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Emptied out

'We have done this to ourselves'

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Second in a two-part series on Rochester's vacant-housing problem.

Eleven percent of Rochester's houses are vacant. The reason: the city's housing stock was built for 300,000 people; Rochester's population is now less than 220,000.

Throughout the United States, people began to leave cities in the 1950's, drawn to the suburbs by the promise of more land for less money. Neighbors followed, and so did businesses owners, churches, barbers, and teachers.

In the wake of that migration, investors began buying up properties and turning them into rental units. But changes in federal tax laws and a softening real-estate market made those investments less attractive. Housing values dropped, and vacancies began to rise.

For cities and their neighborhoods, the vacant houses were more than just an eyesore. They became magnets for drugs, prostitution, and violent crime. They put enormous stress on cities, which had to pay for more firefighters and police officers while contending with a shrinking property-tax base. And the increase in vacancies occurred as other trends were hitting Rochester: a rise in unemployment in the city, and a concentration of the region's poorest people in inner-city neighborhoods.

The effects have been profound.

Rochester began to address its vacant-housing problem in the early 1990's, when it unveiled its first comprehensive housing policy. The city was, by most accounts, ahead of the rest of the country. (Which raises the question: What would have happened if the city had done nothing?)

Seated in his Browncroft-area living room, a gray and white cat meandering about, Tom Argust recounts the day the late Mayor Tom Ryan asked him to become the city's commissioner of community development. It was December of 1991, and Ryan had just a year left in his last term.

"I thought: 'Oh, man, he wants me to take this job. What am I going to do in a year? I'm not going to float. I'm just not a floater,'" Argust, who is now retired, recalls. "So I said, 'What's the one thing you want to do in one year?' He kind of paused; he kind of looked out the window. He answered me with a question, which was typical of him: 'I don't know why we have so many vacant houses and why we can't do anything about it.'"

So Argust pulled together a team of experts and program managers and within 30 days rolled out the city's attack plan. The primary goal: facilitate home ownership in the city. The secondary goal: facilitate affordable rental options for those who couldn't buy a house.

"That was kind of the genesis of this whole thing," says Argust, whose one-year appointment turned into a decade-long commitment. He continued to serve under Mayor Bill Johnson's administration until his retirement in 2002.

His team of experts also realized, says Argust, that the city had to address its housing surplus. Officials decided to demolish two houses for every one that they created, and, where feasible, convert apartment complexes back to single-family units. But city officials could do little to stem residential development outside the city.

Argust pulls out a thick sheaf of papers from a manila envelope. In it are the numbers that formed the crux of the city's housing policy. Brightly colored graphs and pie charts, drawn largely from Census data, underscore the same message: Despite little to no population growth over the past several decades, construction in Rochester's suburbs grew at alarming rates.

"Now, I'm not into statistics," Argust says, "but it seems to me that if we create more housing units than the number of households, we're going to have some vacancies."

"This gets exacerbated," he says. "For example, the Thruway Authority, about eight years ago maybe, added two lanes onto the Thruway between Victor and Canandaigua. I think that was about $35 million to $36 million. Then when that happened, [Route] 332, which goes from the Canandaigua Thruway exit into Canandaigua, was expanded into a limited-access four-laner, and that was another $20-some million. Talk about the great sucking sound out of Monroe County."

What Argust and his team did not know --- and perhaps could not have known --- was that the vacant housing problem was on the verge of spiraling out of control. And as the years passed, the city's housing policy began to look like a small dam in rising floodwaters.

As the city moved forward with its housing initiative, the Housing Council issued its own study in 2000. While the city had analyzed vacant structures as a whole, including properties that had gone into foreclosure and those that were simply unoccupied, the Housing Council study measured only the former group.

Although the number of vacant properties far exceeded the numbers of foreclosed properties, the Housing Council's findings were no less troubling. "What we didn't know and couldn't know was that we were on a wave of foreclosures that wasn't going down and wasn't static," says Eric Van Dusen, the Housing Council's program manager during that time and current program manager at NeighborWorks of Rochester. "It was going up. As you read in the foreclosure study, there were 361 foreclosures in 1990. By 2000, there were over 1,100."

Indeed, despite aggressive city efforts to increase home ownership in Rochester, the number of city landlords skyrocketed in the early 1990s. "From 1990 to 1994," says Van Dusen, "the number of single-family houses in the City of Rochester that went from owner-occupant to investor-owner increased by some 1,600. So if you do the math on that, that's six houses every seven days for five consecutive years. I remember when Tom [Argust] and I talked about that, we were just shaking our heads like, 'Oh, my God. Oh, my God.'"

To deal, in part, with the explosion in rental properties, the city has been increasingly focusedon promoting mixed-income projects, such as Chevy Place on East Avenue and Anthony Square, off Main Street near downtown. Some of these projects are designed for both renters and homeowners, including homeowners in higher income brackets. We must, say City Councilmember Ben Douglas and other city officials, de-concentrate poverty. Otherwise, anybody who climbs the economic ladder will follow the exodus out of the city.

The data paint a realistic, albeit grim, picture, says Tom Argust. As of 2000, only 5 percent of city houses were assessed at over $100,000; and those were largely concentrated in the city's wealthier areas, such as the Corn Hill and Browncroft neighborhoods.

Julio Vazquez, the city's new community development commissioner, says his staff is creating a targeted-initiative policy. That is, rather than take a piecemeal approach to the vacant housing problem, Vazquez wants the city to pinpoint a given area and infuse it with incentives for residential and commercial development.

"What we have done in the past," he says, "is we've sprinkled some resources all over, citywide, and I don't think we're getting the results that we want. So we're going to consider targeting some neighborhoods and perhaps putting more resources in those neighborhoods to see if we can turn them around."

High on the list, says Vazquez, are areas with growth potential. For example, he favors leveraging city funds in the neighborhoods surrounding PAETECPark, the new home of the Rochester Rhinos. He also speaks optimistically about revitalizing North Clinton Avenue, the proposed site for a new Spanish marketplace, La Marketa. North Clinton, says Vazquez, already houses several strong Rochester businesses, such as ITT and Hickey Freeman. "It's a very challenging area," he says, "but if you put in enough resources, I wonder if you could turn that around."

Vazquez says he hopes to introduce the targeted initiative policy in about a year.

Aggressive city involvement can have its pitfalls. A recent city-funded study by the Center for Governmental Research indicated that some Rochester policies --- particularly those relating to enforcement --- may have inadvertently contributed to the vacant-housing problem. These policies, CGR researchers wrote, might be "counter-productive to the city's best interests."

Larry "Skip" Weekes, who owns properties in the UpperFalls area, and Jean Longchamps, who owns property in the Beechwood area, criticize the city's point system, which penalizes landlords --- not tenants --- for code violations such as trash in the yard or broken fire alarms. "The landlord gets points for anything that goes wrong on their property," says Longchamps. "If you accumulate enough points, they vacate your house."

Under the current system, landlords are expected to police tenants' behavior, such as drug use, says Weekes. "I had 10 houses. I had drugs in every one of my apartments. You just couldn't get rid of them," he says. "You get points." And that, says Weekes, makes landlords reluctant to call city officials and report problems.

Officials in the Duffy administration have promised to re-evaluate the city's enforcement policies. Van Dusen, however, hesitates to blame local government policies for the vacant-housing problem. Did the policies cause the problem, he asks, or were they in response to existing market forces? "I think we could argue chicken and egg here," he says.

Looking ahead, Weekes, a member of the New York State Property and Business Owners, Inc., says many landlords are worried about the new city law mandating that all Rochester rental properties pass lead safety tests, starting July 1. And Weekes says he will likely abandon his properties if he fails the lead assessment.

It's far too early to tell whether the new lead legislation will exacerbate the vacant-housing problem. But several other recent trendsalsohave housing analysts nervous.

Ruhi Maker, an attorney with the Empire JusticeCenter, has spent decades addressing one that impacts the homeowner market: predatory lending.

These practices include steering people to subprime loans even when they qualify for prime rates, charging higher interest than a buyer's credit allows, and deceptive marketing tactics, according to the federal Department of Housing and Urban Development website. Predatory lending, Maker says, predominantly affects minority, poor people both here and across the country. It's not a new phenomenon, but it's one that has spiked in recent years.

"There's good subprime lending, and there's bad subprime lending," says Maker. She estimates that about 5 percent of all loans made to city homebuyers are subprime. But it's hard to determine which of those loans were made in buyers' best interest and which set them up for failure. "It's virtually impossible for us to figure that out," Maker says.

When the Housing Council published its 2000 study, it found that subprime loans were not significantly increasing the number of foreclosures throughout the city. But that finding came with a caveat: "Although most subprime loans were originated very recently, high-interest-rate mortgages already comprise 20 percent of all Rochester foreclosures," researchers wrote.

On the rental end, the CGR study published earlier this year indicated that more and more out-of-state and foreign investors are buying city properties because of their low purchase price. This trend, wrote CGR, might hinder officials' ability to identify and fine negligent property owners. The time needed to locate property owners, they added, could further strain city resources.

James Graham, executive director of property-management company Genesis REI, thinks outside investors can help the city get properties back on the tax rolls. A lot of people want to invest in property but don't want to deal with the hassles of property management, says Graham. So for a fee, Genesis buys properties, packages them for re-sale, and oversees property maintenance and code compliance. "We are," says Graham, "their eyes and their ears."

The myriad factors impacting Rochester's housing market indicate to Eric Van Dusen that the city does need to change some of its housing policies. Seated in a NeighborWorks conference room, Van Dusen draws an invisible circle on a table.This circle, he says, represents the stable housing market. Contained inside it, says Van Dusen, are both homeowners and investor owners.

This schema is in marked contrast to the city's housing policy, which typically places homeowner needs inside the circle and investor-owner needs outside. While the city's priorities have evolved, Van Dusen doesn't think they have shifted far enough. "I think we're past the point where we can talk reasonably about home ownership being the strategy that's going to stabilize our neighborhoods," he says.

In the city, six out of 10 housing units are occupied by renters, according to the 2000 Census. But many landlords who own city properties are not there by choice, the Housing Council noted in a 2001 study of the rental market. Included in the investor-owner group, for example, are people who moved out of the city but couldn't sell their house, people who inherited city property from family members, and real-estate speculators who thought they could make a quick buck. Most of these landlords lack property-management experience and are at risk of going into foreclosure, the Housing Council found.

Foreclosures, however, further diminish homeownership potential. A Housing Council study done in the 19th Ward between 1997 and 1999 indicated that homes on blocks with a single foreclosure experienced a 14 percent drop in property values, while the value of homes on blocks without any foreclosures jumped by about 8 percent. "The large number of foreclosures severely limits the impact of programs aimed at encouraging stable home ownership," concluded the study's authors.

Throughout the years, then, as city officials struggled to increase homeownership, market factors whittled away at their policy's feasibility. "You've got this other trend going on that's undoing everything you're doing and then some," Van Dusen says.

"For many of our neighborhoods, and certainly for the city as a whole, we have to have an equally aggressive and equally sophisticated strategy on how to deal with the rental property," Van Dusen says. "In fact, the rental strategy may now be the leader in paving the way for an owner-occupant strategy. Because in certain neighborhoods, unless you stabilize the rental market, you're not going to significantly increase owner-occupancy."

John Kohut has to shout to be heard over the roar of the refrigerator. We are standing in the kitchen behind his bar, Four Brothers Tavern on Hudson Avenue.Stacked on the shelf behind us are huge bins of spices --- turmeric and chilies and black pepper. He is, Kohut says, only the third owner of the bar, which has been around since World War I.

History winds like a fine thread through Kohut's neighborhood. He has, he says, either lived or worked in Northeast Rochester ever since he moved here from Ukraine almost half a century ago at age 5. He watched the area go from a mini Eastern Europe, full of family-owned barbershops and corner stores, to one of the city's most troubled areas. He watched stores close and families move. He watched his part of the city go from a tightly knit community to a mish-mash of loosely woven neighborhoods.

Most people who lived in the area 50 years ago are gone, he says. But some have stayed --- by choice. Kohut himself owns a house in the suburbs but spends more than half his time sleeping in the apartment upstairs. The good news, he says, is that the city's worst yearsappear to be over. Even Hudson Avenue, he says, "is coming back slowly."

Without recent Census data, the claim is hard to substantiate, but anecdotal evidence supports him. "I think that we are now at the tipping point," agrees Rochester Community Development Commissioner Julio Vazquez. Certain demographic groups --- young professionals, empty nesters --- have been returning to cities across the country, he notes, and Rochester is no exception. The Urban Land Institute's recent study of the downtown area determined that there is strong demand for upscale rental property in the commercial district. The key now, says Vazquez, is figuring out how to tap the middle generation.

It is impossible, however, to come to terms with the city's vacant-housing problem unless people stop moving out of the city faster than they're moving in. Between 2000 and 2004, says Van Dusen, 6,000 people left the city.

That's when Argust gets mad. People can blame City Hall, he says, but how far does the government's responsibility extend? Sure, city officials can create incentives to buy homes in the city. They can make it easier for low-income people to find appropriate services. They can conduct market analyses to understand historical trends. They can revamp zoning codes and review enforcement policies. But can they control market forces? Can they force people to forgo three-car garages and cul-de-sacs? Can they require people to send their children to city schools?

"The reality is that as long as people continue to build houses outside the city, whether it's in the county or the region, and as long as people leave the region or the county, there is nothing much that the city can do about that," says Argust. "We don't control our destiny."

"People are blaming the city, blaming something else," says Argust. "The reality is that we have done this to ourselves. We have made conscious decisions to move out, to vacate or abandon not only our homes but our neighborhoods, and thus create instability in our community, add more costs to our daily living and, in so doing, reduce the quality of life in the overall community.

"We have done this," says Argust. "We have done this. And the whole notion that in America it's the individual that reigns supreme --- 'Whatever I want to do I can do. Nobody's going to tell me what I can't do' --- well, that's fine, but there's a price to pay for individualism, and it's the loss of community. And I think that's what has happened."

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