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DULUTH - Duluth native Heidi Kelly is rehabbing a condemned Lincoln Park fourplex nearly top to bottom.

"All I have are walls and a foundation," she said.

As a "boutique" landlord in Duluth, her passion for revitalizing the neighborhood led her to apply for help from the city's new Housing Trust Fund, she said, which recently granted a $600,000 low-interest loan for her project.

To address the city's aging and limited housing stock, Duluth leaders established the trust fund with $4 million from the city's community investment trust. Duluth's Local Initiatives Support Corp. (LISC Duluth) has since raised and added $12 million. With the $16 million fund, combined with $19 million in American Rescue Plan money aimed at affordable housing, the city is making "unprecedented" investments in support of housing, said Mayor Emily Larson.

The fund offers cheaper financing to developers, nonprofits and anyone with a licensed contractor who has a plan.

"We know in Duluth we are kind of landlocked by a beautiful lake and creeks," Larson said, without an abundance of flat, buildable land. "What we do have is a lot of scattered opportunity … and needs across the city."

Loans and grants are available for renovations and rehabs of decaying properties, and infill projects like tiny homes and larger apartment buildings that need gap-financing. Portions of loans may be forgivable, depending on the project. More than 30 pre-applications have been filed, and a handful have been approved or are close to it.

One Roof Community Housing has a loan to build a house that it will sell to a low-income buyer. The site of the former Seaway Hotel in Lincoln Park is set to become a 45-unit low-income housing complex, and a $1 million no-interest 18-month loan from the trust will help the developer, Merge LLC, pay for construction at a time when financing costs are on the rise.

The trust fund was a major recommendation from a housing task force that was convened in 2019 and issued a report in early 2020. A 2019 report found Duluth is in need of more than 3,500 affordable housing units to keep up with demand among those who make less than the area's median household income of about $50,000.

The model mirrors funds in cities like Detroit, flush with older housing stock, said Sumair Sheikh, LISC Duluth's executive director.

"It's a vehicle for folks to access cheaper money to catalyze" housing projects, he said.

Kelly, who manages her own rental properties, owns the triplex across from her new project on West Third Street. She spent two years tracking down the owner of the fourplex to make an offer. The homes are in a corner of Lincoln Park with a history of drug use and crime, and she's "trying to breathe some life back into that area."

A lover of the city's historic architecture, Kelly took the route of saving the fire-damaged brick structure built in 1902. She expects to complete it in the next 18 months and offer affordable housing to four families, pets included. She sees the trust fund as a chance for the city to reduce blight at the same time it helps gain much-needed housing.

Of her project, she said, "It's one little spot on the block that will come somewhat back to its original glory."