Tax Abatements and Home Loan Performance

A Cleveland-based study by the Reinvestment Fund, an equity real estate data and investment firm, has found that foreclosures do not increase after tax abatements end. According to Crain’s Cleveland Business, the foreclosure rate for non-abated city properties from 2008 to 2018 was 5%, while the abated property foreclosure rate was 3%.

"You can see that tax abatement is not the driving force of resident displacement, and it has been an important part of bringing development into the community," Tania Manesse, community development director, said at a Cleveland City Council committee meeting on Tuesday, February 4, Crain’s reports.

According to the study, found that the tax abatement program has declined since a peak in 2006. And abatements make up only a fraction of Cleveland's property overall, according to the study. The share of abated parcels has gone from a high of 4.6% in 2008 to 2.5% in 2018.

There was no strong evidence that a spike in sales follows the expiration of an abatement. Of the 3,858 abatements that ended from 2008 to 2015.

Among city parcels with an expired abatement, 19% sold at the end of up to three years after an abatement, while citywide 48% of Cleveland households have moved within the last four years.

Though the study indicates abated tax abatements are having a positive impact on the city’s housing market, Cleveland still has some of the highest rates of foreclosure in the country, as well as a high volume of vacant and zombie homes.

Counties with a notably high percentage of vacant homes included Ashtabula County, located northeast of Cleveland. According to Stacker, 23.3% of total homes are vacant in this country, and Ohio holds one of the highest rates of zombie homes in the country, with a total of around 891 in the state. Around half of these vacant homes are in the Cleveland-Elyria metro area, with 431 homes. Additionally, the top two zip codes nationwide with the highest number of zombie properties (with at least 100 properties in pre-foreclosure) are Cleveland zip codes 44105 (57) and 44108 (54).