Neighborhoods

Land contracts are one of the ways that out-of-state investors profit from purchasing – and neglecting – Youngstown homes, local officials say.

Investors offer the contracts to prospective buyers who don’t qualify for home-mortgage loans. Those buyers then assume responsibility for maintenance and staying in compliance with city housing codes.

Ian Beniston, executive director of Youngstown Neighborhood Development Corp., said it is a frequent practice in the city.

“It’s basically a scheme, particularly in distressed neighborhoods,” Beniston said. “You get individuals [who] generally aren’t likely to get a bank loan, so they think this is their only opportunity [to become a homeowner] and then you prey upon them.”

In a typical scenario, an investor will purchase a home for $3,000, and turn around and offer it to a buyer for $3,000 down and $200 a month over 10 years. The party issuing the land contract still holds the deed, so if the buyer under the contract defaults on a payment, the issuer keeps the money collected and the home.

“People make the down payment and then go along two, three, six years into it, then … something happens,” Beniston said. “They can’t pay.”

Investors typically claim the occupant is responsible for repairs, so when occupants are hit with code violations, they refuse to address them even though this violates state law and city ordinances.

“That might be in the contract [repair responsibility], but … the owner is the owner, and in the state of Ohio, the owner is responsible,” Beniston said.

In addition, owners often neglect to file land contracts with the county recorder, which makes them invalid.

If the tenant defaults, and the owner evicts them, the investor walks away often having doubled, tripled or quadrupled their investment without making any improvements to the property.

LOCAL PRACTICES

YNDC has identified a few LLCs that frequently issue land contracts, including one company based in Columbia, S.C., and another based in Dallas. The first owns 18 properties in Youngstown and 25 in Mahoning County. The second owns 15 homes in the city and 21 in Mahoning County.

A former home on Lemoyne Avenue in the Brownlee Woods neighborhood on the city’s South Side was used by one of the companies to seek prospective home buyers for land contracts. YNDC recently took over the property, placed it into receivership and demolished it.

“They had it marketed on a sign with spray paint in the front yard,” said Jack Daugherty, neighborhood stabilization director for YNDC.

Nancy Martin, president of the Brownlee Woods Neighborhood Association, said the house had been a nuisance for several years. The house was full of mold, and neighbors kept waiting for the demolition to take place.

During the court case that allowed YNDC to take control of the property, Daugherty said a tenant appeared and claimed to own a land contract on the property despite neighbors reporting it empty for several years. The city determined it was too late for the contract to be filed.

A GROWING PROBLEM

Alison Goebel, deputy director of the Greater Ohio Policy Center, said her organization is just beginning to comprehend the magnitude of the problem in Ohio.

“I don’t think this was as big of a problem five years ago as it is today,” Goebel said.

“You’ve seen some bigger companies grow and get into it,” Ian Beniston said. “[They’re] buying up literally thousands of houses across the country.”

He said YNDC has seen it in their neighborhood assessments when they are producing action plans. Problem properties are frequently linked to land contracts.

Abigail Beniston, code enforcement and blight remediation superintendent for the city, said things may be improving slightly in Youngstown.

“I think it’s leveled off a little bit, but we still receive those calls, and we still deal with people that are purchasing on land contract daily,” she said.

Land contracts also create problems when attempting to demolish houses, she said. Demolition requires the city to deal with the deeded owner, who is not the tenant. Tenants often don’t find out about proceedings until the notice of demolition is issued.

“It becomes a sticky situation when you have to explain to [the tenant], ‘I’m sorry but the piece of paper you’re showing me is not valid,’” Beniston said. “That doesn’t go over well with them.”

Beniston said it’s difficult and time consuming to find out if a tenant holds a land contract, and there’s nothing on the books to stop the practice. When the contract has not been recorded, a civil suit is the tenant’s only recourse.

In the case of the Lemoyne house, the tenant found out about the court case after making the down payment. The law requires the owner to notify individuals about court cases, but the tenant is responsible for pursuing litigation.

These are generally people of limited means, Beniston said.

“They’re likely not going to hire an attorney to sue the company out of South Carolina,” Daugherty added. “It’s a tough situation.”

To read the full story from the Vindicator, click here.

While the city has implemented programs to deal with out-of-state ownership, critics point out enforcement has been impacted by a lack of resources.

There is just one 20-hour-a-week employee who is tasked with managing rental registration, vacant registration and foreclosure bonds.

Abigail Beniston, Youngstown’s code enforcement and blight remediation superintendent, expects that part-time employee to be full time by the end of the year. City council approved the change at its meeting last Wednesday.

“The city did put [the salary] in our budget this year,” Beniston said. “It will double the time where she’s dealing with and trying to track people down.”

Youngstown Mayor John A. McNally said he doesn’t expect the city to hire more people in the code enforcement department.

“While it’s an issue, I’ve got other issues that have to be staffed,” McNally said.

The city employs five people in that department, according to records received from the finance department. Their salaries total $135,461, a small fraction of the $180.7 million in expenditures council approved in its 2016 budget.

REGISTRATION SOLUTION

Programs such as rental and vacant registration are intended to make it easier for the city to keep track of the owners of vulnerable properties.

The registration process requires owners to name property managers who are supposed to be easier to contact than out-of-state owners who often hide behind limited liability companies.

Bill D’Avignon, director of the Community Development Agency, said the programs help filter out those who have an interest in the property.

“Those who ignore the notice – we get a sense that they don’t care,” D’Avignon said. “They’re saying whatever happens happens.”

Many property owners apparently don’t care.

Less than 10 percent of vacant properties and less than a quarter of rental properties were registered in 2014, according to estimates released by the Youngstown Neighborhood Development Corp., a private agency that helps the city stabilize neighborhoods.

“It’s just tracking these people down and getting them to pay,” Beniston said. “That is the biggest hurdle.”

Looking Elsewhere

Paul Kowalczyk worked for several years as building commissioner for the city of South Euclid. He said rental and vacant registrations have been effective in the Cleveland suburb, but they require the proper resources.

“You can’t just take the staff you have and add programs,” Kowalczyk said. “These programs are intensive. They take up a lot of time.”

When rental registration was first implemented, the city created a position to manage the program full time. They have since added vacant registration and foreclosure bonds to the position’s responsibilities while reducing it to part time.

McNally maintains Youngstown has adequate staffing in place.

“Sometimes I think they have to re-prioritize themselves internally,” he said.

YNDC’s estimates showed that increasing compliance with vacant and rental registrations could raise up to $739,920 in annual revenue – enough to support hiring several employees to manage the programs.

South Euclid’s ordinances also require out-of-state owners to appoint local agents in charge who can appear in court. The city has the ability to take the property owner to court as well, but Kowalczyk said they typically go after agents in charge because they are easier to track down.

Nicole Billec, assistant Youngstown law director, handles housing issues for the law department. She said locating owners is frequently the most arduous part of the process.

“Just finding them is honestly really difficult and time-consuming,” Billec said.

The city prosecutor has hearings when owners neglect to respond to code violations, but out-of-state property owners often fail to appear. Billec said city ordinances allow for the prosecutor to impose administrative penalties or pursue criminal charges. The administrative penalties max out at $1,000 for the third offense.

Criminal charges present their own problems, however. The city doesn’t have jurisdiction over out-of-state owners, and extradition often costs more than the city would recoup.

the STATE OF THE Problem

Raymond Pianka, a judge in Cleveland who garnered national attention for sentencing slumlords to live in their dilapidated homes, has had success holding those who fail to appear when charged with contempt of court.

Frank Ford, senior policy adviser at Cleveland’s Thriving Communities Institute, credited Judge Pianka with driving out-of-state investors out of Cleveland by levying sizable fines against property owners.

“He literally had tens of millions of dollars in fines against some of these companies,” Ford said. “If we did not have Judge Pianka basically battle these people, they’d all still be here.”

Jude Pianka said Ohio has taken a lackadaisical approach to dealing with out-of-state LLCs, which exacerbates the problem.

“There is a requirement that if you’re doing business in the state of Ohio that you be registered, but as far as I know – and we’ve written letters to the state officials – they don’t seem to take it seriously,” Judge Pianka said.

Alison Goebel, deputy director of the Greater Ohio Policy Center, said the state attorney general’s office is concerned about the matter. She said enforcement of current policy would improve matters.

“If you’re like, ‘I’m ABC LLC but not even registered with the secretary of state,’ what we hope is going to happen then is that the county recorder is going to say, ‘I can’t record this deed,’” Goebel said. “Then the sale is null and void.”

She acknowledged that less scrupulous LLCs would list another LLC as the statutory agent, but this would stop some transfers from proceeding.

The Mahoning County Recorder’s Office said its policy is to record what it receives from the auditor. They don’t check to see whether LLCs are registered.

“This issue is so complex that there are no simple solutions,” Goebel said. “I wish we had easy answers. If we did, this problem would have been taken care of years ago.”

To read the full story from the Vindicator, click here.

Saturday, September 24

YNDC and the Regional Chamber held a community workday in the Steelton neighborhood on Youngstown's west side on Saturday, September 24.

Fourteen properties were boarded, secured, and cleaned up. The workday is part of the ongoing US 422 Corridor redevelopment project that includes the surrounding neighborhoods of Steelton and Brier Hill. Special thanks to Vallourec Star, who provided lunch for the volunteers, and to the AmeriCorps National Civilian Community Corps (NCCC) Team Cedar 4, who are serving for seven-weeks in Youngstown to fight blight with YNDC.

Some local leaders would like to see the city adopt more aggressive ordinances to help combat the problem of out-of-town property owners.

Youngstown currently has the power to use tax foreclosure to take control of delinquent properties, as well as spot blight – a form of eminent domain.

If a property poses a nuisance to an otherwise stable neighborhood and the city can prove the owner has been unresponsive to code enforcement, spot blight allows the city to buy the property from the owner at fair market value.

This applies only in instances where the house would have value after rehabilitation, however.

Before this year, the city never successfully implemented spot blight, in part because owners flip properties when they’re made aware of the proceedings. A house the city finally obtained on Glenwood Avenue saw three owners in the 12 months before its acquisition.

Ian Beniston, executive director of the Youngstown Neighborhood Development Corp., noted that both tax foreclosure and spot-blight programs cost the taxpayers.

This would not be the case, however, if the city adopted a point-of-sale ordinance, some experts maintain.

This ordinance, successfully implemented in Cleveland Heights and other cities in Northeast Ohio, would require a process similar to a home inspection conducted during the mortgage process, but it’s done for the benefit of the city rather than the buyer or seller.

It results in an affidavit listing all code violations before the transfer of a property’s title.

“That makes it extremely difficult for these properties to continue to cycle because they can’t transfer without a signed affidavit from the city,” Beniston said. “The thing I think is most interesting and intriguing about it is that it basically says make an investment or cancel [the sale].”

BEST OPPORTUNITY

Rick Wagner, housing director for Cleveland Heights, said they’ve had a point-of-sale ordinance since the 1970s, and it works about 90 percent of the time.

“The time of property transfer is when the cash is changing hands,” Wagner said. “That’s your best opportunity to get some work done on the house.”

It also presents an opportunity to obtain contact information from out-of-state investors, he said.

Jack Daugherty, neighborhood stabilization director at YNDC, said point-of-sale forces the current owner to deal with the situation. It stops the owner from transferring to other investors.

“That’s how the transfer cycle continues,” Daugherty said. “But if you stop it at that current owner and prevent that person from transferring it to someone else, it’s easier to pinpoint them and then figure out a strategy to get them to deal with it.”

Paying for It

Bill D’Avignon, director of the city’s Community Development Agency, said the city has considered point-of-sale, but it doesn’t have the resources necessary to implement it.

“I don’t think we have the manpower at this point and the time to be able to do it,” D’Avignon said. “It would be a little difficult to administer.”

Councilman Mike Ray, D-4th, supports point-of-sale. He said passing legislation the city can’t enforce doesn’t help anyone, but they need to look into the ordinance.

“We don’t want to make this a hindrance, but we would also like to do something that would hold folks accountable,” Ray said. “So they can’t just buy a property on Craigslist for $5,000 and then ... walk away from it.”

Like vacant and rental registration, point-of-sale is intended to finance itself.

YNDC released projections saying 1,000 homes under $25,000 are transferred in a typical year. If the city charged a $200 inspection fee, it would raise $200,000 – enough to cover the cost of implementation.

Wagner said Cleveland Heights’ housing department received more than twice their budget in fees on point-of-sale inspections and rental registration.

“It can become self-sufficient,” Wagner said. “We’ve gone far beyond that.”

VARIED REACTIONS

South Euclid also implemented a point-of-sale, but Paul Kowlaczyk, the city’s former building commissioner, said it created a lot of resentment, and residents successfully campaigned for a ballot referendum that threw the measure out.

The city near Cleveland has since incorporated some aspects of point-of-sale into its vacant-property registration program.

“We weren’t here to penalize owner-occupied homes,” Kowalczyk said. “It was really the homes that were being neglected that were going vacant.”

When banks foreclose in South Euclid, they must register the property, which requires a full exterior and interior inspection. They aren’t allowed to transfer the property until code violations are addressed.

“A lot of times the banks will transfer it to a rehabber or an investor, and then they get stuck with all these violations,” Kowalczyk said. “But we’ve been very successful in getting these houses back on the market as code-compliant structures.”

LOCAL ENFORCEMENT

Beniston said implementation of point-of-sale in Youngstown likely would push more properties to demolition at least in the short term, but that’s not necessarily a problem.

“As opposed to just having some of these continuing to cycle where they’re vacant, where they’re marginally occupied for a time or they’re a significant neighborhood nuisance and nothing productive happens, that’s not a bad thing, I don’t think,” Beniston said.

Mayor John A. McNally said his administration would consider a point-of-sale ordinance, but it needs to be something the city can enforce. He said code enforcement is a never-ending battle, but the city does a pretty good job given the scale of the problem.

“I think we are aggressive with what we have,” McNally said. “You’re never going to be aggressive enough for the people who are affected by it on a daily basis, [but] we try to get to everything as quickly as we can.”

To read the full story from the Vindicator, click here.

Tuesday, September 27, 2016

On Monday, September 19, 2016 the YNDC Board of Directors adopted YNDC 2017-2019 Strategic Plan Update.

The Plan Update provides goals and targets for YNDC to achieve over the three year plan period for programmatic and other organizational activity. The plan also provides a detailed review of progress and work completed over the previous three year period. The plan will be publicly released in early 2017.

Tuesday, September 22, 2016

In the summer of 2016 YNDC has completed additional improvements to our 45 Oneta Street facility

including a new building for storage of construction materials, fencing around outdoor storage, the addition of a second fixed panel saw, and other organizational enhancements. This facility was donated in April 2015 and has been transformed into a large scale board cutting production center and storage facility for construction materials. Many thanks to all our funders and partners that have made this facility possible.

Wednesday, September 28, 2016

On Friday, September 23, leaders from Johnstown, PA visited YNDC for a learning exchange related to blight removal and community development.

Johnstown, PA has a similar industrial heritage to Youngstown and has suffered from similar economic issues that have led to high rates of vacancy and abandonment. The Johnstown group, comprised of city officials, local foundation representatives, and consultants, were particularly interested in learning how to develop and implement action-oriented neighborhood plans that would lead to visible change in their city's neighborhoods. While in the Mahoning Valley, the group also met with Trumbull Neighborhood Partnership and the Mahoning County Land Bank.

Wednesday, September 28, 2016

On Tuesday, September 27, 2016, YNDC and the City of Youngstown began tree inventories in the Boulevard Park and Crandall Park neighborhoods. The tree inventories are being completed by Davey Tree

through a collaborative project between the Western Reserve Land Conservancy, YNDC, and City of Youngstown. The project is funded by The Raymond John Wean Foundation.

Davey Tree is conducting an inventory and inspection of every tree in the public right of way in both neighborhoods. The information will result in a tree management plan that can be utilized by the City of Youngstown, YNDC, neighborhood groups, and other community organizations to remove, maintain, and plant trees. Crandall Park and Boulevard Park were selected as the neighborhoods through an open competition in which ten neighborhoods applied. The inventory and tree management plans are anticipated to be complete by early December 2016.

Thirty three area organizations have been awarded grants totaling $646,171.00 by the distribution committee of The Youngstown Foundation. Grants were awarded from the foundation’s unrestricted fund as well as the Hine Memorial Fund, the Mahoning Valley Sports Charities, donor advised and restricted funds.

Additionally close to $264,000 was awarded through the Support Fund, a program that provides approved local charities the opportunity to receive an additional 5% grant for contributions received for their organization.

The largest grant in the third quarter, $232,786, was awarded to the Potential Development Program for costs associated with its Operation Search and Help Program. The program employs a caseworker who assists families of special needs children with medication, medical equipment, medical supplies, specialized formulas and transportation assistance to out-of -own medical appointments. The grant is restricted for the medical needs of children with special needs in Mahoning County, as well as children in Liberty, Girard and Hubbard in Trumbull County.

Youngstown Foundation Unrestricted Fund grants include:

ACTION: $5,000 in support of the Integrated Voter Engagement Program.

Big Brothers/Big Sisters: $7,500 to support the Site Based Mentoring Program.

Boys & Girls Club of Youngstown: $28,000 towards the implementation of the Year of the Teen Programming.

Catholic Charities: $10,000 to assist with the purchase of desk cubicles for the new office space.

Easter Seals: $60,190 in support of the new LED lighting project.

Heart Reach Ministries, $33,255 to replace the boiler system.

Hope House Visitation Center: $30,000 to support the Healthy Child Development/Parent Access Program.

Turning Point Counseling: $20,000 to assist with building renovations.

Youngstown Area Goodwill: $15,000 towards costs associated with upgrading the security and safety systems.

$20,000 to help support after school programming & academics at Martin Luther King Elementary School, YCSD.

Youngstown Neighborhood Development Corp: $11,000 to purchase equipment in support of the REVITALIZE Program Sustainability Project.

Youngstown State University: $20,000 to support implementation of the YSU Encouragers Program for YSTAR students.

Youngstown Warren Regional Chamber Foundation: $10,000 in support of the Jobs Now Workforce Development.

Of the 33 grants awarded, four organizations that serve children with diagnosed disabilities received funds from the Hine Memorial Fund of the Youngstown Foundation. These grants include:

SMARTS: $27,440.00 to support the Beats Drum program.

The Paula & Anthony Rich Center for Autism: $18,000 to update the Sensory Room.

Eastern Gateway Community College: $5,500 for the installation of two exterior automatic door openers.

Potential Development Program: $232,786 for the new offices of Operation Search & Help Program.

$85,000 was awarded from Donor Advised Funds to the following organizations:

Beatitude House

Rescue Mission

Camp Fitch

Pregnancy Help Center

Inspiring Minds

Protestant Family Services

YSU Encouragers

Mercy Health Foundation Mobile Health Clinic

Potential Development Program

Teen Challenge

Veterans Resource Center

Brody’s Bunch

Operation Christmas Child

Mahoning Valley Sports Charities awarded:

Trumbull Mobile Meals: $7,500

The Youngstown Foundation, founded in 1918, is the largest community foundation in the Mahoning Valley and the fourth oldest in the country.

To read the full story from the Business Journal, click here.

Monday, October 3, 2016

On Thursday and Friday, September 29 and 30, YNDC team members Ian Beniston, Tom Hetrick, and Joe Napier presented two sessions at the Center for Community Progress' 2016 Reclaiming Vacant Properties Conference.

The sessions were titled Go Go Micro: Targeted Strategies that Have a Big Impact in Highly Distressed Neighborhoods and Maximizing Community Collaboration: Doing a Lot with a Little. The presentations can be downloaded below.