Here’s How to Bank Real Success in the Fight Against Gentrification

Revitalizing low-income neighborhoods doesn’t mean more yoga studios. It means betting on small businesses that big banks deemed risky in the past.

Chicago restaurateur Quentin Love. (Photo: YouTube)

Jan 16, 2015· 4 MIN READ
A Wolfe has covered arts, entertainment, and politics for Good, Vice, Flaunt, and other publications.

Quentin Love had already been a successful Chicago restauranteur for 15 years. But two years ago, he was approached to do something novel: Open a healthy restaurant, called Turkeychop, that doubled as a part-time soup kitchen for the homeless in one of Chicago’s poorest neighborhoods, the Humboldt Park corridor.

After successfully selling turkey burgers in other parts of town, Love was game, but he knew there would be hurdles to introducing unfamiliar food options in a designated food desert.

“It’s always a process of educating people to make healthier choices,” Love said. “So that in itself is an experience to create awareness—eating healthy—and that’s why they wanted our brand to come here.”

The “they” Love references is a confluence of neighborhood organizations financially backed by Chicago Community Loan Fund, a lending entity—not a bank—that takes on small or riskier loans with bigger community-oriented payoffs. In the fight against gentrification that displaces whole low-income communities, the group, led by president Calvin L. Holmes, actively participates in neighborhood development. It partners with operations such as Love’s restaurant to ease legacy citizens into the coming changes and even welcome them to participate.

On Mondays, for instance, Turkeychop is a food kitchen. It’s fed more than 25,000 homeless or hungry people for free in the two years it’s been open, using funds made from regular restaurant operations. And it’s busier than ever.

Chicago Community Loan Fund is one of about 800 certified Community Development Financial Institutions, or CDFIs, around the country. All engage in community lending, but the level of their community involvement varies. Started 25 years ago by a collection of community development professionals, CCLF had lofty goals and a plan of sticking around long enough to make an impact. Holmes has been with CCLF for 22 years, and it’s had a slow-burn effect on saving smaller residential properties—one to four units—with “mom and pop” owners and developers, who were then able to turn the properties into affordable rentals in the economic decline.

These types of financial institutions are actually growing and competing for federal treasury money more and more these days, in part because President Obama signed an order more than doubling the amount of funds available, from $107 million in 2009 to $247 million in 2010.

The loans CCLF has made would have been deemed too small or too risky for banks to approve using the traditional route, but the group acts as a kind of middleman, pooling funds from individual investors and banks that want to make an impact on the community but need assurance that the investment will make a return.

Why would banks trust these groups with millions of dollars on risky bets? One big reason is because the U.S. Treasury chose the Chicago fund as one of its grantees in 2014, awarding it $1.25 million. Holmes said that money is extremely useful for lending and will go right into new retail and commercial-centered projects. But what it really represents is a seal of approval from the U.S. Treasury. Investors such as Bank of America and Wintrust Bank saw the grant and doubled their contributions. In 2011, the fund had around $17 million; now it has $30.9 million and growing.

You may wonder why, if it has such a good track record, you’re just now hearing of this type of community loan funding.

All of those 800 third-party certified CDFIs have needed to prove themselves to investors and banks. In the financial world, 20 years of growth is still relatively unproven when you’ve got big banks that have been around for a century or more. Twenty-five or 35 years, however, with the bolster of U.S. Treasury support, speaks volumes, and right now, CDFIs all over are competing for that approval seal and finally earning trust.

In San Francisco, Nancy O. Andrews heads up the Low Income Investment Fund, which has a few more years in the game than CCLF does. In 2010, the U.S. Treasury awarded it a $6 million grant that leveraged further investments from places such as Citibank, Capital One, and Bank of America, and now it’s posting record numbers, with $1 billion already loaned into community development projects and a focus on low-income and senior housing.

Of course, San Francisco rents are still soaring, but LIIF is plugging away at the problem. One heartening example: 53 Columbus, a former sweatshop in Chinatown, has been converted into a 21-unit co-op for low-income residents and office space for two nonprofits.

In Lancaster, Pennsylvania, is Daniel Betancourt’s Community First Fund, which has had a major hand in reinventing a city that has twice the poverty level of the rest of the state. Community First Fund even operates a Women’s Business Center to encourage women-owned projects. Holmes cited both LIIF and Community First Fund as inspirations.

Because CCLF actively coaches its customers through the legalese of financing, it can now boast that out of 130 active loans and millions of capital at risk, only one loan is in default. This is a huge feat in the current economy, and it’s due mostly to the fund’s longevity and long-term goals. CDFIs want their customers to succeed because it means the community succeeds.

“We had one customer that runs a social service agency in the suburbs, and they got some bad legal advice,” Holmes said. “They ended up with a costly tax property bill. They thought they were going to shut them down, but we said, ‘No, let’s see if we can get you some better legal advice and get you into abatement. It was a months- and years-long process, but it happened. Our staff spent untold hours restructuring that loan, and they’re doing well now, very stable.”

Since 2012, CCLF has refocused its efforts on small retail pockets, such as Turkeychop and the eight-block Humboldt Park corridor. Its projects have already created 2,450 jobs. Ultimately, Holmes and CCLF want to see diverse neighborhoods. If some wealthier residents want to move in and bring their money, they will be welcomed with open arms, as long as legacy residents have protections in place, with things such as property tax freezes. But shaping a neighborhood, a city, takes time.

“There can be development without displacement. You can have both an ‘A’ and a ‘B,’ but you need to be conscious of it,” Holmes said. “You need a plan. Period.”

With more lending capacity comes more high-profile projects, such as Chicago’s renowned artist Theaster Gates’ risky developments, including the Stony Island Arts Bank, a huge renovation and revival of an iconic bank building into a multi-use retail, rental, commercial, and community space on the South side. CCLF has also created an unexpected partnership with Whole Foods, which is opening a branch of its grocery chain in another CCLF target site, the neighborhood of Englewood. Urban farm and CCLF customer Growing Home hopes to become a major produce supplier for that Whole Foods location, which will also be expanding its cheaper private-label offerings to serve the community with healthy options and lower prices.