No longer forgotten: Lender to invest $1.5M in city’s middle neighborhoods

Former Saint Luke’s Hospital redevelopment in Buckeye-Shaker.

Former Saint Luke’s Hospital redevelopment in Buckeye-Shaker.

Much like the proverbial middle child, Cleveland’s so-called middle neighborhoods, or communities like Old Brooklyn, Bellaire Puritas and Lee-Harvard that are on the edge of stability and decline, are often forgotten yet full of potential. Yet today, Village Capital Corporation announced that it has received a $1.5 million grant from the U.S. Treasury that it plans to dedicate towards lending in middle neighborhoods.

Although the program is still being designed, VCC president Dione Alexander said the goal is to bring together partners, including the city of Cleveland, to create a home repair and rehabilitation loan product that will help homeowners and developers to make investments in these communities. “We’re designing a strategy to shore up and reinvest in middle neighborhoods,” she said.

Right now, she said, it’s often difficult for people to fix up homes in these areas because of the so-called “appraisal gap,” or the difference between the costs of renovating a home, and the estimated appraisal value when it’s completed.

“It’s very difficult to get acquisition and rehab financing … a traditional mortgage assumes you’re buying a property in as-is condition,” she said, adding that the problem disproportionately affects black and brown communities that have suffered from the effects of systemic racism and redlining. “The appraisal gap is extremely real.”

Initially, VCC said, the initiative aims to target 13 neighborhoods: Lee-Seville, Union Miles, Buckeye-Shaker, North Collinwood, Lee-Harvard, Bellaire Puritas, Cudell, Jefferson, Old Brooklyn, West Park, Detroit Shoreway, and Ohio City. The goal is to create more equitable development across the city, not just in the handful of hot neighborhoods that attract healthy private investment.

“The money in Cleveland has largely followed certain neighborhoods and downtown,” Alexander said. “That’s perfectly appropriate because we want more residential density downtown. But we have 25 other neighborhoods in Cleveland that need our attention and that need economic and community development.”

The city of Cleveland launched its Middle Neighborhoods Initiative earlier this year. According to Kwame Botchway, community capital and impact manager with VCC, the goal is to leverage the $1.5 million grant from the U.S. Treasury to heighten its impact. “A purchase-rehab product for middle neighborhoods is one of the uses,” he said via email. “We have other initiatives in the pipeline that support equitable development, women and minority developers/contractors, and some predevelopment financing programs. We’re looking to leverage these funds, in addition to other funding, to catalyze new programs to fill gaps we have within the sector.”

VCC is a nonprofit community development financial institution (CDFI) that has loaned more than $120 million since its creation in 1992. The organization has spent the past year helping its clients to shore up projects that were struggling during the Covid-19 pandemic. Now, it’s turning its attention to economic recovery efforts, especially investment in communities of color and helping minority and female-led contractors.

Alexander pointed to the redevelopment of the former Saint Luke’s Hospital campus in Buckeye-Shaker as an example of the impact of VCC’s work. The area has seen more than $200 million in investment in the last 10 years, including the Opportunity Corridor, a new RTA station, affordable senior housing, Harvey Rice School, The Intergenerational School, and a new library.

“We’re seeing some investment, but it’s a slow process,” said Alexander. “You really do need patient capital to invest in sizeable assets that you can build around.”

Cleveland Neighborhood Progress, the parent organization of Village Capital Corporation, is an underwriter of The Land, helping to support coverage of Cleveland’s neighborhoods.

Lee Chilcote is a freelance writer and editor of The Land.

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