Return to Rondo and get $10,000

What do reparations look like for Rondo residents who lost their homes when interstate 94 was built? Efforts to compensate those long-ago home owners construction took key steps ahead in January, and will continue this winter as city leaders shape an “Inheritance Fund” program.
The St. Paul City Council, acting as the Housing and Redevelopment Authority (HRA) Board Jan. 11 allocated $2 million toward a city program that provides help with home down payments. Final action will be taken by the HRA and council later this month, likely increasing the fund another $600,000. Part of those funds, and several policy changes, would be used for the city’s new Inheritance Fund.
As part of his 2023 budget, Mayor Melvin Carter proposed the Inheritance Fund. It is meant to mitigate what is described as lost generational wealth of direct descendants of families who were displaced when Interstate 94 was built through the Rondo neighborhood in the 1960s. Rondo was a longtime Black neighborhood.
Families said they received pennies on the dollar when their homes were purchased to make way for the freeway.
“This targeted approach to St. Paul’s specific history allows the city to address home ownership disparities in a hyper-local way that can only replace lost wealth but also can contribute to community healing,” a city staff report stated.
The city will work with the Rondo Community Land Trust to verify residential history of people who say they are descendants of residents displaced by freeway construction.
Tara Beard, city housing director, said the changes will help St. Paul address the city’s racial disparities in home ownership.
Allocations have been split between White and BIPOC applicants. Council members expressed support for the program but want updates. “We do intend to monitor the changes,” said Beard.
The Inheritance Fund will draw on two existing city programs, the Downpayment Assistance Program and the Homeowner Rehab Program. The HRA and council action Jan. 11 amended city guidelines for both programs. The amendments could make it easier for more people to use the programs.
The HRA also made a $2 million allocation from the city’s Housing Trust Fund to support the Downpayment Assistance Program.
The Downpayment Assistance Program began in 2020. Since it began the HRA has served more than 40 households earning up to 60 percent of area median income AMI). More than $1.5 million has been spent.
The program is supported through the city’s Housing Trust Fund and has received additional funding from the Minnesota Housing Finance Authority’s Impact Fund. It’s possible that HRA staff will seek the state dollars again in 2023, said Beard.
The Housing Rehab Program, formerly known as the Citywide Rehabilitation Program, has been in place since 2010. It provides affordable residential rehabilitation assistance to low and moderate-income homeowners, with the goal of helping people maintain and improve their homes. The program has served 572 households earning up to 80 percent of AMI. It is funded through the city’s share of federal Community Development Block Grant (CDBG) dollars.
For both program, guideline changes including income limits will open opportunities to more people.
For downpayment assistance, several changes were approved. The previous income guideline was 60 percent AMI or less. The new guideline allows households to earn up to 80 percent of AMI. The change was made because many rejected applicants fell between 61 and 80 percent AMI, and these households suffer barriers to home ownership.
For households that qualify under the Inheritance Fund, income can be up to 100 percent of AMI.
Another change is that previously, properties eligible for down payment assistance had to be in specific census tracts, in neighborhoods where residents face displacement pressures, said Beard. Now the properties can be anywhere in St. Paul. Allowing households to buy homes through the city provides what she described as “economic integration.”
Finance terms were changed, from 30 years repayable if a house is sold to 15 years with amortized loan forgiveness. The new guidelines do away with limits on college and retirement savings. The purchase price limits, which were based on federal Housing and Urban Development (HUD) HOME program limits. The city has never used HUD HOME dollars for the program, so retaining that requirement isn’t needed.
The level of down payment assistance a household can get varies. The typical award is $40,000, but an award can increase to $110,000 with additional factors.
First-generation homeowners can receive an additional $10,000. Household eligible through the Inheritance Fund can be awarded an additional $50,000. Those participants can receive an additional $10,000 if a home is purchased in the Rondo area, in a program Beard described as “return to Rondo.”
The down payment funds can cover down payments, closing costs, and property inspection costs.
Several policy changes were also approved for the housing rehabilitation fund. One key change is on the loan amounts themselves. Loans previously could be for up to $25,000, with emergency loans for an additional $25,000. That maximum that could be received was $50,000.
Regular program loans are now $40,000, with the ability to add another $40,000 if an emergency loan is needed. A total of $80,000 can be obtained. That is meant to address rising home maintenance costs and better reflects the $40,000 most applicants need.
Home owners who fall under the Inheritance Fund can qualify for an additional $15,000, and for another $25,000 on top of that if their home is in the Rondo neighborhood. That increases that maximum available under the Inheritance Fund to $120,000.
Other changes increase household income from AMI from 60 percent to 80 percent for the program. Emergency loan applicants could already be at 80 percent AMI including reducing financing terms from 30 to 15 years, removing life insurance policy redemption value from the household asset limit.