CLEVELAND, Ohio – The city of Cleveland intends to establish a revolving loan fund for home repairs by using at least $4 million left over from a decades-old housing program.
City Council on Monday gave Mayor Justin Bibb’s administration approval to establish the Residential Repair and Rehabilitation Revolving Loan Fund, which is meant to help residents make long-needed repairs to the city’s aging housing stock.
The initial batch of seed money for the revolving loan fund – nearly $4.2 million – comes from a now-defunct city program, funded with federal block grants, that reduced homebuyers’ interest rates in the 1980s and 1990s, assistant director of community development Michiel Wackers recently told a council committee.
Back then, banks agreed to provide lower interest rates to participants as long as the city set aside money for the duration of the loan, in the case of default.
Now, the terms on those old loans are maturing, the debt’s being repaid, and the money that was set aside can be put back to use.
City officials haven’t decided exactly how to use the money going forward, but Wackers said it could be used for loans to support new home rehab programs, or to bolster existing city programs, such as the senior homeowner assistance program, or the repair-a-home program.
Future loans made with the revolving loan fund will be limited to those making 80% or less of area median income. That puts the cap somewhere around $35,000 for a single-person household, said Neighborhood Services Commissioner Louise Jackson. Loans are expected to carry interest rates between 0% and 3%. Repayment may be required within five years, deferred for five years, or deferred until the property is sold or otherwise transferred.
Council must sign off on any future uses of the money.
Wackers said the revolving loan fund will serve as a sustainable funding source. The city will issue loans for various housing programs, but the money will replenish as people pay those loans back, enabling more loans to be made.
Using the money for a revolving loan fund – as opposed to a one-time need — also ensures the city doesn’t run afoul of federal guidelines that dictate when and how quickly a city must spend block grant money, Wackers said.
Wackers was quick to acknowledge that $4 million, while helpful, won’t make much of a dent in the city’s vast need for home repairs. But he said it’s a starting point that would provide the city with a tool to start tackling its goal of preserving 41,400 housing units over the next 10 years via home repair assistance, code enforcement and other measures.
One or two million dollars generally gets freed up each year from the old interest rate program, Wackers said. That money could be added to the revolving loan fund once it becomes available.
This year, the city’s receiving what Wackers described as a “windfall” of $4 million because more loans than average are set to come due.
Money that came due in previous years was generally used to pay for one-time expenses, such as city staffing costs, or demolition, Wackers said.
Using the leftover money for