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‘People are scrambling’: South Bend leaders confront the city’s lack of affordable housing

Jeff Parrott // South Bend Tribune South Bend Tribune

South Bend Heritage Foundation is building Hope Avenue Apartments, a 22-unit permanent supportive housing project, in South Bend's Edison Park neighborhood.

SOUTH BEND — Before moving into Washington-Dunbar Homes in 2018, Victoria Bedford and her two children were living in a third-floor, two-bedroom unit in Mishawaka.

Bedford remembers climbing the partially enclosed concrete steps in the winter, often carrying groceries and worrying that her children, ages 2 and 4, would disturb neighbors with their sometimes “loud or rowdy” play.

By contrast, their two-story townhouse today has three bedrooms, a basement, a washer and dryer and ground-floor access. Her $600 monthly rent is only $20 more than what she had been paying.

“I can honestly say when I come here I feel like I’m at home,” Bedford said, “versus the other apartment I was at, it didn’t feel like home.”

Affordable housing barriers: Community leaders gather for discussion

Bedford, 32, who is single and works in patient admitting at a hospital, is eligible to live at Washington-Dunbar because her income falls between 30% and 60% of the city’s median household income of $40,265. She feels fortunate to live in what’s known as “affordable housing,” meaning rent is subsidized in some way by public or philanthropic dollars.

In South Bend, government and community leaders are increasingly talking about an affordable housing crisis because there simply isn’t enough of it to meet demand. Meanwhile, some developers are trying to answer the call despite some obstacles.

“When I hear people say we’re in a crisis, I don’t know, I’m not analyzing the data every day,” said Marco Mariani, executive director of the South Bend Heritage Foundation. “I just know that all of our units are full and we have people applying trying to come into our housing. I know that people are doubling up in their aunt’s house and staying in the basement, people are scrambling around looking for housing.”Your stories live here.Fuel your hometown passion and plug into the stories that define it.Create Account

South Bend Heritage, a non-profit housing and community development organization, built Washington-Dunbar in 1995 with the help of federal housing tax credits awarded through the Indiana Housing and Community Development Authority. In 2008, the foundation again won the credits to renovate the town homes.

A few blocks to the northeast, in the Lincoln Park neighborhood, South Bend Heritage in 2014 won the credits to build South Bend Mutual Homes, which are cooperatively owned single-family homes.

But since then, the state authority has not awarded the credits to a new construction project in the city. It did award credits to South Bend Heritage in 2016 to build the Oliver Apartments, but those units serve as permanent housing for the homeless.

In November, the state agency decided not to help with two South Bend proposals: converting the former Marquette School building into low-income apartments; and a plan by Fishers-based Real America to build Diamond View Apartments, a mix of market-rate and income-eligible units in the former Fat Daddy’s building near Four Winds Field.

Both projects’ hopes to win grants this year are still alive. The state agency placed the applications, and those of four others around the state, on a wait list. It was a rare move, in the event that Congress approves an increase in credit funding included in the Build Back Better spending package.

The legislation has passed the House but is stuck in the Senate.

If the bill passes, it would send an additional $3.6 million in credits annually to Indiana. That wouldn’t be enough to meet the full requests of all six projects. But Real America’s application scored the highest among those on the wait list.

Victoria Bedford says moving into the Washington-Dunbar development in South Bed with her two daughters has improved her family life and made everyone feel at home.

Critical incentive for developers

Most developers, especially for-profit companies, won’t build affordable housing without the credits. The federal government distributes them to states, which award them to developers. Developers then sell the credits to investors and use the cash to build housing that they say wouldn’t otherwise be profitable.

Jeff Ryan, Real America’s vice president of development, said when it comes to market rate housing, his firm typically takes out a mortgage to finance 80% of a project and uses “equity” or cash for the other 20%. Market-rate rents are high enough to pay off the loan and still generate profit.

For affordable housing, that ratio is reversed. Cash from investors buying the credits creates 80% of the financing while 20% is borrowed. In exchange for generating such a relatively small amount of capital for the construction, the developer pledges to keep rents below market rate.

The state authority can only fund about a third of the applications it receives each year from developers. According to the IHCDA records, significantly more proposals are awarded in Indianapolis than South Bend. Ryan said that’s likely because larger cities receive more federal funding to help affordable housing developers with construction costs, which helps the cities’ applications score better when it comes to tax credits.

Ryan noted that the state authority did give the Diamond View application points because the South Bend Common Council in July awarded the project a property tax abatement, and the Mayor James Mueller administration agreed to donate the land if the project included affordable housing.

City spokesman Caleb Bauer said the city does not expect any payment for the property for now, because the project could still be funded through the waiting list. If that doesn’t happen, he said, the agreement would be revisited.

Ryan said Real America, which in 2016 renovated the former LaSalle Hotel into the high-end LaSalle Apartments, still plans to build market rate apartments at the site, likely breaking ground this spring or early summer. If it doesn’t win the 2022 credits, it will apply again in July for 2023 credits to add low-income units.

Ryan said there is a dire need for more apartments in South Bend, both affordable and market rate, and in nearly every market his company works in.

“I just got the preliminary data from a tax credit application we’re working on in Montrose, Colorado, and our market analyst could not find a vacant apartment in the market, period,” he said. “The apartment market in general is just very tight right now compared to what it is historically, and then the affordable is even tighter.”

The old Marquette Elementary School building stands vacant in this 2017 photo. Brownsburg developer Jon Anderson wants to convert the building to low-income apartments but Indiana officials have denied his application for tax credits to fund the project. A South Bend schools official says Anderson still wants to pursue financing.

Jon Anderson, the Brownsburg-based attorney behind the Marquette School project, did not return messages seeking comment. But his agreement with the building’s owner, the South Bend Community School Corp., gives him until the end of this year to secure financing for the project before the district resumes control of the property. That means he could apply for 2023 credits again in this year’s cycle.

Kareemah Fowler, the district’s chief financial officer, said she has not spoken with Anderson since his application failed to win the credits, but he recently sent her an email saying he still hopes to pursue the project, including seeking alternate funding sources.

When the South Bend Common Council in August granted Anderson a rezoning needed for the project, Council Member Troy Warner stated, “There’s not only a housing need but a housing crisis in our community.”

In a recent interview, Warner said he made that comment shortly after his daughter had failed to find a market-rate apartment in South Bend without a six- to 12-month waiting list.

“There’s not a lot of availability out there, market rate or lower income,” he said. “It’s especially bad for the lower-income segment. I would love to see either of these projects go. Any kind of housing we can get right now, I think the city should do anything it can to encourage those.”

Warner also has advocated for South Bend Heritage’s Hope Avenue Apartments project, which is using state funding to build permanent supportive housing units in the Edison Park neighborhood, despite opposition from some neighbors.

Marco Mariani, executive director of the South Bend Heritage Foundation, with Common Council member Troy Warner behind him, speaks at a Sept. 18, 2020 press conference to announce that an empty lot on Hope Avenue would be the site of a permanent supportive housing project.

As part of the discussion about housing, Mariani, of South Bend Heritage, believes people need to distinguish whether “affordable housing” pertains to single-family home ownership, rental apartments or permanent supportive housing.

He said more affordable housing, when maintained properly, can revitalize and stabilize entire parts of the city.

“Affordable housing can be part of a larger community and neighborhood revitalization plan strategy that needs to be well planned and publicly supported,” Mariani said.

Potential for improvements

The Mueller administration has made affordable housing a priority in its 2022 budget, having earmarked at least $6 million in federal American Recovery Plan money to the issue.

The planned spending, yet to be distilled into specific programs, includes money for home repair and financing to shore up the gap between appraised values and what mortgage lenders are willing to lend in distressed neighborhoods.

The long-troubled Housing Authority of South Bend also seems headed for changes, as well as ambitious projects, under the new leadership of executive director Catherine Lamberg.

In recent months, the authority’s board has approved Lamberg’s requests to form a new nonprofit organization, “South Bend Affordable Housing Corp.,” and to request federal money to demolish the vacated Rabbi Shulman apartments, along with the Monroe Circle apartments near Four Winds Field.

It’s not clear what Lamberg hopes to do with the new nonprofit, or what might come next for the two properties if the buildings are demolished. Lamberg declined to be interviewed unless she could receive questions in advance, a practice The Tribune doesn’t agree to.

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