Revolving loan programs help residents improve their homes
Correction: The print version of this story in our January issue states that the revolving loan program in Southeast Como brought “an additional $1.8 million back to the Southeast Como Improvement Association (SECIA).” Not so, corrects SECIA director James De Soto; $1.8 million is the amount of “additional leveraged funds generated by the projects the loans were used for and is not actual money that has been returned to SECIA,” he stated. The actual amount of money returned to SECIA through the program is currently less than $400,000. The error has been corrected in this online version.
Since buying her 1918 Southeast Como bungalow in 1991, Wendy Menken had wanted to add on a second story. “I wanted bedrooms on the second floor, and a work space,” said Menken, who showed off the near-completed dream during the 2007 Minneapolis/St. Paul Home Tour.
(Related: The 2009 Minneapolis and Saint Paul Home Tour nomination deadline is Jan. 23. Owners who would like to show off their “well-kept or newly remodeled homes” may contact Hour Tour Coordinator Margo Ashmore at 612-673-5103, or in Saint Paul, Natalie Fedie, 651-226-6549, or by email at firstname.lastname@example.org. The application can be downloaded from www.MSPHomeTour.com under “nominate.”)
Menken was able to do the work with the help of a home-improvement loan program facilitated at the neighborhood level.
“Without the loan, I wouldn’t have been able to do it,” said Menken. “I couldn’t have gotten enough [money] from the bank.” In fact, the program allowed an even better project, she said; she installed a $7,000 solar-heated water system at the same time.
In many Bridge-area neighborhoods, homeowners like Menken hoping to update that bungalow, boost energy efficiency or make their homes more accessible can take advantage of the neighborhood-level loans. The Neighborhood Revitalization Program (NRP) funds are allocated by city-designated neighborhood organizations toward various loan programs. The loans themselves are handled by another agency, such as the Center for Energy and Environment (CEE), which has handled nearly $20 million in loans for 30 neighborhoods.
The loans not only help homeowners, but the interest brings money back to the respective neighborhood groups — thus the term “revolving” — to be used in other areas in the budget. For many groups, it’s an important source of revenue, especially as NRP funding dwindled in recent years. Now, as the city prepares to take over NRP, which funds the loans, it’s unclear how these programs will be affected.
Jennifer Lastoka, community engagement coordinator for the city, said that neighborhoods will continue to apply their NRP phase-two dollars to home improvement loan programs, among others, even as the model for NRP becomes internal to the city. “The new department won’t change that,” she said, adding that groups are using those funds at their own pace. Neighborhoods will be able to use the recently authorized funds for their purposes as well.
Beyond that, Lastoka said she couldn’t say for sure what initiatives might continue or not in the transition.
“The new program hasn’t been detailed to say what will be eligible and not. We have work to do over the next two years to define eligible uses,” said Lastoka, adding that the intention is to make the transition as seamless as possible. “It’s my understanding that the idea is to continue the kinds of programs that neighborhoods are doing,” she said. “We know that revolving loans are helpful to the neighborhoods.”
Building up the neighborhoods
Program specifics — earning requirements, interest rates and loan amounts — vary according to neighborhood. Most target single-family dwellings, while some help buy down interest rates tied to state-offered loans, according to Erica Mitchell-Graber, community relations manager for CEE.
“All of [the home improvement loans] are first-come, first-served, and there are many that deal with energy-type improvements,” said Mitchell-Graber, adding that the programs can also help people in an emergency situations.
“[CEE] is willing to accept someone a bank might not take,” said Menken. “It’s more accessible and easy to work with,” she said, explaining that it provides an extra layer of inspection and “a lot of hand-holding throughout the process.”
Here’s a look at the loan programs in some Bridge neighborhoods. (Click here for loan specifics for each neighborhood.)
More than 200 Southeast Como residents have received a loan of some form over the past eight years, leveraging an additional $1.8 million in neighborhood projects and, as of January 2009, bringing almost $400,000 back to the Southeast Como Improvement Association (SECIA).
The program is open to any resident, and improvements have included kitchen and bathroom remodels, roof replacement, concrete work, energy improvements, heating, plumbing and electrical upgrades, garage improvements, siding replacement and especially — in a neighborhood built atop a silt-peat bog — concrete work to fix sagging steps and crooked sidewalks, Menken said.
“[Southeast Como] has a lot of beautiful properties, some of which need work,” said Menken. “We want to encourage people to appreciate what they have and get the resources they need to improve it and get it up-to-date,” she said. The program has helped people invest in their homes and stay in the area longer.
About $946,000 was originally made available through the first of two NRP phases. Of that, $30,000 remains, and, from phase two, SECIA is adding $75,000 to the revolving loan fund and $50,000 to the emergency deferred loan fund.
Previously, SECIA offered additional deferred loans, comprehensive home inspections and loans for rental properties, but with “NRP being dismantled,” as Menken put it, SECIA is “being conservative.
“We’re doing what other neighborhoods are doing — setting up revolving loans,” Menken said. “We have to make sure that people can make the payments. The economy factors into it.”
Menken called the full range programs once offered “a legacy of NRP,” and she said many involved with the neighborhood organizations “have no hope that the city will help our communities. The city has its own agenda,” she said, and she predicts that fewer people will undergo major renovations as a result. “Our goal is to make sure that anyone who wants it can access it through 2010,” she said.
Longfellow and Cooper
Filled with one-story bungalows built around 1920 and some rental complexes, Longfellow is relatively stable in terms of home ownership, according to Kim Jakus, housing coordinator for the Longfellow Community Council (LCC).
According to CEE, Longfellow has invested more than $3 million into its housing programs since 1997, leveraging more than $6 million in projects.
Among the most popular are flexible $2,000–$25,000 inter-subsidy loans, which reduces the Minnesota Housing Finance Agency’s interest rate on home loans, with an income cap of $90,000. “It fits the demographic of the neighborhood,” said Jakus.
Jakus said she’d like to see loans made available to landlords in the future. If NRP doesn’t provide enough money for the programs in the future, however, “We’ll probably be restricted in what loans we’ll be able to offer,” she said. “But we’re in a better position than some neighborhoods. There’s still a lot of uncertainty about how it’ll be fleshed out.”
In Prospect Park, where home values are high, they’ve had trouble lending to homeowners. The the Prospect Park/East River Road Improvement Association’s (PPERRIA) hasn’t received many applications for its home improvement loans, said Roger Kiemele, a member of the group’s Housing Committee. PPERRIA initially received $95,000 in NRP phase-two funds for home improvements; $70,000 remains.
PPERRIA’s adaptability loan program — which offers seniors and people with disabilities up to $15,000 to revamp their homes for accessibility or safety — is also rarely used. Currently, $170,000 is available, compared to $200,000 in 2003.
In July, PPERRIA lowered income requirements and interest rates from 6 percent to 4 percent on the revolving home loans and raised the income level. “Basically, we opened it up for more people,” said Kiemele. “We wanted to make it more attractive for people.” Considering the economic downturn, “The bar was too high,” he said. “It could be tweaked again.”
That said, Kiemele estimates the funds will last through 2009. “When it runs out, there’ll be no more money for this program,” he said.
Eligible improvements include the following: windows, doors, insulation, code violations, furnaces, siding, roofs and air-conditioning. Homes, condos, co-ops and townhomes with one to four residential units are eligible.
In Marcy-Holmes — a mix of historic homes and student housing — loans apply to structures with up to four units, even if not owner-occupied, although townhomes and condos are not eligible. There are no income limits for applicants. Funds can be used for home exterior improvements, renovations, and code violations, among other things.
Melissa Bean, executive director of the Marcy-Holmes Neighborhood Association (MHNA), said its revolving loan program has a higher minimum than it did in the past. Other programs have recently been eliminated, and the neighborhood group is looking for “big improvements,” she said. “We only have $150,000 to work with.” One caveat, she noted: smaller loans take more money to administer.
Bean said that the group hasn’t determined how it will use the money that comes back to the neighborhood as loans are repaid. “It’s seen as a way to help fund neighborhood activities, but there hasn’t been any vote yet,” she said.
Seward Neighborhood Group (SNG) has had great success in the past with its home loan programs, which NRP Director Bob Miller recently recalled as an “excellent housing program,” calling it “one of the best NRP had.” But the organization’s recent financial problems — stemming partially from the mismanagement of income from housing programs — has meant suspending the programs for now. SNG recently settled with NRP over the housing program funds and hopes to resurrect its loan program.
Loan specifics by neighborhood
Whatever your neighborhood, homeowners who don’t find or fit into a specific neighborhood program shouldn’t be deterred, said CEE’s Erica Graber-Mitchell. CEE can often adjust the terms or find other loans programs — through the Minnesota Housing Finance Agency, for example — to meet their needs. Contact CEE at 612-335-5858 for full information.
Loan specifics vary for each area by maximum amount, maximum term, income limits and eligible improvements; and other programs not outlined below are also available for some neighborhoods. The Center for Energy and Environment’s (CEE) website, www.mncee.org, outlines specifics for eligible neighborhoods. Contact them for full information at 612-335-5858.
Revolving loans may be as high as $15,000. The 5.5 percent interest rate is 1 percent below the market rate. The loan is to be paid off within 15 years. Emergency loans with deferred payments can be for as much as $5,000.
Longfellow and Cooper
Several types of loans and improvement programs are available, including low-interest loans of up to $25,000 with a rate between zero percent and
6 percent. Deferred loans are available for emergency repairs, and major remodeling and home adaptability programs also exist.
The maximum for revolving loans, at 4 percent interest, is $5,000, with a maximum term of five years. Deferred loans with income restrictions are available for up to $5,000 at zero-percent interest. They must be repaid within seven years but are forgiven if an owner remains in the home that long.
Loans with 5 percent interest are available from $7,500– $20,000 for most exterior projects. There are no income restrictions.
Funds for revolving and deferred home improvement loans have been used up in Cedar-Riverside, but the West Bank Community Coalition (WBCC) does currently offer zero-percent interest loans of $2,000–$15,000 to first-time homebuyers.
last revised: January 12, 2009