The Cook County Land Bank Authority earlier this year put 4,437 vacant properties up for sale. Many were homes lost to foreclosure during the recession, and located on the south and west sides of Chicago — where much of the city's gun violence occurs. In addition to lowering property values, blighted properties are considered magnets for crime across the U.S., creating a vicious cycle.
Into those same neighborhoods, around 21,000 inmates return home from Illinois state prison each year. Less than half have a high school education, and 75 percent have been in prison before. Only 14 percent have a job lined up after their release, and more than half are likely to be re-incarcerated again within three years.
The new Chicago Neighborhood Rebuild pilot program aims to address the blight and the unemployment by building a path into meaningful careers for at-risk youth and returning citizens.
About 200 at-risk youth, returning citizens and others with high barriers to employment will help to rehab 50 vacant properties in three police precincts identified by the city as “high need,” the 7th, 10th and 11th precincts. The Marshall Project, a journalism outlet that focuses on criminal justice, dubbed the 11th precinct the most dangerous neighborhood with the most inexperienced cops. The precincts overlap many neighborhoods where the land bank is selling mostly one- and two-unit vacant properties for $3,000 to $5,000 apiece, including Garfield Park, Humboldt Park, and Englewood.
“The goal is to pull 200 folks off the streets, replace a gun with a hammer, and to get people into a training space on the project sites,” says Calvin Holmes, president of the Chicago Community Loan Fund (CCLF), which is partnering with the city to run the $2 million pilot program. "We’re angling for the people who are most likely to be involved in gangs or involved with gun violence.”
In exchange for a reduced interest rate on acquisition and renovation loans (not to mention doing the city planning department a favor by reducing blight), the developers of the sites will allow the pilot program’s crews to do the pre-construction work on each site. Think debris or trash removal and yard work. At the same time, participants will get free workshops on problem solving, team work, workplace communication skills, financial literacy, job interview training and more. As much as possible, training will occur on-site.
Workers will earn at least the Chicago minimum wage, currently $11 an hour, and the program will also pay for an on-site crew supervisor, career development workshops and case management. Participants will remain employed under the program until supervisors can place them into full-time, unsubsidized employment or the two-year pilot timeline runs out.
“Once you’re in the program, you’re immediately given on-the-job work experience, wraparound service management, and your job supervisor will continually try to find you a permanent placement while you are having the exposure on the construction job site,” Holmes says. “Most job training programs have a train-and-place model, but here we’re inverting that.”
Drug screening is required, but applicants who don’t pass will be connected with drug treatment services and invited to re-apply.
Job supervisors will be required to provide post-placement follow-up services for each participant to ensure and verify reintegration and retention of full-time employment for at least 180 days after placement.
“If developers like them, if they’re working out well, we want developers to hire them into their construction crew,” Holmes says. “If that path doesn’t play out, then the supervisor still has to push hard to get that person placed in some kind of other permanent job.”
CCLF comes into the partnership with a ready-made cadre of developers. In the aftermath of the financial crisis, CCLF started working with smaller developers to acquire foreclosed or distressed residential properties and rehab them as needed to prevent them from becoming blighted. Since 2009, CCLF has made over 200 loans to developers of such properties, stabilizing or developing more than 300 units of housing that was then for sale or for rent.
“We believe our developers are good at hiring locally and producing locally, which is one of the reasons we’re attracted to them,” says Holmes. “You get the dollar to turn over in these neighborhoods a little bit more.”
To make it possible for smaller developers to rehab distressed properties, CCLF also had to learn how to get comfortable with lending them enough money to acquire properties and get the work done. “Most of these folks are thinly capitalized,” Holmes explains. “They don’t have 20 percent cash after putting money down on projects to add to construction budget.”
On the south and west sides of Chicago, in neighborhoods known to be centers of gang violence, working with smaller developers for rehab usually means lending developers more money than properties are worth. CCLF learned how to underwrite these loans in the years since the financial crisis and recession. “We were able to get comfortable with saying even if you have 10 percent of your construction budget … as long as we see the improvement to the property will [generate] cash flow with the rents or sale prices you can get, we’ll still make the loan,” Holmes says.
The loan pool for the Chicago Neighborhood Rebuild pilot will also be local. CCLF raised a dedicated $4 million from two sources: MB Financial, a 100-year-old commercial bank based in downtown Chicago, and the West Side’s own Rush University Medical Center. Rush’s contribution is one of its first community investments under the Affordable Care Act’s community health requirements. Half of the city’s $2 million in funding will serve as a loan loss reserve, which allows CCLF to charge the discounted interest rate for the loans to developers under the program.
The other half of the city’s funding will pay for wages, supervision and workforce development programming. Since it has never done workforce development before, CCLF put out a request for proposals for a workforce development partner and is now evaluating respondents.
“We had spent the last three to four years in our own internal navel gazing about how to improve our impact,” Holmes says. “We were thinking about what role can a loan fund play on the workforce development, how can we work more into the jobs creation issue, what can we do to help our neighborhood partners be better employers, hire more, hire from the most troubled part of the population.”
Oscar is a Next City 2015-2016 equitable cities fellow. A New York City-based journalist with a background in global development and social enterprise, he has written about impact investing, microfinance, fair trade, entrepreneurship and more for publications such as Fast Company and NextBillion.net. He has a B.A. in Economics from Villanova University.