. As I stated in my comment above, one of the biggest challenges we face in City is preventing black working people and middle-class people from leaving the City for the suburbs. As it is, the data shows that overall they are leaving and actually have been leaving the City for the last 20-25 years, while at the same time certain specific city neighborhoods such as Bond Hill and Roselawn become more segregated and black every year.

    There is no magic bullet here. But, as a guy who lives in an integrated city neighborhood by choice and prefers it, I think that as a city we need to pay much more attention to this question of how to make as many neighborhoods as possible be both stable and integrated.

    As it is today, in the City of Cincinnati we still have a lot of stable integrated communities — see Charles F. Casey-Leininger’s latest report here: http://www.cincyfairhousing.com/pdfs/Final%20DN2%20Report.pdf — but we need for policy makers to take action now to ensure that, as the City increasingly gains popularity and population in the coming years, we don’t lose this advantage that we have now.

    Reply
  6. Nina

    This is an excellent piece of work about the fine art of civic planning. Thank you Mr. Klinger.
    I’m very glad that Johnny has brought up at least one other dimension to this real estate discussion: economic (income) inequality which begins with childhood education. I grew up in Cincinnati, lived away for 30 years, and moved back in 2004; the first thing I noticed was that core, old suburban neighborhoods in Cincinnati (disclaimer: I have zero interest in Butler Warren, Clermont Cos. and any other thing which qualifies as an ex-urb) were as segregated as the day I left, and all a good deal more impoverished with the exception of some East Side neighborhoods. Slight differences were apparent in that it wasn’t always exclusively along racial lines but also, lower income vs. higher. Except OTR which has a sort of “nervous splendor”, a giddiness about food culture, and art. I will defer, again to Johnny as to the strange juxtaposition of the socially conscious individual taking advantage of an economic opportunity to be a pioneer in these places. What can you do? As to the City being “developer friendly” to the point of idolatry, I share this personal story:
    We live in Linwood on the East Side, a neighborhood bifurcated by the extension of Columbia Pkwy. many years ago, so the the hillside part of the community adjacent to Mt. Lookout is spatially, and now, somewhat culturally, different from the Linwood which is home to Lunken Airport. We chose it for affordable housing stock, proximity to downtown, and green space. In 2006-8 a developer purchased the house next to ours, aggressively demolished it without warning, began excavation without a permit and without a courtesy notification, within 6 ft of our house. The earth began to give way one rainy weekend and we hired an engineer and a lawyer at our own expense (no recourse with the City which had rushed to approve the resumption of the project) to insure that our house was secured. The developer went to jail for
    mismanagement of funds, and the house which was built next to ours is tax abated for many yrs to come, while we had to defend ourselves against the City, the rogue developer AND still pay our own taxes. Hmmm, I thought, “Welcome to Cincinnati.” Fast forward:
    East Side neighborhoods are currently facing development issues whereby single family homes are being demolished and replaced by multiple townhouse-like buildings on the same land. Generally has been very unpopular with existing residents. So, recently, on a street in Linwood, in the Hillside Overlay District, above Eastern Ave., a developer requested a zoning change to again place multiple structures, etc…..INTO the hillside vs. ONTO it. Completely avoidable by reducing the number of structures and yet having the income generated by building more then the one which was previously there. The Zoning change was granted, even though there was input from neighbors, including two academics who are a geology professor, and an environmental studies professor, and engineer who found flaws in the topographic documents submitted with the zoning exception application, and clear, clear, clear violation of what is the intent of the HOD guidelines. Aesthetically, these homes will look like a cluster of tenements on a spacious, green hillside with older “painted lady” homes. I think the builder stumbled into (based on the language used by his attorney), what he thought was a “blighted” neighborhood, wherein “old” = “blighted”, but the housing stock is $200K +. Ah….the City had a Linwood Plan dated 2002 (which was not included in our realtors’ pitch when we bought) suggesting this neighborhood was ripe for renewal. Maybe, but reality and adherence to laws and regulations have to have a place in our growth. This brings the discussion back to the purpose of development in a City trying to rebuild itself. My neighborhood is nearly all White, and we are comfortably middle class. If this developer wants to make money (albeit less of it per job), let’s get busy on the West Side, where I grew up: maybe East Price Hill, for starters.

    Reply
  7. Zachary Schunn

    Keep up the good work!

    I’m conflicted on OTR. As a home-owner, I am admittedly selfishly rooting for prices to go higher long-term. But of course, I also want to see the neighborhood maintain its character.

    Ultimately, I have to agree with Bill Collins that there is SO much under-utilized housing stock in the city that I think it is short-sighted to feel we need to satisfy the entire city’s housing demands in one neighborhood. I would rather see Cincinnati develop a comprehensive plan to satisfy the needs of all neighborhoods than to focus on OTR needing to be all things to all people.

    That said, I do hope the neighborhood continues to maintain its historic character, and–while OTR is becoming a regional and even national destination–I hope that it maintains a “neighborhood feel” with true necessities like a grocery store, pharmacy, laundromat, etc. And I hope we do what we can to keep a mix of incomes in the neighborhood… we don’t need 90% of OTR to be low-income housing as it once was, but continuing to encourage OTRCH, 3CDC, Model Group and others to develop affordable housing is important.

    Ultimately, I think those who fail to find their place in a re-developed OTR are those middle class folks who got in too late, and are “forced” to live in Covington, Price Hill, Northside, Walnut Hills, and other surrounding suburbs. As a few have alluded to, it’s just hard to rehab a building and re-sell at a reasonable price. Contrary to popular belief, while this is changing quickly, the margins on condo sales are still very low for developers in most parts of OTR–in fact too low in some places to warrant development.

    While I am hopeful we can keep a mix of incomes in OTR, and I hope fewer and fewer folks will be pushed out of the neighborhood as we figure out how to get the policy initiatives right, I think it is naive to think the newcomers won’t be mostly wealthy. OTR is on par with the historic neighborhoods of Chicago, New York, Boston, Philadelphia, and Charleston, and we are destined for the price appreciation those same cities have seen (though with a discount since we are a smaller, in-land city).

    Reply

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