Jeremy Hobson: We just got earnings from Bank of America, which says it made a profit of about $6 billion last quarter — thanks in part to what you might call “creative accounting.” The bank’s consumer real estate division — think home mortgages — actually lost more than a billion dollars.
Now, Bank of America is holding a huge number of bad mortgages, so it recently began giving away foreclosed homes to cities that demolish them. The theory goes: get rid of excess homes, and housing prices will go up.
But as Marketplace’s Jeff Tyler reports, it costs real money to tear down a house.
Jeff Tyler: Cleveland is home to hundreds of abandoned houses. Damian Borkowski manages their demolition for the city.
Damian Borkowski: There’s a number of costs. Firstly, you have to conduct an asbestos survey, and those run around $600.
If asbestos is found, there are more expenses. Otherwise, the cost to tear down a house is around $10,000. That includes hauling away the debris and filling any remaining hole with dirt, which isn’t cheap.
Kendall Pelling: Oh yeah, we buy dirt.
Kendall Pelling is with a nonprofit community development organization that demolishes dilapidated houses in Pittsburgh. Sometimes, he says, the city recycles dirt from other properties.
Pelling: If we have dirt lying around somewhere, we can get a reduced price. Then we just have to pay to truck it.
Demolishing abandoned homes can prop up the housing market. In Cleveland, Damian Borkowski says it also helps the labor market.
Borkowski: A lot of the people now who are doing demolition were house builders. And since there is no work there, they are using their machinery to tear houses down for us.
Cleveland plans to tear down around 700 abandoned houses this year — one sector of the housing market that’s still booming.
I’m Jeff Tyler for Marketplace.