Cleveland's Tax Abatement Policy Should Aspire to More than "All Lives Matter" Approach to Economic Development

TIKTOK / @GIV.SHARP
TikTok / @giv.sharp

A popular TikTok video during the Black Lives Matter vs. All Lives Matter rhetorical debates of 2020 concerned a burning house. The gist was that when a house on a residential street is on fire, what's urgently required is putting out the flames and saving the people inside that particular house. Even though the street's other, non-burning houses matter — don't all houses? — the one that's literally in flames merits special attention.

The situation is obvious to the point of absurdity, but as an analogy it cuts to the point. From public policy to public relations, broadening a specific message can diminish both its pertinence and power. At a number of Cleveland protests during that era, I witnessed folks delicately explaining a version of the above to what I assume were well-meaning white people chanting "All Lives Matter."

That's not the message, they'd advise. Yes, all lives do matter, but it's Black people getting killed by police. So we need to focus on them right now.

I think about this dynamic often in the arena of tax abatement and so-called equitable economic development, an idea that local leaders support in theory but are generally unwilling to pursue when the rubber meets the road, due to pressure from familiar centers of power

Anyone familiar with Cleveland knows that real estate development over the past two decades has been overwhelmingly concentrated in downtown, University Circle and the near west side, (Tremont, Ohio City and increasingly Detroit-Shoreway). This development has been spurred in no small part by the city's blanket 100%, 15-year tax abatement policy. An abatement can seem like a subsidy for homeowners, who move into a brand-new house and don't have to pay taxes for 15 years, but it tends to be a much more generous subsidy for developers, who jack up the sales price of newly constructed homes, knowing that buyers will gladly pay a premium since they won't be paying taxes. Local developers insist, in fact, that their own financing is contingent on full abatements. 

The explosion of development has increased residential density and enlivened a number of commercial corridors in the city's hottest areas, but one major effect has been the widening gap between the city's prosperous neighborhoods and its poor neighborhoods. These are called "strong markets" and "opportunity markets" in current legislation under consideration at City Hall. The resulting bifurcation has mirrored the recent trajectory of Cleveland's economy, (and the country's economy generally), in which the rich are getting richer and the poor are getting poorer.

Anyone who believes, then, that equity is more than a buzzword should be dismayed by the situation and should support policy interventions — radical ones, in my personal view — to shrink the widening gaps, both at the individual and neighborhood level.  

Restructuring the city's tax abatement policy is one such local intervention. As many advocates have noted, tax abatement policy is merely one tool in what should be a bold policy toolbox, but it's an important one, a tool that could help steer development to neglected parts of town and create ripples of new investment.

Unfortunately, the modified abatement policy advanced by Mayor Just Bibb does precious little to incentivize development in these "opportunity markets" or to incentivize the development of affordable housing, both of which appear to have broad popular support. 

The tax abatement tweaks are now moving through Cleveland City Council. Members of council's Development, Planning and Sustainability Committee met Tuesday to discuss them.  Mayor Bibb has said that a "one size fits all" abatement policy is no longer appropriate, (which is correct). And so the new policy would divide Cleveland into three tiers: strong markets, middle markets and opportunity markets. Only in the opportunity markets, the poorest neighborhoods, would new or significantly renovated homes be eligible for a 100% tax abatement. But in the middle markets, places like Old Brooklyn, West Park and Lee Harvard, homes would still be eligible for 90%. And in the strongest markets, places like Ohio City and University Circle, 85% of a new home's value could still be abated.

As one public commenter noted Tuesday, these distinctions are so small as to be practically meaningless. In a more equitable policy, the disparities in the incentives would reflect the disparities in the strength of the markets themselves, which means that abatement in the city's hottest neighborhoods would be much closer to zero. (Again, if the city is focused on equity, why would it sweeten the deal for developers in areas where they are already flocking? Why would there be an incentive of any kind?)

Taking the recommendations of a recent local report on abatements, the new policy would cap abated value for single-family homes at $350,000, so only a portion of the $800,000 condos in Duck Island would be eligible for abatement. And for big multi-unit projects, the policy would demand that 1/4 of all units be "affordable," (80% of area median income), in order to receive an abatement. Developers could bypass this requirement, however, if they pay a $20,000 fee per non-affordable unit, and those fees would be invested in a public fund and applied toward affordable housing efforts.

At Tuesday's meeting, committee chair Anthony Hairston permitted public comment. Virtually everyone who wasn't a developer offered variations on the same theme: they argued that the policy was a tentative step in the right direction, but that it didn't go far enough. The affordable housing "fee" should be much higher or else it'll simply become a "cost of doing business" for developers, and the distinctions between the market tiers should be more meaningful. As it stands, the fear from many advocates is that the new policy will hardly make a dent.

Developers nevertheless spoke Tuesday to voice their displeasure with the proposed new policy and to characterize its minor changes as the elimination of tax abatement altogether. 

Jonathan Sandvick, a local architect and Vice Chair of the Downtown Cleveland Alliance, recommended a number of changes that would defang the new policy. He proposed a two-year "grandfather period," for example, even though the changes as currently written wouldn't go into effect until May, 2023.

Sandvick said that he and the DCA supported "more growth and greater equity across the city." This is a familiar "have-your-cake-and-eat-it-too" framing, and it's one in which the idea of "equity" is disfigured, (I presume on purpose). In this view, the gently reformed abatement policy is not only bad but inequitable, because it cares more about growth in some areas of the city, (the poorest neighborhoods) than in others, (the hottest and most expensive neighborhoods in town). 

Nobody should take this concern trolling seriously.  Developers understand very well that you don't achieve greater equity when you promote growth equally across the city.  That's the "one size fits all" approach Cleveland has deployed for years, and the result has been concentrated growth and development in three areas.

Folks should recognize that this is a version of the All Lives Matter fallacy. A policy that may look like or sound like it's equal — All Lives / All Houses / All Neighborhoods — has a dramatically unequal effect. In this case, only by targeting the element in crisis —- Black Lives, Burning Houses, Poor Neighborhoods — can you begin to move toward more equitable outcomes.

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About The Author

Sam Allard

Sam Allard is the Senior Writer at Scene, in which capacity he covers politics and power and writes about movies when time permits. He's a graduate of the Medill School of Journalism at Northwestern University and the NEOMFA at Cleveland State. Prior to joining Scene, he was encamped in Sarajevo, Bosnia, on an...
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