The Cream City Hostel in Milwaukee’s Riverwest neighborhood is converting to become cooperative housing, shifting from an industry the pandemic hit hardest to meet a growing social need for people hurt by the economic downturn.
The more than 40 community investors behind the hostel redevelopment are making that transition thanks to $450,000 in new financing from Milwaukee nonprofit Bader Philanthropies Inc., according to a Wednesday announcement of the project. Cream City Hostel opened in June 2019 and like other travel businesses was forced to close during the Covid-19 pandemic.
Work will begin in January to convert the building at Holton and Center streets into a coop for at least 12 residents. Opening by summer 2021, it will offer a lower-cost option because residents will share bathrooms and kitchens, and amenities such as the large yard on the property, said Juli Kaufmann, social entrepreneur and managing member of the RiverBee LLC group that redeveloped the property.
“We really recognized a demand with people really stressed with their housing situations, particularly people with modest incomes getting in challenging situations with their jobs, their current landlords,” she said. “That all comes together in a perfect storm in a way that is an opportunity. It was a really logical transition.”
Milwaukee Area Cohousing is working with the RiverBee ownership group on the effort. Four people have already expressed interest in joining the coop, including people from Madison, northern Illinois, and a refugee from Africa living in Milwaukee, Kaufmann said. A meeting is planned for January to fill the remaining openings.
The project also offers a financial solution to the Cream City Hostel redevelopment, which has become unable to pay returns to its 40 local investors and was on a course toward possible foreclosure with its lenders. The hostel has been generating limited revenue by offering short-term, emergency housing during the pandemic.
Bader Philanthropies’ $450,000 program-related investment loan will replace two bank mortgages on the hostel property. The agreement with Bader Philanthropies gives RiverBee two years to ramp up the coop housing business before payments must be made toward the loan principal, Kaufmann said. The two years of interest-only payments make the transition viable, she said.
“It’s absolutely a saving grace,” Kaufmann said. “By taking out those banks, they have released the pressure valve and stepped in and said we will slow the pace of this return, we will modify the terms such that we recognize your mission and your goal, and will help you pivot.”
Cream City Hostel is among several community-funded Milwaukee developments in which Kaufmann has been a partner. They rely on larger pools of local investors who often accept lower financial returns with the goal of generating a social benefit. That means the projects often happen in neighborhoods that have not attracted investment from traditional developers.
Riverwest resident Jerad Tonn is among the about 40 investors in the Cream City Hostel project, and said he supports the transition to cooperative housing. Tonn by day is an account executive for a Salesforce consulting firm.
“As far as an overall helping our society and helping our neighborhood, it’s almost a bigger mission with affordable housing,” he said. “Coming out of this pandemic a lot of people are going to realize that community aspect is important to them and I think for some people that is going to flow into their desire for their living situation. I think there is going to be a lot of demand for this type of housing, so I believe in it in a business sense as well as a mission sense.”