American Rescue Plan funds support housing plans in South Bend

SOUTH BEND — The city will give $2.67 million to support the construction of 29 new housing units in struggling South Bend neighborhoods where financial shortages have long held back new projects.

Four developers will receive money to cover the often-cited appraisal gap, which occurs when the cost of building a home exceeds its potential sales price because it is located in an area with low property values. This gap prevents lenders from offering mortgages to home buyers, and home builders question whether they can make a profit.

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In poor neighborhoods in South Bend, the assessment gap can range from $75,000 to $100,000, according to Liz Maradek, chief neighborhood officer.

Officials say that this amount, which was announced during a press conference on Monday, aims to release $2.67 million to launch four projects that will help revive growth in those neighborhoods. Maradek said the long-term goal is for the new construction to raise property values ​​and bring about future private development without the need for subsidies.

The money, of which $2.5 million comes from the American Rescue Plan, will be divided among four recipients:

  • Allen Edwin Homes, a Michigan-based company that tends to build new homes, will build 12 single-family homes for renters in the Near Northwest neighborhood.
  • Habitat for Humanity, a nonprofit homebuilder, will build four single-family homes in the nearby Northwest neighborhood to sell to owners.
  • The South Bend Heritage Foundation, a nonprofit developer, will build a six-unit apartment complex in the Near West Side neighborhood.
  • 466 Works, a community development corporation, will build seven single-family homes in the Southeast neighborhood. The homes will be sold to their owners.

According to the city, 19 of the 29 new units will be income restricted so that they are affordable to low- and moderate-income families. All projects will be built on vacant city-owned lots.

The Allen Edwin Homes project, to be built at 615 W. Marion St., is particularly noteworthy because the company typically builds larger homes that sell for $350,000 to $400,000, according to Brian Farkas, director of workforce housing for Allen Edwin.

But Farkas said the company’s business model is shifting to include more small projects that fit urban neighborhoods. The 12 two-bedroom homes in Nearby Northwest will be 1,000 square feet and rent for $1,700 a month, Farkas said.

“We see more and more need for housing on urban lots,” Farkas said. “They have infrastructure already in place. There are a lot of cities willing to work with you to reduce development uncertainty.”

The awards announced on Monday follow two programs unveiled in 2022 aimed at closing the assessment gap. The Sewer Bypass Payment Program reimburses selected developers who build on vacant lots up to $20,000 to connect to the city’s sewer system. The city’s pre-approved building plans also save developers the money and headache of designing a project that adheres to zoning laws.

All efforts fall within the framework of the New Neighborhood Homes Initiative launched by South Bend Mayor James Mueller, which he sees as the next step in the 1000 Homes in 1000 Days program launched by his predecessor Pete Buttigieg. Of the 1,122 targeted homes, most of which were located on the western and southeastern sides, 40% were restored and 60% were demolished.

“They made the initial investment to prepare these lots for development, and now we look forward to seeing construction on these vacant lots,” Mueller said Monday.

Email South Bend Tribune city reporter Jordan Smith at Follow him on Twitter: @jordansmith09

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