A group led by Over-the-Rhine Foundation executive director Mike Morgan and neighborhood resident Danny Klingler has submitted a 29-page report to Cincinnati City Council, outlining changes he believes will both save historic buildings and spur economic development.

Calling a recent surge in demolitions an "imminent threat", especially to historically significant areas such as Over-the-Rhine, the group has been meeting since last September in an attempt to alert council about aspects of the Cincinnati Municipal Code (CMC) that promote demolition of buildings over rehabilitation.

This synopsis of the report includes ideas and quotes from Morgan, who researched, wrote, and signed the document.


Administrative overhaul

Morgan's first suggestion is to refer significant code violations to administrative boards much earlier inthe process, and to empower building owners to make repairs.

Morgan says that both the Board of Building Appeals and the Board of Housing Appeals both become involved after code complaints are filed, but offer few remedies and cannot order repairs to be made.

Additionally, the Public Nuisance Board can declare a property condemned and can order its demolition, but also cannot order repairs.

"The presence or absence of historic significance is essentially irrelevant in the analysis," Morgan says.

Morgan says that the solution is to make the boards more outcome-oriented than reactionary by empowering them to engage property owners, ordering repairs when the owner refuses to remedy the problem and the historic character or neighborhood makes repair more desirable than demolition.

This could be done through revisions to sections 1101-81 and 1101-83 of the CMC, he says.

"Most of these changes are relatively simple in that they utilize existing code and administrative functions," Morgan says.


Use some demolition funds for repairs

Demolition is often chosen as a solution to blighted buildings due to the lack of a funding source for repair work.

Morgan recommends channeling some of the hazard abatement funds into saving building, with changes to CMC sections 1101-63.4 and 1101-63.4.5 calling for repairs and compliance, whenever reasonable, for any historic landmark or contributing structure.

Several changes to Chapter 1101 of the CMC would add preservation as a factor when considering whether or not to demolish a building.

For example, a change to Section 1101-57.1 would provide for a temporary waiver of Vacated Building Maintenance License (VBML) requirements, make enforcement of vacant building standards preferable to demolition of historic buildings, and make receivership preferable to demolition.

"In its current form, Section 1101-57.1 makes a building subject to demolition simply if the owner has failed to comply with the minimum standards required for a vacant building, regardless of whether it poses an actual threat to safety," Morgan says.

Additionally, any historic or contributing building subject to demolition would require notice to be sent to the Urban Conservator and non-profit organizations active in neighborhood rehabilitation, and public hearing notices would be required to be posted both on the building and in the City Bulletin.

The Urban Conservator would then determine the historic significance of the structure, and a reputable, experienced contractor would be required to survey the condition of the building.

All interested parties could testify at the public hearing.

Following the hearing, the building could only be demolished if the value of historic preservation is outweighed by the threat to public safety, and no viable alternative to demolition has been presented.

"Then the director (of the Division of Buildings & Inspections) shall direct the subject building to be demolished and its premises restored to a safe condition, free from any public nuisance," Morgan says. "The director shall reduce the order to writing and incorporate the findings and conclusions supporting the order."

This order would be subject to appeal.

If a building includes usable interior or exterior elements of architectural or historic value, the director of Buildings & Inspections may cause their removal prior to demolition, with the cost of their removal included in the total demolition budget.

The cost for permits to demolish a historic or contributing building would also be raised to $5,000 for the first 1,000 square feet and $1,000 for each additional 1,000 square feet of total floor area. (Comparatively, permit fees for non-historic buildings are $59 for the first 1,000 square feet and $30 for each additional 1,000 square feet of total floor area.)

"None of these changes will generate undue delay or unsafe conditions," Morgan says. "They are intended to simply codify a policy that demolition is a less attractive option for code enforcement when historic buildings and districts are involved."


The VBML

Any order requiring a building to be vacated would include instructions on how the owner could obtain a VBML and how the owner could obtain a certificate of appropriateness for any repair materials.

"The existing code still fails to adequately recognize the number of hurdles and amount of time required to redevelop long vacant properties in areas of disinvestment, e.g. Over-the-Rhine," Morgan says. "The text of VBML requirements also treats redevelopment and demolition as equal options, even in historic districts. The net result is to encourage demolition where redevelopment is preferrable."

Morgan says that the VBML's retention of records of fees and attachment of liens on properties creates a "trap" for purchasers of vacant properties.

Because these liens are not reported to the Hamilton County Recorder, title exams prior to the purchase of the property will not reveal them to a prospective buyer.

Additionally, successive fees of $3,500 per year (properties vacated or vacant for at least five years), over several years, can often exceed the value of the building.

"This helps fuel legal challenges to the VBML, as well as being simply unfair to innocent buyers," Morgan says. "Secondly, it can discourage redevelopment and in some circumstances may even result in an unconstitutional taking."

To remedy this "trap", Morgan recommends having the Board of Housing Appeals aid in the enforcement of the preservation of historic structures and districts by delaying provisions and fees of the VBML by three years -- if the owner can demonstrate "extenuating circumstances".

All liens would be required to be filed with the Hamilton County Recorder, and new property owners could petition the Board of Housing Appeals for forgiveness of the lien.

The board could release the lien if the new owner brings the building into compliance within one year of acquiring title, remains code compliant, and obtains a certificate of occupancy within up to five years after purchase.


Receivership

Receivership is a legal remedy that allows non-profits and municipalities to enter and remediate a nuisance property, then either offer it back to the owner for the expense of the rehabilitation or, if the owner is unwilling or unable to pay, to sell it to a qualified third party.

"Regardless of whether the property is sold to a rehabber, developer, placed in a land bank program, or returned to the owner, the result is to bring non-compliant buildings up to code, remediating blight and dangerous situations and, when the buildings are historic, better conservation of our historic neighborhoods," Morgan says. "The process can be time consuming, but simply being willing and able to proceed with a nuisance abatement suit has proven likely to stimulate the owner to remediate problems in a large number of instances."

Morgan says that Cincinnati's decision to raise VBML fees in 2006 has had a positive effect on pressuring negligent property owners and spleculators to improve their properties or transfer them to someone who can, but it's not a sufficient solution to address the estimated 4,500 vacant buildings in the City.

He says that nearly half of the owners of the 1,600-plus buildings under VBML orders are ignoring them completely, and only 5 percent of code violations are prosecuted by the City solicitor.

"When this occurs, demolition is typically the city's most potent weapon, but an unattractive option in a historic district that is at a tipping point of physical destruction," Morgan says.

Morgan says that the cost of bringing an urban core building of an average size of 3,500-square-feet is typically between $50,000 and $55,000 per building, based on a cost of $15.50 per square foot.

If a receivership action has been initiated, a stay of demolition could be issued during legal proceedings, and during a "reasonable" time thereafter to bring the building into compliance.


Financing rehabilitation

"The vast majority of development occurring in Over-the-Rhine is being accomplished by skilled developers and benefits from some sort of subsidy," Morgan says.

But the kind of owner-occupied "sweat equity" rehabilitation that builds neighborhoods on the grassroots level is missing, he says.

"This is primarily because financing the complete restoration of vacant properties is difficult," Morgan says. "Even before the collapse of many lending markets, most lenders refused to appraise properties in light of the neighborhood's redevelopment and budding market-rate rent potential. Now, obtaining financing for these projects can seem impossible."

Morgan says that this is due mainly to the lack of residential loans for rehabilitation, the refusal of lenders to finance mixed-use buildings, appraisals that look at comparable property sales instead of future potential, and a permit and inspection process that can be daunting to rehabbers.

"The building stock presents unique challenges that call for special expertise, and many contractors refuse to work in the neighborhood [OTR] due to crime," Morgan says. "There is a market for owner-occupant rehabbers, but we lack a program that can help these people navigate rehab projects."

A "Live Buy Design" program, implemented by the City several years ago, was supposed to help owner-occupant rehabilitation projects by combining homeownership classes, a $1,000 down payment assistance grant, and access to traditional Federal Housing Administration (FHA) loans.

Morgan says that the program failed for several reasons: loan officers were poorly educated about the program by lenders, the City provided little incentive to lenders, and the education component didn't cover basics such as navigating the complex FHA loans or the City's permitting and inspection process.

"All of these shortcomings can be corrected," he says. "Whether a loan program utilizes the existing 203(k) [FHA] loan or is modeled on similar loan programs used in other cities, the most potent tool for blight reduction, better historic preservation, and increased taxable land values may be the creation of a city-backed loan program."


Historic preservation

Morgan says that few changes to Chapter 1435 of the CMC, which governs historic conservation, are necessary.

"The key is to take these sections of code seriously," he says.

However, more clarity is needed.

Morgan says that developers continue the guidelines too cumbersome, while historic preservationists believe they are too lax and lead to too many unnecessary demolitions.

"'Economic hardship' exceptions have also been applied inconsistently," he says. "This creates an atmosphere of uncertainty over redevelopment and rehabilitation work in historic neighborhoods."

He adds that the CMC is written to prevent overzealous enforcement of historic guidelines from constituting an unconstitutional taking of property without just compensation, leading to demolitions in the name of financial infeasibility.

Non-profits also enjoy an exemption from historic preservation guidelines.

Morgan says this is irrational, self-contradictory, and damaging to neighborhoods like Over-the-Rhine that have a large percentage of buildings owned by non-profits.

"The clause appears to make demolition easier for a non-profit by stating that exceptions can be granted if preservation would merely deny a non-profit owner of use compatible with the organizations plans, which would essentially constitute a free pass to demolition; but the clause goes on to state that preclusion of the intended use must also constitute a taking of the property," Morgan says.

He says that the primary value of the clause seems to "reside in the potential to generate litigating over its meaning and purpose", and should be removed.

Form-based codes, which outline what is proper rather than what is prohibited and take a shared neighborhood vision into account, could serve as an example that would make both development and preservation much easier.

"These principles could be applied to generate consistent, detailed, neighborhood-specific guidelines with numerous visual examples," Morgan says. "The guidelines could be informed by a series of public meetings designed to clarify the community's vision and search for solutions to typical problems – 'problems' from the perspective of both preservationists as well as owners and developers."


Tax abatements

Tax abatements for rehabilitation and new construction are allowed by Ohio Revised Code Section 3735.67, and municipalities are given the ability to create Community Reinvestment Areas (CRA) in which to apply these incentives.

In Cincinnati, the entire City has been declared a CRA.

"Over-the-Rhine, Avondale and Price Hill are treated as being equally in need of reinvestment as Hyde Park, Mt. Lookout, and Mt. Adams," Morgan says.

One way Morgan says that this is unfair is that the maximum valuation for an abatement is the same for rehabilitation and new construction, but the valuation on a rehabilitation project starts with the existing value of the land and structure – new construction counts only the value of the land.

In other words, if a $60,000 building is rehabilitated and infill is built on a $10,000 vacant lot – and both produce end products worth $275,000 – the owners of the new construction infill will pay significantly less in property taxes.

"And the length of abatements exacerbates this inequity, granting the larger new construction abatement for five years longer [15 years versus 10 years] than the rehabilitation project," Morgan says. "This provides more incentive for demolition and new construction than historic preservation and rehabilitation."

And because the entire City is a CRA, the abatements are less likely to stimulate development in the areas that really need it.

"The current mean cost of residential condo units in Over-the-Rhine is around $185,000," Morgan says. "Even though initial land values will be greater in more prosperous neighborhoods, this still presents the possibility that an abatement on a maximum $275,000 value of improvements will be worth more in more affluent neighborhoods than in struggling ones."

The neighborhood's building stock also presents problems, he says, because buildings with more than three residential units require a cumbersome application process and additional fees.

These mixed-use buildings also require $100,000 in rehabilitation work to qualify for the abatement, more than the $2,500 that would be required by a two-family house of the same size.

Overall, Morgan says that these abatements are a reduction in tax revenue.

"They only constitute good fiscal policy if they lead to greater long-term land valuations, sales tax generation, and economic development than they forfeit in the short-term," he says. "It is difficult to understand how Cincinnati's abatement decisions achieve this goal. Rehabilitation project produce more jons and retain more money in the local economy than new construction, yet we are providing more incentive for new construction than rehabilitation."

Morgan says that the greatest potential to increase land values, add taxpayers to the City, and grow a concentration of residents resides more in the redevelopment of Over-the-Rhine than in any other public project -- including The Banks.

"But as long as tax abatements are given in areas where the market is more lucrative and less challenging, community reinvestment will not occur where it is needed most," he says.


Preservation as economic development

Charleston, Savannah, Boston, New Orleans, New York, Philadelphia, San Antonio, San Francisco....

All of these cities conjure images of living history.

Morgan says that this is no accident.

"These cities all value and promote their history," he says. "They do not do so because they are populated and governed by history buffs. They do it because history sells."

This unique sense of place sets the each city apart from all others, and has the direct effect of producing both private and public income through jobs, tourism, and the businesses and creative professionals needed to employ them.

"Economic development today is won and lost in the battle for young talent, as firms and businesses make location decisions first and foremost on the basis of the access they have to pools of skilled young workers," Morgan says.

Morgan says that the good news is that Cincinnati is rich with the kind of vibrant, eclectic urban neighborhoods that these young professionals crave; The bad news is that the Brookings Institution has found that the City is lagging behind its peers in leveraging these assets.

"We appear to be destroying our most critical assets faster than we can develop them," he says.

Morgan says that historic preservation, the reduction of urban blight, stimulating the economy, and creating sustainable neighborhoods are not mutually exclusive goals.

"We simply need to commit to leveraging the economic value of historic preservation and start understanding that bulldozers are not always the best answer to remedying blight," he says.

Previous reading on BC:
Group petitioning council to stop Over-the-Rhine demolitions (6/10/09)