RealAmerica begins construction on Diamond View Apartments in South Bend
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Developers broke ground last week on a new affordable housing project in downtown South Bend, almost three years after the project was first proposed.
Diamond View Apartments, one of two projects to receive rental housing tax credit in South Bend from the Indiana Housing & Community Development Authority last year, will lease its 60 apartments to residents making between 30% – 80% of the area median income.
Located at 535 South Main Street, the four-story building will be built on the site of the former Studebaker Museum and will feature roof-top views of Four Winds Field, a gym, community space and pet-friendly amenities.
Indianapolis-based developer RealAmerica has reserved 12 of its 16 three-bedroom units for individuals with disabilities. The company will also donate space on the ground floor to LOGAN Community Resources Inc, a local provider of services for individuals with intellectual and developmental disabilities. The building will include 20 one-bedroom apartments and 24 two-bedroom apartments.
After partnering with the city to redevelop the old Hotel LaSalle into LaSalle Apartments with 67 market-rate units in 2015, RealAmerica also looked to the north central Indiana city when it started looking for locations for its new projects.
“We’re primarily affordable housing developers. The city identified several properties downtown that seemed fit for redevelopment,” RealAmerica Executive Vice President Michael Surak said. “We saw this one and all the great things that were around the property with Four Winds Field right across the street. The big Studebaker building had been redeveloped, so this one really caught our eye.”
Following the pandemic and the resulting supply chain disruptions, the cost of building new apartment units has skyrocketed, impacted by rising interest rates, increased construction costs and labor shortages.
“South Bend, like everywhere, struggles with housing costs and not not just at a subsidized level, but across all spectrums of affordability, both lowercase and uppercase,” Marianne Cusato, director of the Housing & Community Regeneration Initiative at the University of Notre Dame, said. “So right now housing is very difficult to afford, costs are skyrocketing and they don’t align with wage growth.”
Cusato said the solution lies in building more, commending South Bend’s proactive approach towards minimizing barriers for housing developers.
“It’s easier to build in South Bend because the regulating barriers are reduced, but you still have financial barriers,” she said. “So while the regulating barrier to building smaller units is taken away by putting the pre-approved plans in place, the financial model hasn’t quite caught up with all of that.”
South Bend updated its zoning code in 2021 to make it easier to build mixed-use developments, duplexes, apartment buildings, and accessory dwelling units. The new code also discarded mandatory parking minimums, a major barrier to infill development in neighborhoods not originally designed for car ownership.
To execute the project, RealAmerica applied for the highly competitive tax credits from IHCDA in 2021 but was not selected. Going back to the drawing board, the company and the city worked on revamping and upgrading their application for a second try, and they were successful.
“That’s the most valuable piece of financing to make the affordable housing projects work and be feasible. They take up such a large chunk of the capital stack for a project like this,” Surak said. “During that time period, a lot of things changed in the financial markets, construction markets and insurance. Interest rates shot up, so the deal we originally had in 2021 looked a lot different than it did in 2022, or as it does now.”
For the 2022 application, Surak said IHCDA included a question that made developers consider how their projects could evolve if interest rates rose by 200 basis points.
“I think it was a really smart move on their part. They didn’t announce the tax credit awards until January of 2023, normally they would have announced it in November of 2022,” Surak said. “When we received the funding, that’s when the real work started.”
Surak speaks about the process from idea conception to the groundbreaking last week.
The company worked with Indianapolis-based CREA LLC, a tax credit syndicator to sell the tax credits to investors or financial institutions with a community reinvestment need. They also got a construction loan from South Bend-based 1st Source Bank.
“They basically pull together investors, and then the investors buy the tax credits to offset their organizations tax liability. It’s really a win-win for everyone,” Surak said. “There’s been a lot of different pieces to pull together but the groundbreaking was a really rewarding moment for us, because you see everybody there celebrating what the hard work was.”
Rich or poor, everyone needs somewhere to call home, and creating affordable housing usually creates a gap between costs and income for developers. Tax credits are a vehicle to absorb the gap.
“Anytime we can activate new housing units, it’s a positive and we need a full toolkit to do that,” Cusato said. “Tax credits are one tool in a toolkit that allows the development team to defray costs.”
The IHCDA application also required a community integration element, prompting RealAmerica’s partnership with LOGAN Community Resources.
“When we went to South Bend, we heard that there was a need for that sort of housing as well,” Surak said. “We asked around and everyone said that the LOGAN Center is a really well respected organization. That was all back in 2021, so we’ve been working with them since the beginning.”
Matt Harrington, president of LOGAN Community Resources, welcomed the opportunity to provide affordable and accessible housing to the people he serves.
“It’s really difficult in the greater South Bend area to find affordable and accessible housing, especially upwards of three bedroom units. Typically, most of the people we serve have roommates,” Harrington said. “So the fact that we have 12 units set aside with three bedrooms each is really a huge benefit to those that we serve.”
The company’s first community integration development, SouthPointe Village Apartments in Fishers, gained both local and national recognition, Surak said.
Rhonda Shrewsbury, RealAmerica’s founder, was inspired by her own story growing up in affordable housing, to continue paying that legacy forward, Surak said.
“She’s very passionate about affordable housing, as is everyone in our company. At the end of the day, it’s what’s most rewarding for us,” Surak said. “Seeing the people, hearing the stories, it’s life changing. We do some market rate housing, we do some commercial development, but tax credits, affordable housing is really our core business and what we’re passionate about.”
Debunking the perceived stigma surrounding affordable housing, Surak noted that applicants are usually working members of society, who just simply do not make enough money to afford market-rate housing.
“For Diamond View, in particular, we have 30%, 50%, 60%, 70% and 80% rent levels based on South Bend’s median income,” Surak said. “These are all people that work. They are working in the service industry, at your local stores, at your schools. These aren’t people that are sitting around and just living in a free apartment.”
Commenting on the dedication and helpfulness of IHCDA and the city’s staff, Surak said the development would not have been possible otherwise.
Rather than looking at the individual projects alone, Cusato advises cities to look holistically at the probable impacts developmental projects will have on the entire city, the economy and the society holistically.
“When you improve one place or when you add a positive here, it can have another effect. So we need to look at the whole ecosystem,” Cusato said. “When we’re solving one problem, we need to make sure that we’re not creating another.”
Apart from the 60 affordable units, RealAmerica is also working to start construction on the same block for Stadium Flat Apartments, consisting of two market-rate buildings of 45 units each by this fall.
“It’s nearly a whole square block in a really important area for the city. It’s going to spur more development and more opportunity,” Surak said. “Since we’ve been working on our project, there’s been other projects along Main Street that have been announced, so we really see this as similar to what we did with the Hotel LaSalle redevelopment but on a bigger scale.”
In total, there’ll be 150 apartments. Diamond View is expected to be completed next July. Stadium Flats should be completed by the end of 2025, Surak said.
With the slew of data center projects that are coming to the area, including Amazon Web Services’ $11 billion New Carlisle project, thousands of newcomers are expected to move to the South Bend region in the coming years.
“That’s one of the reasons why we’re building the housing. We know there’s job creation, and people moving to the area,” Surak said. “We have an application process, it’s really first come first serve with our review process. Our site managers, our regional managers are out in the community, talking to employers and making sure they have opportunities to apply when we’re open. Applications open 60 days before the property opens.”
For Harrington, integration is the goal and living with other people in the community is just the start. He hopes to see people with intellectual disabilities enjoying the perks of living in a city like South Bend, including employment opportunities, wellness programs, going to a play at the theater or even a South Bend Cubs game.
“We ask everybody to embrace people of different abilities. We hope that people will consider employing people with different abilities, we would hope that they would welcome them in their lives,” Harrington said. “I think that everybody can benefit from being around people different from themselves.”
The not-for-profit also welcomes individual and corporate giving and looks forward to engaging with the greater South Bend region philanthropically.
For renters looking to move on to homeownership in the future, Cusato sees rental history as a way to move towards closing on a home. Using the example of Habitat for Humanity’s model, Cusato said, renters can work with not-for-profits who can put up the balance for purchasing a home, giving buyers the opportunity to build equity, leading up to an eventual sale and profit-split.
“We want to make sure that anyone that’s renting is renting in a safe and secure home. And if they want to maintain renting because that’s a choice, then that’s great,” Cusato said. “But if they want to move towards home ownership, then that’s when you look at working with a nonprofit that would be able to offer that second mortgage to get somebody a rate that doesn’t absorb too much of their monthly income.”
With projected costs over $14 million, the complex will be partially financed through the Low-Income Housing Tax Credit program, contributions from the City of South Bend and the Indiana Housing and Community Development Authority. Other partners in the project include Cedar Rapids Bank and Trust and Legacy 25 Inc.
Tax credits were also awarded to the South Bend Heritage Foundation for SB Thrive, a 54-unit development near Bethel University. Construction for the 60-unit Monreaux Apartments, serving low and moderate income families is also scheduled to begin soon, thanks to tax credits from the IHCDA. Another development at Lafayette and Stull streets by KCG Companies will add 50 affordable housing units for senior living.