0% loan program puts economic power in the hands of Detroit homeowners
Sandra Cavette loves her historic home in downtown Detroit. She has lived in the 1915 brown stone house for almost 35 years and admires its bay windows, masonry fireplace and oak paneling. But she’ll be the first to admit that the house needs constant attention.
Get a 0% loan program
âWhen you have an older house, you still have work to do,â she says. “You just have to plan it in your budget, I had to budget every year for something.”
Cavette, who describes herself as an âoriginal flint stoneâ as a nod to her childhood in Flint, is now a very happy retired healthcare professional. She has seen Detroit go through its ups and downs and over the course of her career has worked for several hospitals, the Detroit Department of Health, and General Motors as part of an employee health program. It normally has to be repaid back in a few days or weeks.
Cavette bought his home for $ 47,000 in 1986 after a foreclosure and saw the potential in the neighborhood. His instinct paid off.
âNow I can cross the street and take the bus to the jazz concerts and Campus Martius, I can walk downtown,â she says. “One of my best friends has a house across the street.”
It has seen the area grow over the past three decades, attracting an increasingly younger owner population, but the process has been slow. In the past two years in particular, it has seen more bike lanes, foot traffic, and visitors make the most of the city’s QLine public transport.
âThere is a lot to be gained,â she says. “We predicted it would happen, but it took longer than expected, with all the economic setbacks.”
0% home repair loan program
Cavette fears, however, that the historic houses in his neighborhood represent too much work for the owners. “The old houses are going to die because no one is shopping for bricks and masons.”
This is where a 0% home repair loan program, offered by the Local Initiatives Support Corporation (LISC) Detroit, helps residents. Cavette first heard about the program, which offers 10-year interest-free loans, from a neighbor two years ago. She wanted to do some renovations, especially putting in new steps and modernizing the kitchen and bathrooms on her 105-year-old property, and decided to apply.
âI’ve invested a lot in it to stay up to date,â she says. “But my devices were on life support.”
âI went to Hannan House, filled out an application, and a few months later, I went for an interview and got $ 25,000,â she explains. “It was truly a blessing.”
0% Interest Home Repair Loan Program
LISC Detroit launched the 0% Interest Home Repair Loan Program in April 2015, and is providing $ 5,000 to $ 25,000 to help Detroit homeowners make repairs and invest in their homes. The initiative grew out of the city’s goal of stabilizing the housing market and closing an imbalance in the system, says Damon Thompson, LISC’s home repair coordinator.
âHomeowners were excluded from the market, unable to access credit,â says Thompson. âAccording to Zillow, in 2013, around 80% of applicants were refused loans. We looked at home improvement loans guaranteed by the FHA and there were 460 approved out of 2,284. â
âOne of the challenges was accessing home improvement capital, usually due to insufficient collateral or insufficient credit.â
Damon Thompson, home repair coordinator for LISC Detroit, witnessed a 0% interest loan program for more than 1,000 homeowners in the city.
A city-led partnership with LISC and Bank of America was formed, designed to help homeowners address health and safety issues, repair their homes, and eliminate the burn. Initiative leverages block grant for community development through the city of Detroit, privately financed by Bank of America, and in 2019 Quicken Loans joined the partnership.
Applicants must have lived in the residence for at least six months and loans are repaid over 10 years, with a closing cost of $ 150. Homeowners need a minimum credit score of 560 and a debt-to-income ratio of less than 45% to apply.
In the past five years, 1,048 homeowners have been approved for loans under the $ 21 million loan fund program, which has distributed more than $ 10 million across the 518 projects completed to date. The average loan size has grown to around $ 22,000, and by far the most popular renovation is roof and window repairs.
Thompson says using a loan, rather than a direct grant for home repairs, means less wait times, faster access to funds and more beneficiaries.
“[The program] allows the city to have the greatest impact possible with limited funds on Detroit neighborhoods in all city districts, âhe says.
Bank of America has invested more than $ 8 million in the initiative as part of a larger goal for the bank to support economic mobility in the Detroit subway, Senior Vice President Tiffany Douglas said.
âAs the birthplace of creators, doers and do-it-yourselfers, and a city of the Renaissance, Detroit is a critical place to invest,â says Douglas, a resident of Detroit for 20 years. âIt’s just a program that helps maintain a safe and sustainable place to start your journey every day, at home.â
Cavette says that while she would have continued to repair her house without the loan, it would have been much less time consuming and a âpiecemealâ process. She also sees the overall improvement in the city’s neighborhoods, but wants more people to know about the initiative.
âThere is a need,â she explains. “You find you don’t have a run down neighborhood because people can afford a loan – that makes it possible.”
For her, however, the most reassuring part of the loan program was the reliability of the contractors. The program has a list of approved contractors that grantees can choose from and Thompson estimates that over 60% are locally-based minority businesses.
âThey have an understanding of homeownership here,â says Thompson. âAnd what it means to live and work in the city of Detroit. These dollars go straight back to the city. “
âThey hire you right away,â says Cavette, admitting that entrepreneurial confidence has been an issue in the past.
âAs a layman, you don’t know if an entrepreneur is doing something as planned,â she says. âMaybe my expectations weren’t high enough for a public program, but I haven’t encountered one that has that kind of follow-up.â
âThis is a program that manages the way our government should operate – with checks and balances. I felt comfortable, I had nothing “rigged”. What this allowed me to do was to be convinced that it was a good investment. “
However, finding enough contractors to meet these standards is often a problem. Thompson explains that because the initiative competes with the private market, there is always a need for skilled and quality workers.
âIt’s not just a problem in Detroit, but across the country,â he says.
Cavette is also concerned about the impact of COVID-19 on the program, saying she appreciated the advice she received from the loan program offering a six-month deferred payment during the pandemic.Â
âThey were sensitive to people who couldn’t pay their payments,â she said. “I thought it was really great.”
COVID-19 forced the program to end in March, as 70 homeowners were conducting inspections or starting construction. Work will resume soon, but Thompson laments that April through November would have been the best construction season.
There were, however, a few small silver linings. With employees and loan partners working remotely and using electronic tools, such as electronic signatures, Thompson believes the pandemic could change the way they do business in the future.
âIt can actually solve some problems in a positive way,â he says.
With all the changes she has witnessed, in her home, in her neighborhood and in her city, Cavette also believes that Detroit can be resilient.
“We will survive it too.”
This is part of a series supported by LISC Detroit which tells the story of Detroit’s small businesses in response to the COVID-19 pandemic.