From 2007 to 2009, the recession’s worst years, Cleveland’s economy got flattened by a Wall Street 18-wheeler heavy with subprime mortgages. In three years, the metro area’s real gross domestic product, the value of all goods and services, dropped by about $10 billion. Oof.
Since then, though, the economy has gotten better, with lots of growth. According to U.S. Bureau of Economic Analysis statistics, from 2016 to 2017, the area’s real GDP grew by 2.9% to $120 billion, making it the 28th largest in the U.S., and the largest in Ohio.
Finding a job in Cuyahoga County, the anchor of the regional economy, has gotten easier too. During the most gut-wrenching months of the recession, county unemployment spiked up to around 9%.
But now, the rate continues to trend downward, driven by a shrinking labor force and more job opportunities. In May, the U.S. Bureau of Labor Statistics pegged it at 4.1%.
The housing market is looking a lot better too, as noted by a new study from the Western Reserve Land Conservancy. In some West Side areas of Cleveland, and in the county’s western suburbs, sale prices have recovered to or even exceeded their pre-recession peaks.
These are all signs that good times are here again. Ten years after the recession slump, Cleveland’s economy has corrected its posture. That’s great news, and we probably deserve a good backslapping and a beer.
But before we get swept away by the positivity of “renaissancing,” we should ask: who is benefiting from all this growth? That’s where things get less rosy. Cleveland is still a deeply segregated place and it turns out prosperity has been distributed along racial lines.
White families have done well since 2009. The median incomes of Cuyahoga County families in which the homeowner is white has shot up since 2009. Then, they made $69,408. By 2017, their income had increased to $82,024.
Black families’ median income, meanwhile, was $34,346 in 2009, and $35,656 in 2010. It dipped slightly and has recently eked back up to $36,304, only 1.8% growth.
The pattern holds even inside Cleveland, where incomes are lower. The median income for white families in the city has increased by $3,176 since 2009, from $46,242 to $49,418, while the income of families in which the homeowner is black declined, from $27,379 to $27,207.
White families in Cuyahoga County have, essentially, gotten a $12,000 raise since 2009. Black families in the county got only $650, compared to their 2010 peak income. And in the city, black families have lost money.
The other reliable measure of wealth for most American families is the value of their home. But Cleveland’s post-2009 growth has been racially lopsided by that measure too.
According to the land conservancy study, suburbs on the West Side of Cuyahoga County have recovered 94% of their value since the recession. In 2005, for instance, the median sale price in the West Side suburbs was $133,000. After dipping to a recession low in 2011, it has increased to $125,000 in 2018. Cleveland’s West Side, which includes neighborhoods like Detroit Shoreway and Kamm’s Corners, has recovered well too, to 79% of its peak value.
“The good news is that things aren’t going down or staying flat,” says Frank Ford, senior policy advisor at the land conservancy’s Thriving Communities program. “They’re moving upward.”
But Ford’s study also points out that the upward swing on the East Side has been far weaker. East Side suburbs have achieved only 64% of their pre-recession peak value.
And, in the city, East Side homes have recovered only 34% of their value. In 2005, the median sale price on the East Side, which includes neighborhoods like Kinsman and Hough, was $80,000. After dipping into the teens during the recession, the median price has recovered to only $27,500 today.
The upward price movement shows there is demand for homes on the East Side. Many are changing hands in cash deals. But there simply aren’t enough transactions to buoy prices more. And the blame for that rests on mortgage lenders.
“There’s a missed opportunity, at a time when homes are available for $30, $40 or $50,000, for people who could become homeowners,” says Ford. “But they can’t, because they don’t have access to credit.”
A sad irony is at work. Black Clevelanders have historically struggled to get access to safe mortgage products from local banks. In the mid-2000s, they turned to national lenders, who saddled them with subprime mortgages. As those loans went bad, houses were foreclosed upon and left abandoned, erasing neighborhoods worth of black wealth.
Now we have come full circle. The East Side market is growing. Yet black residents once again struggle to get loans.
Individual mortgage applications are possibly being denied due to bad credit or the lender’s preference against small loans. But the big picture points to a barely functioning, racially segregated East Side credit market.
Both a study by the Fair Housing Center, analyzing Cuyahoga County mortgage data from 2012 to 2016, and Ford’s study, analyzing data from 2017, found that lenders receive far fewer mortgage applications from blacks than whites. And mortgage applications from blacks are denied at more than twice the rate of ones from whites.
“We don’t believe that any of the top 10 mortgage lenders in Cuyahoga County are doing a good enough job at creating or selling mortgage products in majority-minority neighborhoods,” says Michael Lepley, senior research associate at the Fair Housing Center.
Take the county’s largest-volume lender, Howard Hanna Mortgage Services. Howard Hanna received 5,896 mortgage applications in majority-white areas from 2012 to 2016, and denied 2.1% of them. It received only 574 applications in majority nonwhite areas, and rejected 4.2% of them.
Housing advocates are aware of this problem. A small-dollar loan program was part of a $30 million housing package recently passed by County Council. The city also quietly uses its depository relationship with banks to encourage fair lending, a practice recently adopted, also quietly, by the county.
But public programs will be inadequate unless paired with the will to publicly squeeze better behavior out of private lenders. On that count, we have failed before. In 2009, Cleveland sued several subprime lenders under a race-blind public nuisance law. The suit was smacked down in court.
Baltimore, meanwhile, filed a suit under the Fair Housing Act, asserting that blacks had been targeted with subprime loans, and won a $175 million settlement from Wells Fargo & Co. Memphis, in a similar suit, received a guarantee that Wells Fargo would lend $425 million to its residents, with $125 million going to low-income borrowers.
Cleveland cannot afford to repeat its stumble. Half of the city’s citizens, the black half, have been denied even a proportional share of the region’s growth. Their incomes are stagnant, and their access to wealth-building credit is spotty.
That Cleveland has roared back with such flagrant gusto, has embraced its comeback with such evident relish, while meeting that challenge with same-old policy, is an indictment of us all. We can do better.
We should do better.
8:00 AM EST
September 16, 2019