A New Generation of Town Makers
This article is part three in a five-part series on small-scale, incremental development. You can read part two here, and sign up here to receive the e-book for this series when it’s available.
Picture a lively open house taking place in a spacious living room on a cool evening in a mid-size American city. It’s a networking event of sorts. There are over 50 people there, including the mayor and members of the city council. Everybody is talking about their latest business venture and exchanging ideas on how they can collaborate.
Now imagine almost everyone in that room, aside from the public officials, is some kind of small-scale developer. The majority of them are women and people of color. Most are working in low-income neighborhoods pockmarked with vacancies, the kind where conventional wisdom says it’s almost impossible to build anything profitably, let alone get the financing to do so. And many of those people live in, and grew up in, those neighborhoods themselves.
Sound like an impossible fantasy? In fact, you can attend just such a gathering in South Bend, Indiana.
Something remarkable has been brewing in South Bend. Belying the idea that incremental development is a sideshow or “doesn’t scale,” in South Bend a cohort of small developers representing over 100 properties in poor, disinvested neighborhoods are, if taken collectively, the largest developer in the city. And they didn’t get there by competing with each other for opportunities, but by creating opportunities for each other.
Furthermore, they’ve done it essentially without subsidy. In the process, they’ve often provided below-market rents and commercial space, and space for community-serving activities.
The most important thing to underline is who is doing it. Real estate development tends to be an exclusive club for a lot of reasons, the biggest one being that the easiest way to get started is to be independently wealthy or partner with someone who is. And that correlates with race and social capital. But South Bend’s upstart developers are a group that is representative of the city’s diversity, and many have come to development without wealth, connections, or formal training.
Photo from a small developer social event in September 2021. (Image via City of South Bend.)
Building an incremental development ecosystem and support network is like getting a snowball rolling: It takes a long time to acquire momentum, but once you do, the heaviest lifting is behind you. At that point, a whole different story is possible.
I’m not writing this to be a Pollyanna. South Bend is a Rust Belt city with a 24% poverty rate that still has problems with blight, vacancy, and a long list of community needs. But what’s happening with incremental development is an organic response from within the community to a portion of that need, with great potential to accelerate.
How did this happen here? Can the momentum continue? And why South Bend?
The former Ward Bakery building in the Portage Midtown area, which Mike Keen and partners are redeveloping into an incubator space for up to 60 businesses. (Image via Mike Keen.)
“Find Your Farm”
This is not one person’s story, but Mike Keen is as good a person to start this story with as anyone. Until recently, Keen was a professor of urban studies and sustainability who founded the Center for a Sustainable Future at Indiana University South Bend. About five years ago, he decided to walk his talk and, with business partners Dwayne and Corbin Borkholder, become a developer of net zero energy-efficient homes.
Keen and his partners envisioned their project filling a need in South Bend’s Near Northwest neighborhood, which had not seen a new residential development in over 40 years. But they struggled to obtain financing because of a typical Catch-22 in a neighborhood that’s been through decades of decline: an appraisal gap. Absent any comparable properties nearby, they could not convince appraisers that their homes would sell for enough to cover their construction costs.
They could wait a generation for the market to catch up. Or they could “work on the neighborhood” themselves. Keen and his partners at Thrive Michiana bought and renovated nearby properties, and acquired some 20 vacant lots. Soon, they found themselves with a “farm”: an area of several blocks they were systematically working to cultivate. “What started out intended to be one house became a sustainable neighborhood demonstration project” that Keen and Co. have dubbed Portage Midtown.
Aerial view of Mike Keen’s development “farm” in the Portage Midtown area. (Image via Neil Heller.)
And the market is turning a corner. A fully renovated four square in the area, Keen told me, used to be $125,000; today it goes for $165,000. Appraisers now have their comps, which will help more aspiring small developers obtain the loans they need, in a virtuous cycle.
What Keen considers their broader “small development ecosystem” now includes about 100 properties. About 50 are homes that have been renovated; about 45 are vacant lots picked up in tax delinquency sales. Estimates by Neil Heller of Neighborhood Workshop are that by 2031, redevelopment in Portage Midtown alone will total $15.2 million in private investment and deliver about $300,000 in taxes to the city per year—a staggering 2,334 percent increase from before Keen started.
“Find your farm” is a mantra used by the Incremental Development Alliance (IDA) in their small-developer workshops. One recipe for success as a small developer is to pick an area—smaller than a neighborhood, maybe just a few blocks—where you intend to commit for the long haul, and then come to know that area intimately. Live there, if you can. Frequent its businesses. Get to know every neighbor, every property. Do multiple projects there: You’ll find opportunities once you’re a known, trusted quantity to your neighbors, and you’ll bring them along with you. Keen has helped other developers acquire property and do projects in the vicinity of his own, to the mutual benefit of everyone involved.
Image via Mike Keen.
“Intentionally Inclusive”
Keen met Incremental Development Alliance cofounder Monte Anderson in 2016 and began attending the group’s programs. In late 2017, he helped get the City of South Bend to bring the IDA team in for a workshop and a stress test of their zoning code. The city kicked in $4,000, while Keen raised the other $16,000.
If Keen believed incremental development had the potential to transform Near Northwest and other South Bend neighborhoods, though, it was important to him to engage those neighborhoods from the beginning in an intentionally inclusive way. Keen reached out to community organizations and offered to have them be cosponsors of the IDA events at no charge if they would send the information out to all of their contacts. The result was a diverse group of interested attendees at the first lecture and workshop. Keen also worked to arrange scholarships for participation in the developer workshop.
The goal is real estate development as a form of community organizing. To do this well, deliberate discomfort is a must. “Take a look at what you look like, and whatever you look like, try to find some folks that look different than you and really connect with them,” says Keen.
Keen began to host regular small-developer receptions at his house, as a community formed around the group. “We call it, informally, the Michiana Incremental Development Alliance Ecosystem. But all that is, is a spreadsheet where I’ve got a bunch of phone numbers. There are 15–20 people actually doing development. But we’ve got city officials, financial people, contractors, architects, engineers, community members, nonprofits; we’ve got about 180 people on that list. We can get 20 to 25 to show up for a reception for somebody like Monte when he comes in.”
Paraphrasing Anderson, Keen told me, “We don’t want to have any secret handshakes. We don’t want a situation where you’ve got to be invited to the Christmas Party of a law firm on the 20th floor of a building to know how to make things happen in the city.”
The incremental developer cohort in South Bend has a culture of generosity: They share knowledge and connections, with no proprietary hoarding of trade secrets. You know a contractor? Cool, now I know a contractor. You know a banker who understands mixed-use buildings and is open to issuing a loan for one? Hey, I want to know that person too. You know the mayor? Now I know the mayor.
Connections open doors, especially in small-scale development, where knowing the right lender or the right affordable-but-also-highly-competent contractor is worth its weight in gold, since the mainstream development and finance world is not attuned to small projects.
“If I Can Do This, Anyone Can”
Barbara Turner of Revive Homes, LLC.
The result is that a remarkable cross-section of South Bend residents have become small-scale developers in the past few years. I spoke with several of them; still others are profiled on the city’s “Build South Bend” website—itself an indication of how City Hall has embraced this growing movement and tried to nurture it. Multiple developers shared some version of the sentiment, “If I can do this, anyone can.”
Barbara Turner is a longtime South Bend resident who was born in Mississippi to a sharecropping family. She moved to South Bend in her 20s with dreams of owning her own home, and at age 26, designed and built her own ranch house. “I caught the bug,” then and there, she told me; Turner wanted nothing more than to be able to give that same feeling of home and belonging to others. Once her children finished school, they encouraged her to revisit her dream. So, after a few years commuting back and forth to Chicago to be a project manager for her son’s home renovation company, Turner founded her own: Revive Homes LLC in South Bend. She renovates homes in South Bend and hopes to one day build a subdivision. Financing has been Turner’s biggest challenge—she at one point refinanced her own home to get the startup capital to begin her development work. (This is a not-uncommon story for a small developer.)
Sarah Hill is a public library administrator by day. She founded Penny Hill Homes to renovate historic houses with partner Jennifer Henecke. “The kinds of houses that we approach, these foreclosed historic homes, have so much innate beauty in them, so when they’re done they are just stunning,” Hill said. She would like to branch out beyond single-family renovations to do a new build on a vacant lot, perhaps a fourplex. “I don’t feel we’ve quite cracked the nut of commercial financing,” Hill said. “We’ve relied on conventional financing for everything so far.”
Home renovated by Sarah Hill and Jennifer Henecke. (Image via Penny Hill Homes.)
“Swella’s Ville” on Lincoln Way West is the brainchild of Consuella Hopkins, the owner of a local accounting and tax firm. Hopkins has opened what may be the first office building in the corridor in three decades. But her “farm” and ambitions are much greater: a district of commercial and office space and rental homes which can act as an anchor for economic revitalization on the west side. You can watch a video of Hopkins discussing her Swella’s Ville vision here and read a profile here.
A flyer from the city’s Department of Engagement and Economic Empowerment advertising upcoming small developer events.
Fertile Ground
Nobody involved in this story is a miracle worker, conjuring a whole crop of eager small-scale developers out of nothing. The truth is, the ground was fertile in South Bend for this kind of work. The energy and drive were already present in spades and just needed to be channeled.
Part of this is the cultural scrappiness characteristic of the Rust Belt. There’s a commitment to community development and a willingness to try unorthodox things. As Alkeyna Aldridge, Director of Engagement and Economic Empowerment at the city, puts it, that willingness is rooted in the recognition that “our system is so broken, the need is so big, and the cavalry’s not coming.” In South Bend, this is particularly manifested in the Near Northwest neighborhood, where churches and a very active community development corporation are centers of civic engagement.
The whole concept of a Department of Economic Empowerment is unusual. It was established in early 2019 in response to residents’ concern about the huge disparity between redeveloping areas of South Bend and the continuing problems west and south of downtown. Then-mayor Pete Buttigieg greenlighted the concept, but the department is still a work in progress, an upstart counterpart to more traditional economic development activities. “We had this mandate to do neighborhood-level economic development, but nobody knew what that was,” said Marty Mechtenberg, an architect by training who is now employed by the department as an Economic Empowerment Specialist. “So we kind of made it up as we went along, and maybe surprised everyone by being more successful than we were expected to be.”
The keys were the connection to the IDA, and the realization that South Bend was full of people already trying to improve their neighborhoods. Many of them owned property but didn’t know what to do with it—a result of years of abandonment in which things “sort of fell into folks’ hands because they cared.” Now these residents have opportunities to capitalize on that ownership and develop these sites to help bring back former neighborhood commercial centers. But they need technical support and access to the same kinds of networks that bigger developers have.
South Bend is also rife with entrepreneurship programs, including the SPARK program through St. Mary’s College for women and minority entrepreneurs, and the Entrepreneurship and Adversity Program at Notre Dame. A number of the small developers are graduates of one or more. But these programs weren’t talking at all about real estate, said Aldridge.
The Economic Empowerment department is the connective tissue for these disparate sources of community energy and ambition. It serves as the one-stop shop at City Hall for South Bend’s small developer cohort. The city’s role is twofold:
Technical assistance. The department holds Build South Bend workshops in which participants can hone their understanding of the basic steps in development—”How do I stabilize my building, develop a rent roll, talk to a contractor or an architect?” They can also share what their “farm” is and connect to neighbors who might be touching it. “Hopefully the technical assistance process helps them get some numbers that they can take to the bank,” says Aldridge.
Facilitating networking and peer support. This is for the people who say, “I’ve never worked with an attorney before, and I find attorneys to be really scary and intimidating and expensive,” says Mechtenberg. The city can help facilitate introductions to bookkeepers, CPAs, contractors, and architects “who we know get how to work with the little guy. We’re giving folks access to that ecosystem, peer-to-peer, and peer-to-broader-network. And also to the city itself. People don’t know how to work with the city, who to ask questions about zoning, building codes, et cetera. People buy properties because they have an idea, and we don’t want them to later find out ‘You can’t do that.’”
South Bend looking northwest from near downtown. (Image via Wikimedia Commons.)
Not “Does it Scale?” but “Does It Replicate?”
An important question I asked those involved in this progress was, “Is South Bend unique?” Can we do this elsewhere?
South Bend is illustrative of a crucial point about incremental development. The historically depressed economy in South Bend is part of what creates opportunities to do this work. This model would not port in the same way to an affluent place with sky-high property values, or one already buzzing with big-time investor activity.
Incremental developers, because of their deep connection to a place, are able to identify underappreciated opportunities and undervalued property. They can prove the market where the conventional wisdom is that there isn’t one. And the model of development is fundamentally cultivative as opposed to simply extractive. You’re creating value through patience and commitment to a place. This also means you can’t be a lone wolf. You will realize more value—and this includes financial return on your own development projects—if you work to lift the whole community up with you.
This can happen anywhere there’s a community and work to be done. But the energy can only come from within. For this reason, Keen told me, the right question is, “not how does it scale, but how does it replicate?”
“I see this as a form of biomimicry, because I come at it from a sustainability perspective,” says Keen. “I see the small-scale development approach as a form of DNA. It’s a pattern; it’s a method. It’s going to adapt differently in different contexts. But if you have a dandelion seed, a bird can drop it anywhere, and it’s going to create dandelions. Unless something is really wrong with that place, something will grow.”
Read part four of this series here, or click below to get a free copy of the full series in e-book form!
Who is actually going to do the work of incremental development, and what will their motivations be?