Community Neighborhood Housing Services of St. Paul, Minnesota, joined with another community-based non-profit and a local lender in targeting rehabilitation grants and loans to achieve visible improvements in a distressed neighborhood.

Community Neighborhood Housing Services, formerly known as West Side NHS, was incorporated in 1980 and has provided services citywide in St. Paul since 1984. The organization provides NeighborWorks Full-Cycle Lending services, including first-mortgage programs; homebuyers counseling and education; housing improvement loans; and acquisition, rehabilitation and sale of homes. The organization also provides loan servicing for other organizations. The mission of CNHS is to promote community development through education and affordable housing programs in the communities it serves.

Program Partnership.  In 1999, CNHS and the Neighborhood Development Alliance (NeDA), a neighboring community development corporation that redevelops housing, formed a partnership to rehabilitate homes in a neighborhood of the city. Simultaneously, Firstar Bank decided to target a neighborhood with its Adopt-a-Block Program. In an effort to create a visible neighborhood improvement, the three joined forces and developed a two-year, targeted, neighborhood improvement program — the Winifred Improvement Initiative (WII).

Target Area.  The target area consisted of 425 households in a six-block segment of Winifred Street and two adjacent streets. This neighborhood had become inundated with rental properties (about half the homes were rental), and the housing was becoming increasingly run down. The project began with the purchase and rehabilitation of three homes, which then were sold to first-time homebuyers. The program went on to provide rehabilitation grants, home improvement loans, purchase loans and refinance/rehab loans to other interested households.

Grant/Loan Program.  CNHS had $43,000 in flexible funds from which it could offer grants of up to $1,500 for exterior home improvements. There were no income requirements for the grant program. Homeowners needed only to live in the designated target area and have a viable rehabilitation project (no decks, hot tubs or other “luxury” remodeling projects were eligible). Rehabilitation projects included retaining walls; repairing steps, windows, doors, etc.; exterior painting; and roof or soffit work.
 
In addition, low-interest loans were available from CNHS and NeDA for added home improvements. Community Development Block Grant (CDBG) rehabilitation loans were available at below-market interest rates for families whose income was below 80 percent of the local area median. CNHS rehab loans were available for families above 80 percent of the median or for projects that didn’t fit CDBG guidelines. The average loan was about $10,000, and the terms were based on affordability or set at one year per $1,000 borrowed. CNHS managed all of the funds and was responsible for all grant and loan packaging.

Program Marketing.  A local bank, Firstar Bank, paid for all program marketing, which was done through open houses, newspaper articles and fliers. CNHS also made face-to-face contact with potential customers. The local newspaper reported on the program (though no special arrangements had been made for this), which proved a very successful marketing strategy.

Funding.  Funding in part came through an unexpected windfall from Washington County. Ten years earlier, CNHS had received funding from this partner for a particular project. The partner then offered a separate $20,000 for CNHS to use in a different program. CNHS decided to use the money for rehabilitation grants for the WII. In addition, CNHS also used HOME funds.

• In three months (January–March 2000), 30 grants were made totaling $43,468. Eight households also received rehabilitation loans, and 12 added their own money to conduct further rehab. In total, $164,039 was spent on exterior home improvement for 30 households.
   
• The impact this program has had on the neighborhood has been significant. The street view has improved as people rehabilitate their homes, and other homeowners in the neighborhood have been inspired to conduct home-improvement projects on their own.
   
• Once the initial funds were depleted, CNHS designated additional funds for rehabilitation grants in other targeted neighborhoods. Homeowners in those neighborhoods can obtain a $1,000 grant, which must be accompanied by a rehabilitation loan. CNHS marketed this program in spring and summer 2001, and several homeowners have taken advantage of it. Currently the program is not heavily marketed but is still available in some neighborhoods.

• CNHS did not designate funds to rehabilitate rental properties. Considering that half the homes in the area were rentals, with many not well maintained, this created an obstacle to total neighborhood revitalization. The rental market in St. Paul is such that there is little need for landlords to spend much on rental maintenance, because properties can be rented regardless of their condition.
   
• Extensive administrative time was required in putting together the grant and loan packages. It is important, therefore, to charge a fee to help recover these costs, and also to require borrowers to contribute money of their own through a rehab loan. This not only helps recover costs, but also increases the homeowners’ investment in their homes and connections with the organization.
   
• CNHS learned that even a small grant was enough incentive for homeowners to embark on major rehabilitation projects.
   
• Having flexible dollars without income limitations allowed anyone in the neighborhood to participate, which resulted in a wide range of rehab projects. This flexibility allowed CNHS to help a broader range of households than if the funds had been designated only for lower-income households.

Agency interview with: Cynthia Paulson