The week before KeyBank said it would give $2.5 million to Cleveland’s new home repair fund, the bank’s CEO toured the southeast side of town at the invitation of City Council.
KeyBank’s donation was already in the works at the time. But the tour gave council a chance to build a relationship with its hometown bank, according to Council President Blaine Griffin.
There was relationship building to be done. City officials have long tried to entice private lending to Cleveland’s working-class neighborhoods. Council members often complain that the big banks don’t seem interested. KeyBank itself has come under scrutiny from housing advocates who say the bank should be lending more in cities like Cleveland.
The tour, then, was “mutually beneficial” for council and the bank, Griffin said.
“We learned a lot about KeyBank and their products and some of the strategies and things that they would like to do to be innovative and invest in our neighborhoods,” he said. “And we wanted to give them…an up-close-and-personal view of some of the challenges that we’re dealing with in our neighborhoods.”
Cleveland is dealing with plenty: New development – buoyed by city tax breaks – in a few parts of town, surrounded by neighborhoods still wounded by the 2008 financial collapse. Aging homes in need of repairs and aging homeowners who can’t afford to make them. Homebuyers who need mortgages losing out to the cash offers of rental investors.
The city is plowing part of its $512 million American Rescue Plan Act windfall into housing. Cleveland put $15 million in ARPA money into its home repair fund. Another $7.3 million will be spent on homes and businesses in “middle neighborhoods” that are neither the hottest nor the most disinvested parts of town. And $35 million will finance home construction.
City leaders hope all the federal dollars will unlock private spending from the banks.
“One of the biggest things we wanted to focus on was leverage, leverage, leverage,” Mayor Justin Bibb – a former KeyBank vice president – said at a news conference announcing the bank’s grant.
The mayor’s call for more investment comes at a difficult time. Interest rates have risen, local home sales are falling and banks are tightening their lending standards.
Cleveland will need leverage in home repairs and beyond. A city plan from 2021 called for $2.2 billion in spending on housing over the next 10 years – including hundreds of millions of dollars in repairs to more than 41,000 housing units.
That’s more than the city can afford on its own, even with coffers full of federal stimulus money.
“The home repair need is gargantuan,” said Tania Menesse, the leader of the nonprofit Cleveland Neighborhood Progress, which received the city’s funding for middle neighborhood development.
Meeting that repair need can help stabilize neighborhoods, although the most disinvested places will require patience and time before the market picks up, she said.
An aging neighborhood hopes for a refresh
The list of middle neighborhoods includes places like Lee-Harvard, in Cleveland’s farthest southeast corner. A community of postwar homes where the median income is $40,000 and almost a quarter of residents are older than 65, Lee-Harvard served as the backdrop for last week’s KeyBank news conference.
There, city officials and KeyBank CEO Christopher Gorman stood in front of Brenda Reese’s home to show off an oversized prop check for $2.5 million.
Her ranch-style house is about 50 years old and sits on a cul-de-sac. It wouldn’t look out of place in a bedroom suburb like nearby Maple Heights. The home next door belongs to a California-based rental real estate investment fund, according to property records.
Reese’s yard is well maintained, and her house looks to be in good shape. She was still able to rattle off a list of work she’d like to get to, such as fixing the gutters and redoing the kitchen and bathroom floors
But she told Signal Cleveland she hasn’t sought a loan for home repairs. She’s retired and doesn’t want to take on the debt, she said. Instead, she spent her coronavirus stimulus check on her house. She said she would like to use the city’s home repair funds, though.
KeyBank’s contribution will be split between CHN Housing Partners and the Local Initiatives Support Corporation, two nonprofits that also received part of the city’s $15 million repair investment. The dollars should be ready for home repair applicants next year, according to a housing network spokesperson.
In the view of Ward 1 Council Member Joe Jones, who represents Lee-Harvard, all this stimulus spending is just doing what the private market won’t.
“If the market space took care of itself in the Black neighborhood,” Jones told Signal Cleveland, “we would not have to need all this exorbitant amount of money pushed in.”
Asking more from the banks
Jones’ refrain – and the belief that banks have little interest in the smaller mortgages that many Cleveland homebuyers need – is a familiar one at council committee meetings.
At last week’s news conference, Gorman disagreed with the idea that the bank he leads won’t lend for smaller-dollar home purchases.
“There sometimes is this misnomer that there’s some kind of price limit or price requirement,” Gorman said. “That’s just not the case. As we look at all of the loans we make in and around Cleveland, they range in all sizes.”
KeyBank has faced its share of criticism over the last year. In 2022, the nonprofit National Community Reinvestment Coalition accused KeyBank of falling short of its community benefits promises – a claim the bank denied.
A report presented this year to Cuyahoga County Council noted a positive trend in lending by banks to Black borrowers, though white borrowers still had better access to mortgages. The report encouraged banks to make more smaller-dollar mortgages available on Cleveland’s East Side.
The report ranked KeyBank as neither the best nor the worst performing lender, but concluded that the bank should be doing more in the city where it is based. KeyBank increased lending to Black and low- to-moderate income borrowers in Cuyahoga County over the last six years. The bank was the largest home improvement lender on the East Side of Cleveland, although the number of such loans declined countywide since 2016.
In a statement to Signal Cleveland, a KeyBank spokesperson Matthew Pitts said the bank would work to increase homeownership in underserved neighborhoods.
“We are immensely proud to call Cleveland home – and our grant to support this new home repair initiative is part of our enduring commitment to supporting and revitalizing this great city,” Pitts wrote in an email. “Since 2017, we have delivered nearly $2 billion in Northeast Ohio supporting home lending, small business lending, and community development investments in low-to-moderate income neighborhoods.”
Cleveland’s need for capital extends beyond a single bank. A new study from the Urban Institute ranked Cleveland low on the list for private housing loans. The city fared better in rankings for philanthropic and federal investment.
Frank Ford, the researcher who authored the study for County Council, called KeyBank’s $2.5 million grant a “very positive thing.” But increasing the regular loan business was important, too, he said.
“I’m happy to hear that a bank is making a grant to help with something,” he said. “But what I’m concerned about is, do we end up looking at that and saying, ‘Oh, okay, now they’re off the hook, they don’t have to make the loans in the community.’”
