fitzpatrick et al - anti-blight ordinances and local housing markets

7/31/2019 Fitzpatrick Et Al - Anti-Blight Ordinances and Local Housing Markets

1/37

1

The research and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the

views of Pew, its management or its Board.

What Impact do Anti-vacancy and Anti-blight Ordinances

Have on Local Housing Markets?

by

Thomas J. Fitzpatrick IV1

Lisa Nelson2

Francisca Richter3

Stephan Whitaker4

1Economist, Community Development, Federal Reserve Bank of Cleveland. The views and opinions expressed are

the authors alone, and do not necessarily reflect the views and opinions of the Federal Reserve Bank of Cleveland,the Board of Governors, or other Banks in the Federal Reserve System. Our thanks to the Pew Center on the States

for their feedback and to Moira Kearney-Marks for her research assistance.2

Senior Policy Analyst, Community Development, Federal Reserve Bank of Cleveland3

Research Economist, Community Development, Federal Reserve Bank of Cleveland4

Research Economist, Research Department, Federal Reserve Bank of Cleveland


2/37

2



Executive Summary

Foreclosure has been a national issue since the current housing crisis began, and has received a

lot of attention from federal policy makers. Foreclosures effects are felt primarily at the local level, and

include lower surrounding property values, increased crime, and erosion of the municipal property tax

base. But in weak housing markets, like those found in the core and inner-ring suburbs of older

industrial cities, foreclosure causes a different set of problems. Foreclosure in these markets

accelerates the long-term vacancy, and eventual abandonment, of property. Federal housing policy in

the wake of the crisis has not been as responsive to these problems, leaving states and localities to craft

their own policy interventions.

The primary federal responses to the housing crisis have been to implement and refine the

Home Affordable Modification Program (HAMP) and the Neighborhood Stabilization Program (NSP).HAMP focuses on foreclosure prevention, which some features that incent foreclosure alternatives

when modification is not feasible. Research suggests that foreclosure prevention is likely the optimal

policy intervention in normal and strong housing markets. In weaker housing markets, more emphasis is

needed on interventions to prevent and remove blight created by vacancy and abandonment. States

and localities have stepped up to fill this role in a number of ways, but few of these responses have been

thoroughly evaluated.

This paper analyzes the impact local anti-vacancy and anti-blight ordinances have on housing

markets in Cuyahoga County, Ohio (home to Cleveland). These ordinances, consisting of point of sale

inspections, escrow requirements, and vacant property registrations, have become immensely popularover the past 5 years. In order to evaluate the impact these ordinances have on local housing markets,

we compare home sales in communities with ordinances before 2004 to home sales in communities

without ordinances through 2009. To isolate the impact of the ordinances, we use a probabilistic

matching to link information about borrower and loan characteristics (found in HMDA and local recorder

data) to property characteristics (found in local Fiscal Officer data), and control for these characteristics.

Cash transactions are also analyzed.

We examined the impact of these ordinances on two sets of decision makers: loan underwriters

and property purchasers. We find that local ordinances did not do much to discourage the making of

loans that would eventually end up in foreclosure, though adding an escrow requirement to a point of

sale ordinance slightly decreases the probability that a loan that eventually enters foreclosure would be

made. The main impact of local ordinances is in how properties are cared for. Given than municipalities

with point of sale requirements have worse housing markets than those without them, the addition of a

requirement to escrow sufficient funds to repair the property at the point of sale will improve the


3/37

3



condition of their housing stock relative to what it would have otherwise been. The selection of buyers

who are willing and able to maintain the properties is reflected in the lower incidence of post-sale tax

delinquency in municipalities with escrow requirements, relative to those with point-of-sale inspections

alone. Thus, policymakers considering the enactment of local ordinances should understand that they

will likely have a marginal impact, and should include an escrow requirement if they seek to preserve or

improve the condition of their housing stock.


4/37

4



Introduction

Since the foreclosure crisis began, the majority of federal housing programs have focused

primarily upon foreclosure prevention by trying to keep borrowers in their homes. These efforts may be

optimal housing market interventions in strong housing markets, where stable or growing populations

have resulted in relatively low vacancy rates and almost no abandonment. But urban blight specifically

vacant and abandoned housing is a bigger problem than foreclosure in weaker markets that suffer

from an oversupply of housing, and federal policy leaves this largely unaddressed. Even federal

neighborhood stabilization efforts, such as the first round of Neighborhood Stabilization Funds, required

special waivers for spending more than 10% of the funds to demolish houses without building new ones,

and did not consider demolition a final use of land, creating barriers preventing weaker markets from

using those funds optimally.

This has left states and localities to develop their own policy responses to urban blight and in

some cases find ways to reduce the frictions in federal programs. Unfortunately, few of state and local

responses have been formally evaluated, despite wide adoption. In this paper, we discuss different state

and local gap-fillers for federal foreclosure-prevention programs and responses to blight, highlighting

those that have been evaluated and where there is room for additional evaluation. We attempt to move

towards closing this research gap by evaluating the impact of anti-vacancy and anti-blight ordinances on

strong and weak housing submarkets in Cuyahoga County, Ohio (home to Cleveland).


5/37

5



The Local Issue: Foreclosure, Vacancy, and Abandonment

While foreclosure has been a national issue since 2008, its effects are felt primarily at the local

level. For example, foreclosures lower the values of surrounding homes. (Immergluck and Smith 2006;

Schuetz, Been and Ellen 2008; Lin, Rosenblatt, and Yao 2009; Hartley 2010; Campbell, Giglio, and Pathak

2011) This directly impacts neighbors by reducing any equity they had in their homes, and directly

impacts localities by reducing their taxable value. These impacts may have a substantial impact on

municipal finance, particularly in markets with weak housing demand. (e.g. Fitzpatrick and Zenker 2011)

But research shows that foreclosures have other negative spillovers besides the price impacts, such as

increases in violent crime. (Immergluck and Smith 2006a; Ellen, Lacoe and Sharygin 2011)

There has been substantially less research conducted on vacancy and abandonment, but what

has been done illustrates the extent of the problems vacancy and abandonment create in weaker

housing submarkets. Generally, vacant and abandoned properties have a larger impact on surrounding

home values than foreclosures alone. (Mikelbank 2008) As housing submarkets become weaker,

foreclosures tend to produce fewer externalities than abandoned properties. (Whitaker and Fitzpatrick

2011) For instance, properties that were foreclosed andare currently property-tax delinquent have a

much larger impact than pure foreclosures. This is driven, in part, by strategic foreclosure on the best

of the worst properties in weak housing submarkets.

The relationship between the strength of housing submarkets and how they are impacted by

foreclosure, vacancy, and abandonment is the key to understanding the gaps in federal responses to

vacancy and abandonment. In relatively stable housing markets, foreclosures tend to have bigger price

impacts on surrounding property values. But in relatively weak markets, vacancy and abandonment are


6/37

6



so prevalent that additional foreclosures have a negligible impact on surrounding home values. Federal

policy offers a one-size fits all response, primarily focused upon foreclosure prevention, that leaves

many gaps for states and localities to fill.

Gaps in Federal Policy: Foreclosure, Vacancy, and Abandonment

The federal government has also provided various forms of foreclosure prevention assistance,

with the Home Affordable Modification Program (HAMP) being the most well-known. Unfortunately,

many of the evaluations of HAMP point out that it has disappointed relative to the expectations when it

was announced. There are many features of HAMP that contribute to the programs performance, but

here we will highlight some of the gaps that states and localities have stepped in to fill.

These gaps include a lack of communication, inaccurate property valuation in some markets,

and the initial lack of principal reduction and foreclosure alternatives. Servicers and investors

incentives may also be misaligned, resulting in fewer modifications than would be optimal. (Levitin and

Twomey 2011) Housing counselors, borrowers, and lenders all point to communication as the biggest

roadblock preventing successful loan modifications. This communications gap may be a function of

servicers lack of capacity to handle the deluge of modification applications, but anecdotal reports are

conflicted. Borrowers and housing counselors cite unresponsive lenders and servicers, while lenders

and servicers cite incomplete borrower applications. Research suggests that property is being

overvalued in weak housing markets, which may also prevent loan modifications from occurring.

(Fitzpatrick & Whitaker 2012) This is because the decision to grant a loan modification, and how

generous that modification will be, depends on the lenders use of a net present value calculation, which

itself depends on the lenders valuation of the property. All else being equal, the closer the propertys


7/37

7



value to the loan amount, the less likely the borrower will receive a modification. Finally, HAMPs

voluntary principal reduction for underwater borrowers and options added through the Home

Affordable Foreclosure Alternatives (such as owner to renter programs, borrower relocation incentives,

and short sales) helped reduce HAMPs one-size-fits-all approach that, in fact, fit fewer borrowers

than expected. The Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets also

helped states tailor responses to fill these gaps.

Another large gap in federal housing policy is the lack of programs for low-value property,

whether or not it has been foreclosed. The vast majority of federal housing policy has an expansionary

focus, which creates problems in relatively weaker housing markets where vacancy and abandonment

are common. For example, the home-mortgage interest deduction, Government Sponsored Enterprises,

and a variety of tax-credit subsidies focus on the construction of new housing and encouraging greater

housing consumption by borrowers. Generally, this expansionary policy results in urban decline in

weaker markets looking quite different from urban growth. This has a number of negative implications

for weaker markets. As housing demand falls, so do prices, attracting low-skilled, low-wage workers and

discouraging high-income, high-skill workers from locating in the market. (Glaeser & Gyourko 2005) This

lack of demand also leads to vacancy and abandonment of residential property in the weakest

submarkets, which further drive down the prices of surrounding homes. (Whitaker & Fitzpatrick 2011;

Mikelbank 2008)

There has been limited federal support designed specifically to deal with foreclosed, vacant,

and/or abandoned property, and each of these programs has various gaps that created challenges in

weak markets. The one regular source of funding is the Community Development Block Grant (CDBG)

program administered by the U.S. Department of Housing and Urban Development. In 2012, CDBG


8/37

8



funding totals $3 billion nationwide, down roughly 25% from 2009. These funds are awarded to states

and communities by formula, and can be used for a variety of neighborhood and social services. While

blight removal is an eligible use of CDBG funds, the majority of funds are used to provide established

services to at-risk populations. In 2011, only 1.9% of CDBG disbursements were spent on clearance and

demolition.5

Additionally, the Housing and Economic Recovery Act of 20086 created the Neighborhood

Stabilization Program (NSP1) a four billion dollar initiative to help stabilize communities hard hit by the

foreclosure crisis. NSP1 funds were distributed according to the formula used to distributed Community

Development Block Grant funds. Section 2301(c) of the Act names eligible uses of NSP1 funds, including

some uses well suited for weaker markets, such as property rehabilitation and demolition. NSP1 funds

were also available to create land banks, which are typically quasi-public entities designed to remediate

blighted property and put it back into productive use. (Alexander, 2011; Fitzpatrick 2010) A two billion

dollar second round of Neighborhood Stabilization Funds (NSP2) was authorized by the American

Recovery and Reinvestment Act of 2009.7 These funds were awarded via a competitive grant process,

and their use in weak markets was further restricted: funds could only be used by land banks if they

were acquiring property that had been foreclosed upon (rather than any blighted property), and no

more than 10 percent of the grant could be used for demolition unless the grantee received a waiver

from the Secretary of Housing and Urban Development.

5See HUDs CDBG expenditure reports, available at:

http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/dis

bursementreports.6

P.L. 110-289 (2008).7

P.L. 111-5 (2009).
http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/disbursementreportshttp://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/disbursementreportshttp://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/disbursementreportshttp://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/disbursementreportshttp://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/budget/disbursementreports


9/37

9



While NSP1 and NSP2 provided vital funding to address foreclosures, vacancy, and

abandonment, there were a number of challenges preventing states and localities from effectively

utilizing NSP funds. First, the compressed timelines and ever-changing regulations made it difficult for

all NSP recipients to utilize the program to its fullest extent. (McKay et al. 2011) Likely due to a lack of

legal infrastructure, very few NSP recipient plans included land banking as a use of NSP funds. (Sheldon

et al. 2009) Early on, there were questions about whether property demolition was a final use of land

eligible for NSP1 funding, or whether demolished land had to be sold to individuals who meet NSPs

income restrictions.

But most importantly, there was a misunderstanding of the market for low-value, foreclosed

property. Anecdotal reports suggest recipients found it difficult to acquire foreclosed properties for

their NSP programs, as investors were able to move more quickly and nimbly in the REO market.

(McKay et al. 2011) This is likely because lenders began rapidly selling their low-value REO in bulk to

investors before NSP came into existence. (Coulton et al. 2008; Lee & Immergluck forthcoming) This

gave investors the advantages of having pre-established relationships with REO sellers and not delaying

purchases to ensure compliance with NSP regulations. Despite a healthy dialogue with communities,

and allowing local recipients some latitude in tailoring NSP programs, local NSP recipients were unable

to keep pace with investors who had already established REO relationships.

State and Local Responses to Foreclosure, Vacancy, and Abandonment

States have stepped into fill numerous gaps in federal policy, but despite being natural

laboratories for differences in legal regimes, there has been little evaluation of state and local responses

relative to evaluations of federal policy. State and local efforts to prevent or remediate foreclosure,


10/37

10



vacancy, and abandonment occur before and after homes are foreclosed or blighted. Pre-foreclosure,

pre-blight policies include front-end consumer protection to prevent borrowers from obtaining loans

likely to end up in foreclosure, and loan-modification gap-fillers such as Hardest Hit Funds and

foreclosure mediation programs. Post-foreclosure, post-blight policies include land banks, eminent

domain, and code enforcement or public nuisance laws.

Pre-foreclosure State Interventions

Home loan consumer protection laws are designed to lead to better borrower outcomes and

prevent foreclosure and the subsequent vacancy or abandonment in less robust housing markets. The

primary federal anti-predatory lending consumer protection law is the Home Ownership and Equity

Protection Act (HOEPA), codified in Regulation Z8, which governs high-cost loans. High-cost loans are

defined as those with an APR that exceeds a statutory trigger, or total points and fees that exceed a

separate trigger. Over a dozen states have augmented HOEPA with their own mini-HOEPA laws that

have lower triggers, regulating a greater number of loans. The general aim of these laws was to further

curtail predatory lending.

Numerous studies have examined the impact of these state laws, with mixed results.

Elliehausen, Staten, and Steinbuks (2006) used two approaches to determine that the presence of a

mini-HOEPA law is associated with decreases in subprime originations. The authors also conducted an

event study with mixed results, which they interpreted as the creation of a mini-HOEPA law causing

lenders to shift from high-cost lending to lower-cost lending. Conversely, Ho and Pennington-Cross

(2006) analyze lending data from counties in states with mini-HOEPA laws that border counties in states

8Regulation Z is codified at 12 CFR 226.


11/37

11



without them, and find that the laws have a small, negative impact on the probability of application and

rejection, but no effect on probability of origination. In a separate study, they found that stronger mini-

HOEPA laws resulted in lower-APR subprime loans relative to states with weaker laws, and lower APRs

relative to states with no such law. (Ho and Pennington-Cross 2006a). Bostic et al. (2008) takes a more

nuanced approach, categorizing laws based upon numerous dimensions. They found that more

restrictive mini-HOEPA laws reduce subprime originations and increase the probability of subprime

application rejections while broader coverage of the law, in terms of the parties subject to it, results in

higher subprime originations. Finally, a study of the preemption of an anti-predatory lending local

ordinance in Cleveland found that removing the ordinance led to worse borrower outcomes. (Xu 2011)

Generally, the inconsistency of these studies suggests a need for further evaluation that takes into

account other laws governing the mortgage origination channel, including those binding real estate

brokers, mortgage brokers, and real estate appraisers.

Once a loan has been made and the borrower has defaulted, lenders may modify the loan to get

it back to performing status. Although federal policy supported loan modifications by offering incentives

to modifying lenders through HAMP, the program had several gaps that states had to fill. One of these

was that it provided little guidance on program implementation, particularly relating to communication

with the borrower. This communications gap was recognized by the Federal Reserve Board during its

review of servicing practices, and resulted in enforcement actions directly related to servicing.9 This

communications gap marked by lenders trying to reach borrowers hundreds of times prior to

foreclosure, and borrowers resubmitting the same paperwork to lenders numerous times while seeking

9Press Release, Federal Reserve Board, Federal Reserve issues enforcement actions related to deficient

practices in residential mortgage loan servicing and foreclosure processing (April 13, 2011), available at

http://www.federalreserve.gov/newsevents/press/enforcement/20110413a.htm
http://www.federalreserve.gov/newsevents/press/enforcement/20110413a.htmhttp://www.federalreserve.gov/newsevents/press/enforcement/20110413a.htmhttp://www.federalreserve.gov/newsevents/press/enforcement/20110413a.htm


12/37

12



a loan modification has been addressed, in part, by states. The most common practice to close this

gap is the creation of foreclosure mediation programs. These programs require borrowers and lenders

meet face-to-face to negotiate an alternative to foreclosure before the foreclosure can be completed.

(Fitzpatrick and Ott 2010, Clifford 2011, Walsh 2012) These programs essentially stay the foreclosure

during the mediation period, which can span numerous months. (Pollard, 2012) Anecdotally,

participants report these programs are effective mechanisms to foster communication. (Fitzpatrick and

Ott 2010, Clifford 2011) But like many other state interventions, there has been no evaluation of their

performance. Thus it is unclear whether the benefits from increased communication, especially so late

in delinquency, outweigh the costs of additional delay in foreclosures.

Another gap in HAMP is its one-size-fits-all approach to loan modifications. HAMP modifications

follow a specific waterfall, do not require principal reduction, and offer little help for borrowers

between jobs. To help states address these gaps, the Hardest Hit Fund was created in February of 2010,

and through four rounds of funding it provided targeted aid to 18 states as well as the District of

Columbia. These funds were authorized to be used for mortgage payment assistance to un- and under-

employed borrowers, principal reduction, second lien elimination, and relocation assistance for

homeowners. The specific uses of Hardest Hit Funds were determined by the states themselves, with

public input. In a descriptive analysis of the programs implemented in a subsample of states receiving

Hardest Hit Funds, it is clear that states tailored the program to their needs. (Immergluck, 2010)

Immergluck (2010) finds that funds in non-judicial foreclosure states were most commonly allocated to

deal with negative equity through either a second lien payoff program or permanent modifications with

principal reduction. A close second was rescue assistance for un- or under-employed residents, either

through programs that make up missed mortgage payments or providing temporary mortgage


13/37

13



assistance for the same groups. Like other state-level interventions, the hardest hit funds programs

have not been empirically evaluated to determine which programs are the most effective improving

borrower outcomes.

Post foreclosure blight reduction

Other than anti-vacancy and anti-blight ordinances, which will be discussed in more detail the

next section, the three primary tools states and municipalities have to address blighted property are the

eminent domain power, land banks, and enforcement of local housing codes. Eminent domain is the

power of the government to take property for a public purpose, and has been controversial since the

U.S. Supreme Court ruled that it could be used to take land for private redevelopment in 2005.10

Eminent domain is often viewed as a way to solve the holdout problem: when contiguous blighted

properties are being acquired for redevelopment, owners of the last few parcels needed for

development may hold out to extract higher payments from the acquirer. Eminent domain can be used

to force such owners to sell for just compensation. Eminent domain has been critiqued on many

fronts, both theoretically and empirically.

The most common empirical evaluations of the use of the eminent domain power aim at

determining whether the government over or underpays for property taken through eminent domain.

In an early evaluation, Munch (1976) found that the government tended to overvalue high-value

property and undervalue low-value property. Similarly, Chang (2010) finds that overall, the government

underpays for property taken through eminent domain, but there are cases in which it dramatically

overpays. Somin (2007) illustrates that projected gains from the reuse of land taken through eminent

10Kelo v. City of New London 545 U.S. 469 (2005).


14/37

14



domain are rarely realized. Studies like these, combined with the political backlash from using eminent

domain, have likely contributed increasing reluctance to use the eminent domain power. In the absence

of eminent domain, municipalities have focused on alternative tools for acquiring blighted property,

such as tax-foreclosure and land banking.

Land banks are public or quasi-public entities with statutorily-defined public missions to acquire,

remediate, and return blighted real property to productive use. (Alexander 2011) Land banks acquire

properties through foreclosure for failure to pay property taxes, or directly from the propertys current

owner. Once acquired, the land bank focuses on remediating the property. This may include demolition

or rehabilitation of the property. (Fitzpatrick 2010) Once the property is remediated, the land bank

seeks to put it back into productive use in a number of ways. Properties with homes may be sold to

owner-occupiers, private developers, municipalities, or nonprofits. Properties without structures may

be sold to neighbors as yard expansions, made into public green space, or banked for parcel aggregation

and development. The principle undergirding land bank activity is that by removing the blight that

lowers surrounding property values, property values will be preserved or increase. The limited empirical

evaluation of land banks is consistent with that theory, finding that the land banks activity turning

blighted structures into vacant lots helped preserve home values in Flint, Michigan. (Griswold and Norris

2007). However, a thorough empirical evaluation of land bank activity has not yet been conducted.

Finally, municipalities can address blight through their state or local housing code and public

nuisance laws. Generally, housing code enforcement is limited in its use it requires inspection of the

individual house and criminal proceedings against the owner. While these steps may not be necessary

when the owner is also occupying the house, they are when the owner is absent and cannot easily be

located or served with process. (Lind, 2011) Public nuisance lawsuits, on the other hand, are civil actions


15/37

15



that expand the remedies available when a property owner is in violation. For example, permanent

injunctions can be issued in civil actions to require the abatement of the nuisance, instead of repeated

criminal suits for failure to correct a violation. Broadly, a residential property becomes a public nuisance

when it becomes a threat to the public health, safety or welfare. This standard usually requires truly

blighted conditionsfar worse than would be expected from normal wear and tear. Ohios public

nuisance law, often considered a gold standard by community development practitioners, allows a

broad array of public and private persons to file a public nuisance lawsuit. If the party bringing the suit

has the ability to abate the nuisance conditions meaning completely rehabilitate the structure or

demolish it then with court permission the party can become a receiver of the property and

implement an abatement plan. While this provides a critical tool for addressing housing blight, it is not

clear how efficient the process is. (Lind, 2011) The use of public nuisance law has not been formally

evaluated, but anecdotally it is reported to be a slow, expensive process.

Anti-vacancy and Anti-blight Ordinances

In this study we evaluate the impact that local anti-vacancy and anti-blight ordinances have on

local housing markets. The general lack of federal anti-blight policies and the gaps in federal foreclosure

policies that have not been addressed on the state level are left to municipalities to address through

local ordinances. Municipalities may prefer this structure to federal or state level policies because it

allows municipalities to respond to local conditions, but it comes at the cost of complexity for lenders

and servicers. There are a number of features to these ordinances that are designed to reduce the time

and expense associated with housing code enforcement. Foreclosure and vacancy registrations, for

example, require municipalities to take no action until they are notified of a vacancy or foreclosure. This

allows them to target enforcement actions to the subsets of those properties, rather than every


16/37

16



property in their jurisdiction. Similarly, point-of-sale ordinances require automatic inspections when

properties are sold.

In recent years hundreds of municipalities across the country have passed foreclosure and

vacancy registration ordinances. Many of these were passed in the wake of banks beginning to rapidly

sell low-value REO in 2007 and 2008. These sales were usually to an atomized group of investors, who

bought multiple properties. (Lee & Immergluck forthcoming) Communities responded to this practice

because of anecdotal reports of investors leaving homes vacant, in poor condition, and tax delinquent.

Empirical analysis confirms these anecdotal reports. Over this period, large investors were far worse

property tax avoiders than individuals, and their properties remained vacant at about twice the rate of

individuals. (Ergungor & Fitzpatrick 2011)

The most common ordinances are registrations for foreclosed and/or vacant property. Once a

property is registered it is subject to periodic inspections for code violations. A less common ordinance

requires an inspection of the home before it can be sold. In all cases, the buyer receives the most recent

inspection report when purchasing the home. While an inspection is required for all bank-financed

purchases, low value properties transact in an all-cash market, where generally no inspection is required

in the absence of these ordinances. These ordinances should provide an incentive for owners of low-

value property to keep up with routine maintenance and property taxes, as these owners know that the

municipality is keeping a close eye on their properties. We expect these ordinances to have a direct

impact on unhealthy housing market transactions, which often rely on being able to sell the home as is

with code violations and/or property tax delinquency, sometimes to an uninformed buyer. Past research

shows local land use laws have an impact on housing markets. (e.g. Dumm et al. 2011, Speyrer 1989,


17/37

17



Glaeser & Gyourko 2003, Rogers 2006) Although this research is primarily on land use restrictions, we

would expect these ordinances to also have measurable effects.

While there is great uniformity among the general provisions of these ordinances, there are

outliers worth discussing. For example, some vacancy registrations place a relatively high burden on the

foreclosing lender. In September, 2011, Springfield Massachusetts passed one such ordinance.11 While

most of the ordinance is similar to others, one provision jumps out as out of the ordinary: a requirement

that any non-exempted owner of vacant or foreclosed property post a $10,000 cash bond for each

foreclosed or vacant property owned by that person. Worchester, Massachusetts passed a similar

ordinance requiring a $5,000 bond be posted. (Pollard 2012) Albany, New York has also followed

Springfields lead and required a $10,000 bond be posted.12 It will be interesting to see how lenders

react in these areas, now that they face the prospect of an additional $5,000-$10,000 per foreclosure.

Another ordinance passed in Chicago, Illinois takes a different, but still relatively extreme,

approach. Rather than posting a bond for every vacant or foreclosed property owned, it broadens the

definition of owner to include a mortgagee or the mortgagees agents and assigns.13

This is

problematic for lenders, because they are mortgagees, but that status alone does not give them the

legal right to enter upon and alter the property. Provisions in most mortgage documents may give

lenders the power to enter and secure properties, but this is largely untested in courts.14 The Federal

11

Springfield City Ordinances 7.50.010 et seq.(2011)12City of Albany Ordinances 133-78.3(B)(7) (2011)

13City of Chicago Ordinances 13-12-125(e)(4) (2011)

14In a recent Ohio Court of Appeals case, the court held that the property protection provision of the

mortgage granted the lender the right to enter the home and secure it upon the borrowers default. Amir Jamal

Tauwab v. Huntington Bank, 2012 Ohio 923, (Ohio Ct. App., 2012)


18/37

18



Housing Finance Administration, overseer of Fannie Mae and Freddie Mac, has sued Chicago to enjoin

enforcement of the ordinance against the GSEs.

Even without these extreme provisions, anti-vacancy and anti-blight ordinances may provide an

incentive for banks to foreclose less on low-value property, and to surrender low-value properties that

they own to land banks or similar entities. Because the ordinances would increase the probability of

being caught violating housing codes, lenders may be wary to take ownership of property that is already

in violation of housing codes.

Data

In this analysis, we use data from a number of sources including: Home Mortgage Disclosure Act

(HMDA); Cuyahoga County Recorder; Cuyahoga County Auditor; and census tract level variables

extracted from the NEO CANDO database at the Center on Urban Poverty and Community Development

at Case Western Reserve University.15

The HMDA data contain loan level data on the lending institution, loan characteristics such as

origination date and borrower characteristics such as income. The recorder data contains information

on the lending institution, loan amount, parcel, and date mortgage deed was recorded. Sales

transactions data comes from the Cuyahoga County Auditor and include sales date, sales price, deed

type, buyer and seller, and parcel. Property characteristics such year built, square footage, and number

of units in property are also provided by the Auditor.

15Database can be accessed athttp://neocando.case.edu
http://neocando.case.edu/http://neocando.case.edu/http://neocando.case.edu/http://neocando.case.edu/


19/37

19



While HMDA is a loan level file, the census tract is the smallest geographic identifier available on

the file. Given we are interested in analysis at the individual property level we link the HMDA to the

Cuyahoga County Recorders file which is a parcel level file. Once these two files are linked, we can link

with other parcel level files such as the Auditors.

Matching HMDA to the Recorder file

To link the HMDA file with the Cuyahoga County recorder file we use probabilistic record linkage

software called Link Plus which is made available by the Centers for Disease Control.16 The files are

separated by year and then are run through linking software. In the linking process, we use the lender

name, origination/recorded month, loan amount and census tract as matching variables. Prior to linking

these two files lender names are standardized across the two files. Loan amounts in the two files are

rounded to the nearest $1,000. The census tract is the blocking variable in the process, which means

only those records with the same census tract across the two files are then matched with the loan

amount, lender name and origination month. The user sets a cut-off value which is recommended to be

no lower than seven and up to ten. We used a cut-off value of nine. The cut-off value is the value

above which comparison pairs are considered potential matches. A linkage score is provided for each

matched pair. The higher the score the more likely the paired records are a match.

We match HMDA and Recorder files for the years 2003-2009. Those pairs that did not match all

variables were manually reviewed. When reviewing pairs that do not match on month but do match on

all other variables, we discovered when the month was different the difference was usually one or two

months. After this manual review, we determined as long as the origination was within the same year it

16Probabilistic matching method is based on a model developed by Fellegi and Sunter in 1969.


20/37

20



was a considered a match for both date variables (month & year). When reviewing those not matching

on the loan amount but matching on all other variables, we decided those within $1000 would still be

considered a match on the loan amount. Reviewing those not matching based on differences in the

lender name was a more involved process. In some cases, the lender name in the two files was spelled

slightly differently and was considered a match (i.e Naval Credit Union versus Navy Credit Union). In

other instances, it was discovered a lender in one file was an affiliate or subsidiary of the company in the

other file and should be considered a match. In other cases, lenders had acquired other lenders, and

one file contained the old name rather than the new one (i.e. PNC Bank and National City). These, too,

were considered matches.

After updating our matches through the manual review, we matched about 75% of the HMDA

records to the recorder records over the 7 year period. Table 1 shows matches rates by year. These

counts include home purchases, refinances and home improvement loans. In our final analysis, only

home purchases are used.

Records entering matching process # Matches Match rate

2003 HMDA 80,556 57,874 71.8%

2004 HMDA 55,206 40,808 73.9%

2005 HMDA 54,241 40,512 74.7%

2006 HMDA 44,983 33,777 75.1%

2007 HMDA 31,181 23,538 75.5%

2008 HMDA 21,377 16,094 75.3%

2009 HMDA 24,461 19,804 81.0%

Total 312,005 232,407 74.5%Table 1. Match rates for HMDA and Recorder data


21/37

21



Matching HMDA-Recorder data to Sales transactions and Parcel Characteristics

Next sales transactions and parcel characteristics were merged to Recorders data for the years

2004-2009. Sales transactions without a corresponding deed in the Recorder file are considered to be

cash transactions. Figure 1 illustrates the merging and linking scheme.

1. Merge A with B using parcelII. Merge A&B with C using parcel, date

III. Probabilistically link A&B&C to D using origination

amount, date, bank, blocking by census tract and

year

A. ParcelCharacteristics

B. Sales-mortgage &cash

transactions

C. Recordermortgage sales

D. HMDAmortgage sales

Figure 1. Data merging and linking scheme.

Methodology

Faced with decades of population loss and suburbanization, central cities and inner ring

municipalities experienced a slow but steady deterioration in housing market conditions. In the 1990's

and early 2000's, local housing ordinances in Cuyahoga County, Ohio (home to Cleveland) were enacted

in some cities to manage vacant and abandoned properties and mitigate neighborhood blight. We

investigate whether these cities were better able to respond to the foreclosure crisis, in comparison to

similar neighboring cities that did not have pre-crisis housing ordinances.

In order to explore this question, we compare outcomes of sales in treated and untreated cities

on several measures of housing distress. A sale is considered treated if it is in a city that has enacted any

one or more of the following ordinances before 2006: point of sale inspection, vacancy registration, or

escrow requirement. It is usually the case that a city has at least two of these ordinances in place. Sales


22/37

22



taking place in cities within the county with no ordinances before the last quarter of 2009 are

considered for inclusion in the control group. This allows us to compare outcomes of interest in the

period 2006-2009. After 2009 some cities enacted rules as a direct response to the foreclosure crisis

making the treatment clearly endogenous. Thus, for the time being, we focus on the analysis of pre-

foreclosure ordinances and outcomes during the 2006-2009 period.

Ideally, to measure the effect of local ordinances on housing market outcomes, we would want

to observe housing outcomes with and without rules for the same parcel, transaction, neighborhood,

and borrower. As this is impossible, we build a control group that has similar distributional pre-crisis

characteristics than the treated group on these four levels. Sales transactions are selected via a simple

matching procedure that assigns to each sale the closest untreated sale, where proximity is measured in

terms of the Malanobis distance. The set of tract variables that are used to calculate this vectorial

distance are: the share of owner occupied housing, median income, share of the population with high

school and college degrees, and unemployment rate, all extracted from the NEO CANDO database at the

Center on Urban Poverty and Community Development at Case Western Reserve University.17 Also

included are: the median sales price in 2004 from the Cuyahoga County Auditor and the share of

mortgage loans originated by non-depository institutions in 2004 according to HMDA. Table 2 sketches

the matching procedure.

Year

Single Family Multiple Family

Owner Investor Miss. Occ. Type Owner Investor Miss. Occ. Type

HC nHC HC nHC cash HC nHC HC nHC cash

17Database can be accessed athttp://neocando.case.edu
http://neocando.case.edu/http://neocando.case.edu/http://neocando.case.edu/http://neocando.case.edu/


23/37

23



1 2 3 4 5 6 7 8 9 10

Table 2. Matching scheme to build control group. First we block by: Occupancy type (investor, owner, missing);

Instrument type (high cost loan-HC, non-high cost loan-nHC, cash); Property type (single family, multiple family).

Within each of the 10 blocks, we pair records in the treated and control groups with the smallest vectorial distance

from each other. A record is an n-tuple containing the following continuous variables: property size, vintage,

conveyance amount, borrower income (for mortgage transactions), and census tract characteristics such asincome, education, unemployment rate, race composition, median sales price in 2004, and percent of non-

depository loan originations in 2004.

A preliminary analysis at the municipality level compared repeat sales home price indices for

non-distressed home sales, excluding sales below $20,000 and sheriff sales, and found similar trends

among treated and untreated municipalities (figure 2). Thus, our current focus is on housing outcome

measures in the distressed market.

0

50

100

150

200

1990 1995 2000 2005

Euclid-1 Bedford

0

50

100

150

200

250

1990 1995 2000 2005

Garfield Hts-1 Brookpark

0

50

100

150

200

250

1990 1995 2000 2005

Mayfield Hts-1 Parma Hts

0

50

100

150

200

1990 1995 2000 2005

Parma-1 Nolmsted


24/37

24



Figure 2: Estimated Repeat sale home price indices in the non-distressed market for ordinance (-1) and

non-ordinance cities

We hypothesize that local ordinances may influence housing markets, by affecting the

underwriting decision, the purchase decision, and/or the decision to maintain the home. We consider

these channels as we analyze effects on the following outcome variables: propensity of properties to

end up in foreclosure, propensity of properties to enter a flipping cycle, likelihood to be sold at a very

low value (less than 10 thousand dollars), propensity for tax delinquent properties to become current

after a sale, and propensity of properties with no tax delinquency to become delinquent after a sale.

Potential buyers may enter a transaction with more information on the status of the property (but not

on the loan) when the rules are in place, so thatall else equal- we would expect to see fewer purchases

that end up entering a flipping cycle or foreclosure. Because anti-blight ordinances will add costs once

homes are foreclosed, they should have a marginal impact on the underwriters decision to make a loan

that will eventual enter foreclosure.

0

50

100

150

200

1990 1995 2000 2005

Warrensville Hts-1 Bedford Ht


25/37

25



We regress these variables against dummy variables indicating whether the sale occurs in a city

with enforced point of sale inspection, escrow requirement, and vacancy registration prior.18 Control

variables are all regressors used in the matching procedure and year dummies. Standard errors are

clustered by census tracts.

Results and Policy Implications

Our matching procedure produced a control group of sales relatively similar to the treated

group in all the characteristics considered. Figures 3 and 4 compares histograms of most census tract,

loan, sale, and parcel characteristics used to match sales. Figure 5 maps the locations of treated and

matched- untreated sales. Parcel characteristics are very similar, but it is worth noting that even when

selecting untreated sales closest to the treated sales, control sales more often occur in census tracts

that are slightly better off in terms of unemployment, median income, and median home value.

Furthermore, the difference in the interest rate spread of high cost loans increases considerably from

2004 to 2006 in the treated group relative to the control group.

Table 3 presents regression results using all sales that took place in the 2004-2009 period.

Contrary to what was expected, the point of sale parameter is significant in reducing the likelihood of a

good outcome. The escrow requirement, on the other hand, offsets most of the negative point of sale

effect suggesting that sales in cities with point of sale and escrow tend to have better outcomes than

those in cities with point of sale only. A possible explanation for these results is that in spite of our

matching procedure, the point of sale parameter is picking up the slightly worse overall conditions in

which treated housing markets entered the crisis. These conditions may have spurred further

18We consider an ordinance enforced if the municipality is maintaining records on the number of properties

subject to the ordinance. Those that maintain no such records, even in aggregate, are considered unenforced.


26/37

26



deterioration in the years to follow. Yet, comparing these (early point of sale) cities among each other,

we see that those that had an escrow requirement were able to fare better during the crisis. That is, an

escrow requirement in addition to a point of sale ordinance brings cities that begin with housing

markets in bad shape closer to the housing markets in the control group, and in some cases makes

housing markets better than the control group.

Overall, local ordinances do not appear to have much of an impact on the underwriters decision

to make a loan that will eventually enter foreclosure. This can be seen in Tables 3, 6, and 5. In each of

these, cities with a point of sale inspection are correlated with a slightly higher chance of a loan that will

enter foreclosure being made. However, adding an escrow feature to the point of sale inspection

virtually eliminates this. When all sales are considered, point of sale, escrow, and vacancy ordinances do

not seem to have any statistically significant impact on the market for properties sold for less than

$10,000 (low value sales) or on property flipping. The main impact that ordinances seem to have is on

the tax-delinquency status of the property, which is a proxy for the propertys condition. (Whitaker and

Fitzpatrick, 2011) Properties subject to a point of sale ordinance are more likely (than the control group)

to be tax delinquent after a sale, less likely to transition from delinquent to current after a sale and more

likely to transition from current to delinquent after a sale. As previously discussed, this is likely due to

the pre-existing weakness in the housing markets of municipalities that pass the ordinance. However,

the addition of an escrow requirement changes these dramatically. They make it less likely that the

property is delinquent after the sale than the control group, almost as likely that the property

transitions from delinquent to current as the control group, and less likely that the property transitions

from current to delinquent than the control group. Having an escrow requirement may also be signaling

a stronger enforcement of the local regulations.


27/37

27



When we limit sales to cash-only or those below the median home price, we see the coefficients

on the ordinances increase significantly over the all sales model. This suggests that the largest

problems, and impacts these ordinances have, are on the lower-end of the housing market and in the

cash-only arena, where there is no lender to oversee the owners activity (such as paying property

taxes). Again, what we see is generally a pattern where sales of homes with a point of sale ordinance are

in areas with slightly weaker housing markets, where tax delinquency is more common. We also see

that an escrow requirement goes a long way to overcoming this weak market, by requiring owners to

bring their houses up to code and pay property taxes at the time of property transfer.

These results are instructive to policymakers who are considering passing anti-vacancy, anti-

blight ordinances at the state or local level. In short, vacancy registrations seem to have little to no

impact on the underwriting decision, how the property is transacted, and the condition of the property.

Point-of-sale ordinances alone do not appear to have much of an impact either, though this is difficult to

identify because of the relatively weaker housing markets in municipalities with point of sale ordinances.

Escrow requirements, on the other hand, seem to have a significant impact on the owners care for the

property. The presence of an escrow requirement forces the property owner to invest in brining the

property up to code rather than selling it as is which comports to the anecdotal reports we have

received from municipalities. In sum, requiring the establishment of an escrow account containing the

funds necessary to bring a home up to code at the point of sale seems to improve the way the property

is maintained by its owner. These results may also suggest that if municipalities are focused on

improving the condition of homes in their jurisdiction, funds used to track vacancy registrations may be

put to better use enforcing a point-of-sale inspection and escrow requirement.


28/37

28



Figure 3. Parcel and loan characteristics for treated and matched-control sales


29/37

29



Figure 4. Census tract characteristics for treated and matched-control sales


30/37

30



Figure 5. Geographic locations of treated and matched- untreated sales


31/37

31

The research and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of Pew, its management or its Board.

--------------------------------------------------------------------------------------------------------------------Loan in F Low Value Property Property is Property Becomes Property Becomes

Sales Flipped Delinquent Current Delinquent(SE) (SE) (SE) (SE) (SE) (SE)

--------------------------------------------------------------------------------------------------------------------Point of Sale 0.004*** 0.003 0.001 0.040*** -0.075*** 0.033***

(0.001) (0.007) (0.006) (0.010) (0.019) (0.009)Escrow -0.003** -0.011 0.002 -0.059*** 0.067* -0.053**

(0.001) (0.011) (0.010) (0.018) (0.027) (0.017)Vacancy Registration -0.001 -0.005 0.005 0.012+ -0.025 0.010+

(0.001) (0.004) (0.006) (0.006) (0.019) (0.006)FHA VA Loan 0.002 -0.052*** -0.001 -0.074*** 0.144*** -0.058***

(0.001) (0.008) (0.023) (0.009) (0.028) (0.007)Rental Mortgage 0.003 -0.041*** 0.035+ -0.047** 0.040 -0.038**

(0.002) (0.006) (0.020) (0.014) (0.038) (0.014)High Cost Loan 0.027*** -0.045*** 0.067*** 0.093*** -0.058+ 0.105***

(0.002) (0.007) (0.018) (0.013) (0.032) (0.012)Cash (no loan data) 0.000 0.006+ 0.022* 0.099*** -0.146*** 0.094***

(0.001) (0.003) (0.010) (0.007) (0.020) (0.007)Vintage -0.000*** -0.001*** -0.000* -0.001*** 0.002*** -0.001***

(0.000) (0.000) (0.000) (0.000) (0.001) (0.000)Square Feet -0.000 0.000 0.000 0.000 0.000 0.000

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)Multifamily 0.003+ 0.019 -0.006 0.053** -0.082** 0.040*

(0.002) (0.012) (0.011) (0.017) (0.030) (0.016)% Black 0.000** 0.001*** 0.000 0.003*** -0.005*** 0.003***

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)% Owner Occupied 0.000 -0.000 0.000 -0.000 -0.002+ -0.001

(0.000) (0.000) (0.000) (0.000) (0.001) (0.000)Median Income 0.000 0.000 0.000 0.000* 0.000 0.000*

(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

% No High school 0.000 0.001+ 0.001 0.002+ -0.007** 0.001(0.000) (0.001) (0.001) (0.001) (0.002) (0.001)

% College Grad -0.000* -0.001 0.001 -0.000 -0.004+ -0.000(0.000) (0.000) (0.001) (0.001) (0.002) (0.001)

Unemployment -0.000 0.006** 0.002+ 0.005* 0.001 0.005*(0.000) (0.002) (0.001) (0.002) (0.003) (0.003)

Median Home Pri~2004 -0.000 -0.000 -0.000* -0.000+ 0.000 -0.000*(0.000) (0.000) (0.000) (0.000) (0.000) (0.000)

2004 0.014*** -0.107*** 0.039* -0.065*** -0.029**(0.001) (0.017) (0.015) (0.013) (0.011)

2005 0.014*** -0.107*** 0.043** -0.038*** -0.003(0.001) (0.018) (0.013) (0.011) (0.010)


32/37

32


2006 0.015*** -0.110*** -0.014 -0.032** 0.124*** -0.001(0.001) (0.018) (0.012) (0.011) (0.030) (0.008)

2007 0.008*** -0.093*** -0.025* -0.024** 0.102*** 0.005(0.001) (0.016) (0.011) (0.008) (0.027) (0.011)

2008 0.002* -0.001 -0.004 0.000 0.054* 0.015(0.001) (0.008) (0.014) (0.010) (0.025) (0.011)

o.2004 0.000(.)

o.2005 0.000(.)

_cons 0.160*** 1.056*** 0.702* 2.674*** -2.672* 2.400***(0.040) (0.179) (0.308) (0.358) (1.033) (0.345)

--------------------------------------------------------------------------------------------------------------------N 39804.00 49317.00 7902.00 49317.00 5780.00 43537.00R2 0.10 0.24 0.07 0.28 0.39 0.23--------------------------------------------------------------------------------------------------------------------

Table 3: All sales, impact by type of ordinance. Loan in F is a measure of a loan that eventually ends up in

foreclosure weighted by the number of years from sale to foreclosure, with higher numbers representing loans thatentered into foreclosure quickly after being originated. Low value sales are properties sold for less than $10,000.

Property Flipped is a measure of the number of sales occurring after a foreclosed property has exited REO through theend of our data, divided by the number of years of data that exist after the sale out of REO. Property is delinquent

means the property is tax delinquent after the sale, regardless of states prior to the sale. Property BecomesCurrent means that the property was delinquent the year before the sale, but the delinquency is cured by the year

after the sale. Property Becomes Delinquent means the property was current the year before the sale, but becomesdelinquent the year after the sale.


33/37

33


--------------------------------------------------------------------------------------------------------------------Low Value Property Property is Property Becomes Property Becomes

Sales Flipped Delinquent Current Delinquent(SE) (SE) (SE) (SE) (SE)

--------------------------------------------------------------------------------------------------------------------Point of Sale 0.003 0.001 0.068*** -0.098*** 0.060***

(0.011) (0.007) (0.014) (0.020) (0.014)Escrow -0.018 0.005 -0.082*** 0.072* -0.076***

(0.019) (0.009) (0.022) (0.033) (0.022)Vacancy Registration -0.010 0.011+ 0.019+ -0.028 0.015

(0.007) (0.006) (0.011) (0.026) (0.011)--------------------------------------------------------------------------------------------------------------------N 23970.00 7053.00 23970.00 4340.00 19630.00R2 0.26 0.05 0.30 0.36 0.25--------------------------------------------------------------------------------------------------------------------Table 4: Cash sales only, impact by type of ordinance. Low value sales are properties sold for less than $10,000.

Property Flipped is a measure of the number of sales occurring after a foreclosed property has exited REO through the

end of our data, divided by the number of years of data that exist after the sale out of REO. Property is delinquent

means the property is tax delinquent after the sale, regardless of states prior to the sale. Property BecomesCurrent means that the property was delinquent the year before the sale, but the delinquency is cured by the year

after the sale. Property Becomes Delinquent means the property was current the year before the sale, but becomesdelinquent the year after the sale.


Sales Flipped Delinquent Current Delinquent

(SE) (SE) (SE) (SE) (SE) (SE)--------------------------------------------------------------------------------------------------------------------

Point of Sale 0.006*** 0.002* -0.012 0.016+ -0.048 0.013(0.001) (0.001) (0.016) (0.009) (0.030) (0.008)

Escrow -0.005** -0.000 -0.013 -0.032+ 0.050 -0.031+(0.002) (0.001) (0.029) (0.016) (0.030) (0.016)

Vacancy Registration -0.002+ -0.000 -0.024+ 0.001 -0.001 -0.000(0.001) (0.000) (0.014) (0.006) (0.026) (0.006)

--------------------------------------------------------------------------------------------------------------------N 24228.00 25347.00 849.00 25347.00 1440.00 23907.00R2 0.08 0.01 0.20 0.10 0.17 0.10--------------------------------------------------------------------------------------------------------------------


34/37

34


Table 5: Loan-financed sales only, impact by type of ordinance. Loan in F is a measure of a loan that eventually endsup in foreclosure weighted by the number of years from sale to foreclosure, with higher numbers representing loans thatentered into foreclosure quickly after being originated. Low value sales are properties sold for less than $10,000.Property Flipped is a measure of the number of sales occurring after a foreclosed property has exited REO through the

end of our data, divided by the number of years of data that exist after the sale out of REO. Property is delinquentmeans the property is tax delinquent after the sale, regardless of states prior to the sale. Property Becomes

Current means that the property was delinquent the year before the sale, but the delinquency is cured by the yearafter the sale. Property Becomes Delinquent means the property was current the year before the sale, but becomes

delinquent the year after the sale.


Sales Flipped Delinquent Current Delinquent(SE) (SE) (SE) (SE) (SE) (SE)

--------------------------------------------------------------------------------------------------------------------Point of Sale 0.003* 0.009 -0.000 0.068*** -0.079*** 0.061***

(0.001) (0.011) (0.007) (0.014) (0.019) (0.015)Escrow -0.003* -0.006 0.012 -0.063** 0.068* -0.057**

(0.001) (0.014) (0.012) (0.019) (0.032) (0.020)Vacancy Registration -0.000 0.005 0.007 0.021+ -0.057* 0.013

(0.001) (0.009) (0.008) (0.011) (0.023) (0.012)--------------------------------------------------------------------------------------------------------------------N 15127.00 23473.00 6919.00 23473.00 4591.00 18882.00

R2

0.06 0.25 0.06 0.28 0.36 0.23--------------------------------------------------------------------------------------------------------------------

Table 6: Sales of properties for below-median sales price, impact by type of ordinance. Loan in F is a measure of a

loan that eventually ends up in foreclosure weighted by the number of years from sale to foreclosure, with highernumbers representing loans that entered into foreclosure quickly after being originated. Low value sales areproperties sold for less than $10,000. Property Flipped is a measure of the number of sales occurring after a

foreclosed property has exited REO through the end of our data, divided by the number of years of data that exist afterthe sale out of REO. Property is delinquent means the property is tax delinquent after the sale, regardless of states

prior to the sale. Property Becomes Current means that the property was delinquent the year before the sale, but the

delinquency is cured by the year after the sale. Property Becomes Delinquent means the property was current the year

before the sale, but becomes delinquent the year after the sale.


35/37

35



Bibliography

Alexander, Frank Land Banks and Land Banking Report for the Center for Community Progress (2011)

Bostic, R.W., K.C. Engel, P. A. McCoy, A. Pennington-Cross, S.M. Wachter State and Local Anti-predatory

Lending Laws: The Effect of Legal Enforcement Mechanisms Journal of Economics and Business 60: 47-

66 (2008)

Campbell, J.Y., S. Giglio, and P. Pathak, Forced sales and house prices American Economic Review 101:

2108-2132 (2011)

Clifford, R. State Foreclosure Prevention Efforts in New England: Mediation and Assistance New

England Public Policy Center Research Report 11-3 (2011)

Coulton, Claudia, Michael Schramm and April Hirsch, Beyond REO: Property transfers at extremely

distressed prices in Cuyahoga County, 2005-2008 Center on Urban Poverty and Community

Development, Mandel School of Applied Social Sciences, Case Western Reserve University (2008)

Dumm, R.E., S. Sirmans, and G. Smersh The Capitalization of Building Codes in Housing Prices Journal

of Real Estate Finance and Economics 42: 30-50 (2011)

Ellen, I.G., Lacoe, J., Sharygn, C., Do foreclosures cause crime? Working Paper: New York: Furman

Center for Real Estate and Urban Policy (2011) available at

http://www.frbsf.org/community/conferences/2011ResearchConference/docs/3a-sharygin-paper.pdf

Elliehausen, G., M.E. Staten, and J. Steinbuks The Effect of State Predatory Lending Laws on the

Availability of Subprime Mortgage Credit Credit Research Center monograph #38 (2006)

Ergungor, O.E. and T.J. Fitzpatrick IV Slowing Speculation: A proposal to Lessen Undesirable Housing

Transactions Forefront 2(1) (2011)

Fitzpatrick IV, Thomas J. Ohios Land Banking Legislation: Modernizing and Aged Model Journal on

Affordable Housing and Community Development Law 19: 127-146 (2010)

Fitzpatrick IV, T.J. and J. Ott Ohio and Pennsylvania: Two Approaches to Judicial Foreclosure

Alternatives Federal Reserve Bank of Cleveland CR Report (2010)

Fitzpatrick IV, T. J. and M. Zenker Municipal Finance in the Face of Falling Property Values Federal

Reserve Bank of Cleveland Economic Commentary no. 2011-25 (2011)

Fitzpatrick IV, T.J. and S. Whitaker Overvaluing Residential Properties and the Growing Glut of REO

Federal Reserve Bank of Cleveland Economic Commentary No. (2012)


36/37

36



Glaeser, Edward L. and Joseph Gyourko The Impact of Building Restriction on Housing Affordability

Federal Reserve Bank of New York, Economic Policy Review 9(2): 21-39 (2003)

Glaeser, Edward L. and Joseph Gyourko Urban Decline and Durable Housing Journal of Political

Economy 113(2): 345-375 (2005)

Griswold, N.G. and P. E. Norris Economic Impacts of Residnetial Property Abandonment and the

Genesee County Land Bank in Flint, Michigan Michigan State University Land Policy Institute (2007)

Hartley, D. The effect of foreclosures on nearby home prices: Supply or disamenity? Federal Reserve

Bank of Cleveland Working Paper no. 10-11 (2010)

Ho, G. and A. Pennington-Cross The Impact of Local Predatory Lending Laws on the Flow of Subprime

Mortgage Credit Journal of Urban Economics 60(2): 210-228 (2006)

Ho, G. and A. Pennington-Cross Predatory Lending Laws and the Cost of Credit Federal Reserve Bank

of St. Louis Working Paper 2006-022A (2006a)

Immergluck, D. State Foreclosure Mitigation Strategies: A Comparisoin of Round 1 and 2 Hardest Hit

Fund Plans to States with Nonjudicial Foreclosure Processes (October 20, 2010)

Immergluck, D. and G. Smith The external costs of foreclosure: The impact of single-family mortgage

foreclosures on property values Housing Policy Debate 17(1): 57-79 (2006)

Immergluck, D. and G. Smith The impact of single family mortgage foreclosures on crime Housing

Studies 21(6): 851-866 (2006).

Lin, Z., E. Rosenblatt, and V.W. Yao, Spillover effects of foreclosures on neighborhood property values

Journal of Real Estate Finance and Economics 38: 387-407 (2009)

Lind, K. J. Can Public Nuisance Law Protect Your Neighborhood from Big Banks? Suffolk University Law

Review 89: 89-137 (2011)

Lee, Yung Sang and Dan Immergluck Explaining the Pace of Foreclosed Home Sales during the U.S.

Foreclosure Crisis: Evidence from Atlantaforthcoming in Housing Studies

Levitin, A and T. Twomey Mortgage Servicing Yale Journal on Regulation 28: 1-90 (2011)

McKay, Shannon, Urvi Neelakantan, and Kimberly Zeuli, Neighborhood Stabilization Putting Policy

into Practice, A Study of Five NSP1 Indirect Recipients Community Scope Vol. 2 (2011)

Mikelbank, Brian, Spatial Analysis of the Impact of Vacant, Abandoned, and Foreclosed Properties

(2008)


37/37

37

Pollard, A.M. Statement before the U.S. House of Representatives Committee on Oversight and

Government Reform on Failure to Recover: The State of Housing Markets, Mortgage Servicing Practices,

and Foreclosures (March 19, 2012)

Rogers, W.H. A Market for Institutions: Assessing the Impact of Restrictive Covenants on Housing Land

Economics 82(4): 500-512 (2006)

Schuetz, J., V. Been and I.G. Ellen, Neighboring effects of concentrated mortgage foreclosures Journal

of Real Estate Research 15: 147-161 (2008)

Sheldon, Amanda, Phillip Bush, Aaron Kearsley, and Anne Gass, The Challenge of Foreclosed Properties:

An Analysis of State and Local Plans to use the Neighborhood Stabilization Program Enterprise

Community Partners Inc. (2009)

Speyrer, J.F., The Effects of Land-Use Restrictions on Market Values of Single-Family Homes in Houston

Journal of Real Estate Finance and Economics 2(2): 117-130 (1989)

Walsh, Geoff Rebuilding America: How States can Save Millions of Homes through Foreclosure

Mediation National Consumer Law Center Report (2012)

Whitaker, Stephan and Thomas J Fitzpatrick IV, The Impact of Vacant, Tax-Delinquent, and Foreclosed

Property on Sales Prices of Neighboring Homes Federal Reserve Bank of Cleveland Working Paper No.

1123R (2011)

Xu, Yilan Does Mortgage Deregulation Increase Foreclosures? Evidence from Cleveland Job Market

Paper, University of Pittsburgh Department Of Economics (2011), available at

http://sites.google.com/site/xuyilan/

fitzpatrick et al - anti-blight ordinances and local housing markets

Documents