Back in the early 2010s, when Capital Impact Partners started heavily investing in Detroit, it did so with the express purpose of growing density in the urban core.
In partnership with the Kresge Foundation—and with the support of numerous other financial institutions—the national nonprofit lender launched the $30 million Woodward Corridor Investment Fund. It lent money to a bevy of projects, like the Scott, James Scott Mansion, and the Forest Arms Apartments, with the goal of growing housing density in and around Midtown.
Capital Impact Partners could have continued to invest exclusively in projects in high growth areas of the city. But over the last few years it’s been reevaluating its, well, impact and how it can help developments get off the ground in neighborhoods that hadn’t seen much in a long time.
“We try to see things through the lens of equity and inclusion,” says Nicholas Pohl, business development officer at Capital Impact Partners. “Systemic disinvestment occurred along racial lines, and that’s especially true in Detroit. And that’s part of our strategy of inclusive reinvestment.”
Capital Impact is trying to do inclusive reinvestment in a number of ways.
The most obvious avenue is through more lending. In Detroit, where there’s still a large gap between what a development costs and what market rents can support, a number of financial tools have to be leveraged to get nearly every project off the ground. That could be subsidies, grants, or low-interest loans from financial institutions like Capital Impact.
But that gap is even higher in neighborhoods where rents tend to be lower. Which make investment from nonprofit lenders all the more necessary.
In 2014, this time in partnership with JPMorgan Chase, it launched the $30 million Detroit Neighborhoods Fund. Subsequently, Capital Impact has lent to B. Siegel’s Detroit, a $8.3 million mixed-use development on the Avenue of Fashion; Parker Durand, a $22.5 million development that will bring 92 apartment units to the West Village; a $8 million redevelopment of a former Packard Showroom in the North End into 38 units; and more.
In all these cases, the units will have some of the steepest affordability rates anywhere in the city for a project that doesn’t use Low-Income Housing Tax Credits. At Parker Durand, half will be available for those who make between 50 and 80 percent of the area median income (around $28,000 to $45,000 per year).
Over the last five years, it’s lent over $88 million to neighborhood projects, almost half of which has come in the last year alone. Pohl says Capital Impact has a general commitment to lend $30 million to $40 million per year throughout Detroit, though much of that will be along neighborhood commercial corridors.
Capital Impact has also set up programming to complement its lending arm. A fellowship program called the “Equitable Development Initiative” arose after an internal review found that over 90 percent of CIP’s loans were going to firms that didn’t represent the city’s demographics.
“We took a hard look at our portfolio and the needs of developers in the city, and realized that very little of our financing was going to borrowers of color,” says Elizabeth Luther, Capital Impact director of programs in Detroit.
The initiative provides at least 20 fellows, mostly African-American Detroiters, a year-long course on development, as well as mentorship and networking opportunities. So far, 47 have graduated from the program with a third cohort starting in 2020.
Capital Impact has issued predevelopment loans to two of the program’s graduates, and recently secured a $650,000 grant through the Community Development Financial Institutions Fund to expand lending opportunities to fellows.
And Pohl says there’s more in the pipeline. It’s been in active talks with the Detroit Housing Compact to potentially start a large-scale single-family renovation program. Though Capital Impact declined to release the details of that initiative at this time.
This shift to the neighborhoods, which has really kicked into high gear in the last couple of years, has come about through rigorous evaluation of its work.
“We’re always learning from what we do,” Pohl says. “Some lenders are only focused on growth, but don’t look at impact of their financing. We don’t think about it in those terms, but instead what are the needs of the community.
He adds, “We’re continually thinking about how we can support the type of development that Detroiter’s want to see.”