Cleveland ended the decade with a boom, and it’s showing

Several major residential construction
projects are visible in this October 2018
view looking east down Euclid Avenue,
including construction cranes for the 34-
story Lumen (foreground) and 29-story
Beacon. Plus the construction elevator
guideway on the side of The Athlon, a
conversion of the 15-story Cleveland
Athletic Club, is also visible. The 10-
story Edge Apartments that opened in
2018 is at left. The May Company
residential conversion is just out of
view (clevelandskyscrapers.com).
CLICK IMAGES TO ENLARGE

When John Knopfler and his spouse moved into their Tremont house where a large family had just moved out, each did what many are doing in Cleveland these days. They’re participating in the city’s Fifth Migration, bringing with it socio-economic changes unlike any experienced from the previous four migrations in the past 223 years.

As empty-nesters who grew up in rural Northeast Ohio, they brought decent incomes from their professions in insurance and law. The couple bought a single-family home previously occupied by a six-person family who were lower income. They reduced the population of that home but increased its income.

The Knopflers fixed up the house, originally built more than century ago for a family of four plus a live-in unit, such as an au pair or housekeeper, as there’s a servant’s staircase built into the house.

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Their experience became increasingly common from the 1990s into the 2010s in 19th-century Tremont, whose previous best years were two or three great migrations ago. But over the past 20 years, Tremont has morphed from a downtrodden neighborhood of rotting homes in the shadows of mammoth steel mills that had once supercharged this enclave.

“In the past five years, four adjacent homes that were owned by long-time residents have flipped,” Knopfler said. “The first that sold went to a couple. I believe the previous family that lived there was four or five people.”

While near-west neighborhoods like Tremont and Ohio City were among the first to gentrify from a heavily low-income population to having slightly fewer but wealthier residents, they certainly wouldn’t be the last. And there may not be fewer residents for long considering the rate which some neighborhoods are densifying.

Downtown, Detroit-Shoreway, Edgewater, St. Clair-Superior, Midtown, University-Little Italy, and even Glenville, Fairfax and Hough are seeing increased incomes and a resultant physical change in the landscape.

Some parts of Cleveland sparkle and could soon shine even
more. This is the scene on Huron Road at Tower City Center
which could see a multiple-phase development called City-
Block featuring a business incubator alongside the city’s
rail transit hub plus new offices and apartments (KJP).

COMPELLING DATA

Since 2016, individual taxable incomes in Cleveland have grown by more than $1.25 billion, according to data extrapolated from Cleveland’s 2019 city budget (Page 81). And this year’s income data is still just a conservative estimate. The city won’t know the real data until February when its 2020 budget is released.

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Care must be used with that income number, however. The reason is that taxable income also includes people living outside of Cleveland and working in Cleveland. In fact, 87 percent of Cleveland’s income tax revenues in 2016 came from non-residents. They also benefit from credits that reduce their tax impact.

In addition to a changing population in the city, the data also strongly suggests that a big reason for a bump in city income tax revenue is due to either better-paying jobs in Cleveland or an increase in the number of jobs in Cleveland or both.

Preliminary data from the Bureau of Labor Statistics show that nearly 25,000 more Greater Clevelanders were employed in November 2019 than they were in November 2016. Roughly 600,000 jobs, or more than half of the region’s 1.1 million non-farm employment total, is in Cleveland.

Based on that data, about one-third of the $1.25 billion growth in Cleveland’s taxable incomes is due to the increased number of jobs. The rest is due to better pay and more wealthier residents living in Cleveland.

And the revenue also includes an income tax increase that Cleveland voters passed in November 2016, raising the base amount from 2 percent to 2.5 percent. But after the tax increase impacts were added, a changing population demographic and an increasing number of jobs in Cleveland have pushed the city’s income tax revenues another 10 percent higher.

When combining the results from that tax hike and the city’s changing population makeup and job growth, the city’s income tax receipts grew a whopping 35 percent, from?$314,801,172 in 2016 to a conservative projection of?$424,869,173 this year. Income taxes represent 66 percent of Cleveland’s budget revenue. The next largest source is grant revenue at a mere 6 percent.

Parts of Cleveland can be considered a boomtown. University
Circle is one of them. This is Cleveland’s education and health
care epicenter, accounting for more jobs in the region than any
other economic sector. Apartments rents rose 44 percent in
University Circle in 2018. This is Uptown along Euclid Ave-
nue, lined with parking lots at the start of the 2010s (KJP).

THE FIFTH MIGRATION

That’s the data behind the Fifth Migration, which was detailed in a 2016 report by The Center for Population Dynamics at the Maxine Goodman Levin College of Urban Affairs at Cleveland State University (CSU). The report was issued just as Cleveland’s residential development was kicking into a higher gear.

The Fifth Migration is the movement of Millennials and, to a lesser degree, empty-nest Baby Boomers — the two largest generations in U.S. history — into Cleveland. CSU’s study said Cleveland ranked 8th in the U.S. in the growth rate of college-educated Millennials.

“This infill into the core has recently been termed the Fifth Migration by urban scholars,” the report said. It noted that, of course, this migration is occurring in cities throughout the nation.

To put this migration into context, the CSU report said the First Migration was the pioneers that settled North America; the Second Migration from farms to the factory towns; the Third Migration to the great metropolitan centers like Cleveland; and the Fourth Migration to the suburbs of these centers.

“The Fifth Migration — which will significantly affect the City of Cleveland’s landscape going forward — is a re-urbanizing’ counter-movement to decentralization, particularly for younger, college-educated adults,” the report said.

The Hingetown Section of Ohio City is another boomtown
part of Cleveland. A haven for drug dealers and prostitutes at
the start of the 2010s, there is now a 21st-century development
built, underway or in advanced planning on every single block
in this neighborhood. In the foreground is the third phase of
Snavely’s Hingetown development with the crane above
Hemingway Development’s Church+State project (KJP).

RENTS & CONSTRUCTION RISING

That has manifested itself in a number of ways, including rising apartment rents, increased real estate investment and growing immigration.

Robert Salmon, a Maryland-based investor/analyst who tracks securities and public-sector bonds, said the city’s recent spike in wealthier residents moving is apparent. He occasionally visits Cleveland to see family.

“I would say that extra billion (dollars) in new wealth is very visible around town,” he said.

According to Apartment Guide, Cleveland ranked 7th in the nation with the highest increases in rent. Cleveland rents have grown in the past year by 11.1 percent, to an average of $1,364 for a one-bedroom apartment. Newark, NJ ranked #1 with a 30 percent average rent increase, due mainly to people fleeing higher rents in nearby New York City.

“The major surprises for me from the research was the Newark percentage increase and Cleveland’s rents also headed upwards,” said Apartment Guide’s Managing Director Brian Carberry. “An ongoing trend we are seeing is younger people who want to live in big cities.”

“Thanks to its strong economy, people from Ohio are flocking to Cleveland,” he added.

Rent.com echoed the Apartment Guide report, but added more detail by showing the one-bedroom apartment rent increases by neighborhood. Most of the largest increases were either downtown or in and near booming University Circle, a planning district that includes Little Italy.

University Circle led the way in Cleveland with a 44.28 percent increase, where a one-bedroom apartment’s rent now averages $1,853. Rent pressures in University Circle spilled over into neighboring Hough, long a national symbol of urban decay, where average rents have shot up 7.74 percent to an average of $1,415 for a one-bedroom apartment, according to Rent.com.

Hough is home to market-rate apartment developments built, underway and planned like Upper Chester/Innova, Axis at Ansel Avenue, Paradigm near Wade Park Avenue in the East 60s, 75 Chester located in the 7500 block of Chester Avenue, and the East 90th Street Apartments, just north of Chester.

Downtown’s Gateway District saw rents rise 11.83 percent while the Warehouse District edged up 3.6 percent. Overall, downtown apartment rents grew 7.34 percent, even as thousands of new units are added to the market each year either through new construction or renovation and conversion of obsolete office buildings. Occupancy percentage rates are holding steady in the mid-90s.

Downtown, of course, has among the city’s wealthiest populations. Yet new arrivals displaced fewer residents because there weren’t many residents to begin with. It had 6,484 residents in 1990 but is approaching 20,000 residents today. If it was a separate municipality, downtown would be larger than all but 15 of Cuyahoga County’s suburbs. There are 58 suburbs in the county.

Thomas Bier, a senior fellow at CSU’s Maxine Goodman Levin College of Urban Affairs, recently wrote in Cleveland.com that, even with smaller households replacing ones with larger families, Cleveland’s seven-decade-long population slide has virtually stopped. In the 1970s, Cleveland was losing 30,000 people a year. Last year, it lost just 1,700. But that could be one of its last losing years.

“People will continue to move out — which is normal, just as people move from suburb to suburb — but probably within a few years movers-in will exceed movers-out,” Bier wrote. “Then, after 70 years of loss, the corner finally will have been turned as growth takes hold.”

The population stabilization is reflected in Cleveland’s real estate values, he added. Between 2012 and 2018, the value of the city’s residential properties increased by $248 million, resulting in more property tax revenues for the schools, libraries and parks.

“That’s quite a turnaround from the previous 12 years, spanning the Great Recession, when the city lost $821 million,” Bier said. “The value of commercial properties, including apartments, increased $1.1 billion between 2000 and 2018. Downtown and University Circle are responsible for most of that gain.”

The Inspiron Group’s East 90th Street Apartments, just north
of Chester Avenue, is just one of many developments built,
underway or planned in the long-troubled Hough neighbor-
hood. These investments are occurring because of Hough’s
proximity to boomtown University Circle (LDA).

MIGRATIONS AND INEQUALITY

But there’s still some of the old Fourth Migration showing a pulse in Cleveland. It and the Fifth Migration are simultaneously causing a contrast in terms of income inequality and abandonment in neighborhoods yet to be touched by investment.

For every middle-class person moving into Cleveland, there may be an impoverished person either moving out of their dangerous Cleveland neighborhood to a less dangerous one, or to an inner-ring suburb, or out of the metro area altogether.

This is especially true on the East Side where depopulation continues, People are escaping a lack of opportunities and the resultant drug-fueled crime and violence. Neighborhoods like South Collinwood, Mount Pleasant, Union-Miles, and others are fighting to address disinvestment, improve education and attract jobs.

Kinsman and Fairfax are on the cusp of turning long-abandoned urban prairies into job-rich development sites along the new Opportunity Corridor. This urban boulevard is clearing and cleaning dozens of vacant, polluted, 19th-century industrial sites so they can be returned to productive uses.

Cleveland also has a void of new, high-quality housing types in between the luxury units at one end of the market scale and subsidized housing at the other. So, as developers tap into Opportunity Zone investment funds, they are marketing 5-15 percent of their apartments as “affordable.” Smaller units are being developed and marketed as “workforce housing.”

Interestingly, one of the most inclusive developments in recent years is Snavely Group’s growing Hingetown development, along and near the intersection of Detroit Avenue and West 25th Street in Ohio City. The multi-block development features a mix of market-rate and affordable housing units, as well the Music Settlement school plus co-working facilities and business incubators.
 
For decades, Midtown was an overlooked, pass-through be-
tween downtown and University Circle. Today, streets like
East 69th are seeing new life. Restored homes set next to
Tru Hotel by Hilton, as viewed from the Midtown Tech
Hive, a coworking and business incubator space (KJP).
IMMIGRATION DRIVES GROWTH
 
Another impact of the city’s improving economy and real estate development, in part spurred by the Fifth Migration’s stabilization of urban neighborhoods, is increased foreign immigration. Immigration plays a decisive role in separating America’s growing cities from its declining cities.
 
Without immigrants, powerhouse metro areas such as New York City and San Jose would have lost population at triple the rate of metro areas such as Milwaukee and St. Louis last year, according to a 2019 report by the Economic Innovation Group (EIG).The report is titled “Why is San Jose Growing While Cleveland Shrinks? Maybe It’s Immigration and Not the Weather.”
 
“Many metro areas such as Cleveland that lost population from 2017 to 2018 would instead have registered positive growth if they had received new immigrants at even half the rate of San Jose,” the EIG report notes. “In fact, with only slightly more immigration, Cleveland’s population growth last year could have matched that of Seattle and Washington, DC.”
 
That may be starting to occur, according to the New American Economy (NAE) Cities Index.
 
In 2018, Greater Cleveland ranked 64th nationally among major metros in the NAE Cities Index, a ranking of cities based on their ability to integrate immigrants into the economy. This year, however, Greater Cleveland leaped ahead to 14th in the nation. It was the largest year-over-year increase for any metro area.
 
Immigration not only boosts population figures, it boosts the economy. Immigrants in the Cleveland area have far higher educational attainment than U.S.-born residents and are more likely to start new businesses than established residents.
 
“Not only did median incomes rise and poverty rates fall for all residents in Cleveland, but the city’s immigrant entrepreneurship rate also increased, going from 6.9 percent to 8.0 percent, meaning more new businesses creating more new jobs for all workers,” the NAE report noted.
 
Cleveland in the 2010s saw dozens of underutilized and vacant
buildings restored to productive uses, as well as lots of mid-
rise construction and five 20+ story towers built. What will
the next decade offer to Cleveland? And what might Cleve-
land offer to the world in the next decade (KJP)?
THE NEXT DECADE
 
The challenge for Cleveland as it enters the 2020s isn’t merely to continue the turnaround it started in the 2010s, but to make it more inclusive, the NAE report notes. The city cannot accept merely replacing a person of need with a person of means. Everyone deserves and desires access to their dreams.
 
Yes, there are still too many neglected areas of the city that are in need of more investment as well as a need of more ways for longtime residents and immigrants to physically reach education and employment opportunities.
 
But it’s clear that Cleveland’s trend is to bring wealth and opportunities nearer to the urban core where everyone can physically access it. It’s a powerful counterforce to decades of urban sprawl, and that’s moving the region strongly in a positive direction. For a change.
 
END

7 thoughts on “Cleveland ended the decade with a boom, and it’s showing”

  1. This is very encouraging to read. Do projections suggest Cuyahoga County turn around its population loss? Last I checked the county still lost population, I guess it could be considered a continuation of the fourth migration, as folks move to the neighboring counties. It seems like the pieces are in place; hopefully the city leadership can keep things going.

  2. All of West 25th, from Brooklyn Center north to Ohio City, is seeing a huge amount of construction. And more is coming. Look for an article soon that summarizes all of the underway and coming developments.

  3. Great overview, Ken. For the first time in my life, I'm actually not dreading what the 2020 census will reveal about Cleveland's population in the last 10 years. (Cuyahoga County may still be pretty ugly, though.)

    That 35% increase in income tax revenue from 2016-19 has to be one of the more underreported stories in the last several years. Granted, the half-percent hike voters endorsed in 2016 have something to do with that number, but expanding the overall base by $1.25B during the same period is pure organic growth. Hopefully, the Mayor and Council have some productive conversations about how best to take advantage of this largesse.

  4. Thanks. And the 35 percent increase may even be higher after the actual 2019 numbers are gathered. The 35 percent figure is due to a inherently conservative projection for the 2019 budget.

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