Photo Credit: The New York Times

With over 20,000 patients across the city, Callen-Lorde Community Health Center has provided outpatient health care to New York City’s LGBTQ and homeless community for over 50 years. So, when COVID-19 infections in New York City spiked in early March and the emergency rooms and hospital beds were overflowing, Charles King, the CEO of Housing Works, knew who to call. Wendy Stark, the Executive Director of Callen-Lorde, quickly took him up on his proposition to work together.

“We quickly pivoted to be part of the city’s front-line health care response. And under very dire circumstances, our staff turned a hotel into a field hospital to serve COVID patients. We’ve needed more staff than we thought because people were sicker than we expected,” says Wendy.

In a matter of hours, Housing Works and Callen-Lorde converted a 133-room hotel in Queens into a hospital, pharmacy, and testing center. In addition to managing their telemedicine program for current patients, the Callen-Lorde team worked day and night to support the influx. And they were running out of money. The volume of their services increased, but payment and government support did not.

When the SBA CARES Act funding became available, Wendy immediately applied for the Paycheck Protection Program (PPP) with a large financial institution; they were not successful. Three days before the SBA portal opened for the second round Wendy held an all-team meeting to announce that Callen-Lorde had no choice but to furlough 80 employees— that’s when one of their employees referred them to us.

“It’s been incredibly emotional. The Spring Bank team worked over the weekend to help us secure the PPP loan, and by Monday morning, I delivered happy news to the team that we did not have to furlough anyone right now,” says Wendy. “We had a staff call with the Spring Bank team to celebrate.”

The PPP loan provides Callen-Lorde with two months of funding and time to secure longer-term fiscal support as their team continues to work, day and night. The transformation of the health care system, one that is accessible for all New Yorkers, is also of the highest priority for Wendy.

“People have talked about this moment as an equalizer. It’s not. COVID-19 has impacted people of color, and people with less access to ongoing services most acutely,” says Wendy. “We need a centralized, single-payer, unified system that works to the benefit of our entire society. We need a total transformation.”

Callen-Lorde and Housing Works continue to operate the working hospital at the hotel in Queens. They plan to serve as many people as they can for as long as they can. Partnerships with other health centers, affordable housing providers, and community-based organizations have been crucial to their journey. We are humbled and grateful to be one of those partners.

“As a result of COVID-19, we are now connected with a financial institution oriented to serve people who are underbanked. Our overnight partnership with Spring Bank shows the beautiful way a community can organize during a crisis. It’s important that we raise our voices together,” says Wendy.

Raise your voice on behalf of Callen-Lorde by donating to their emergency fund. Read a feature piece about Callen-Lorde in the New York Times. Learn more about their COVID-19 services. Read about PPP Loan forgiveness on our website.

The property at 645 Barretto Street in the South Bronx was so far behind on taxes that its owners were facing foreclosure. A 48-unit building incorporated as a Housing Development Fund Corporation co-op (HDFC), the property had not been fully occupied for years. Its unpaid water bill alone was close to half a million dollars. And it had a history of maintenance issues that went back years — a boiler collapsed shortly after it was incorporated as a co-op in the early 1980s, says Ann Henderson, who has worked at UHAB, the Urban Homesteading Assistance Board, since the late 1970s.

UHAB, a nonprofit that develops low-income co-op housing and assists existing co-ops, had tried to help the Barretto Street group resolve its tax arrears in 2002 and 2008, but they were having trouble filling the vacancies, so it was tough to secure loans, Henderson says. In 2014 the property was up for auction, but a city councilmember pulled it off the list at the last minute.

“And so we had to come up with a plan to resolve it or they would get foreclosed,” Henderson says.

As an HDFC co-op, the Barretto Street property’s owners are income-limited, earning up to 120 percent of area median income. HDFC co-ops also get reduced tax bills for adhering to income caps and certain rules about renting, subletting, and reselling units. New York’s Department of Housing Preservation and Development had money available for co-ops like theirs through its Green Housing Preservation Program. Quite a bit of money, in fact — $2.4 million from the housing department, according Juliet Pierre-Antoine, a department spokeswoman. And the grant came with a retroactive tax exemption through Article XI of the New York Private Housing Finance Law. That would get the co-op close, but not the whole way. Money from the housing department can’t be used to pay down water bills. So, working with UHAB, the co-op got two more loans, from Habitat for Humanity NYC and the Bronx-based Spring Bank, to cover the water debt.

“That’s what we try to do, is sort of combine this and that and come up with a plan,” Henderson says. “Our main goal is to make the maintenance [payments] affordable for the current residents.”

Henderson says there are around 1,200 HDFC co-ops in the city, many of which were turned over to residents by the city as landlords were abandoning properties during the 1970s. Many of them have been lost to foreclosure, she says. And many others have struggled to keep their properties maintained. Groups like UHAB have been a lifeline, offering technical assistance and help finding loans and grants to co-ops like 645 Barretto Street. This helps stabilize co-ops so that low- and moderate-income owners can stay in their homes.

“The reality is that the city sold these unrenovated buildings to the lowest-income people in the city of New York and said, ‘Bye, have a nice life,’” Henderson says.

Henderson says that most co-ops are stable, but there are around 150 HDFC co-ops that might need help. They might need a new boiler, or have to clean up after a fire, or they’ve had money stolen. But many are “allergic to loans,” Henderson says. In the case of the Barretto Street property, UHAB met with the board repeatedly to walk the shareholders through the finances of the deal it structured, which will require the board to pay back loans for years. The vote to approve the deal was unanimous, Henderson says.

“In most buildings, the shareholders have a deep, deep sense of ownership,” she says. “And it’s not based on ‘how much money I’ve invested’ and ‘how much I’m going to sell the apartment for.’ It’s, ‘I lived through the abandonment of the sixties and seventies.’”

Akbar Rizvi, the chief lending officer at Spring Bank, says the co-op’s situation was a “catch 22,” because it needed money from the city to complete the repairs that could keep it from foreclosure, but it couldn’t get the money because it couldn’t pay the water bill. And the size of the water bill would be a red flag in most cases.

“Most banks would hear that and go, ‘You know what? No thanks. This doesn’t make sense,’” Rizvi says.

But Spring Bank saw that the co-op had new management and was working with Habitat, and was “in it for the long haul,” he says.

“What helped us move forward was our commitment to being able to understand the full story and not jumping to conclusions — understanding what this HDFC had been through,” Rizvi says. The bank ultimately ended up loaning the co-op $265,000.

Chris Illum and Charlotte Bell, a vice president of housing services and loan officer, respectively, at Habitat NYC, both previously worked at UHAB, according to Ann Henderson. The group loaned the 645 Barretto Street co-op $250,000 through a housing preservation program that’s part of the Habitat NYC Community Fund. Given how many limited-equity co-ops there are in neighborhoods threatened with displacement, the group has focused on keeping those homeowners in place, offering technical assistance on construction projects, help with budgeting, and facilitating board elections.

The fund launched recently, and in its first year, it lent $640,000 across five buildings, according to Illum. The Community Fund is hoping that over the next three or four years it will lend around $4.5 million to help develop or preserve 1,500 buildings in New York, Illum says. For projects like Barretto Street, even relatively small loans can make a big difference.

“There was a previous effort to save the building, but all of that was contingent upon selling the units they had vacant during a time when no one wanted to live in the Bronx,” Bell says. “When we’re not able to help stabilize the type of housing that’s in these communities, they’re likely to be lost.”

This article is part of Backyard, a newsletter exploring scalable solutions to make housing fairer, more affordable and more environmentally sustainable. Subscribe to our thrice-weekly Backyard newsletter.

You may not have ever heard of Greyston Bakery, in Yonkers, New York, but if you are a fan of Ben & Jerry’s Brownie Batter Ice Cream, you know its brownies.

You may also be surprised to know that the workers who bake those brownies in 12-hour shifts, 24 hours a day, five and sometimes six days a week, all came through an open door hiring process — no questions asked, no drug test, no credit check. Not even an interview. Founded in 1982, the bakery was recently featured in the New York Times for its open hiring policy, which has given a second chance to many with a criminal record or other barriers to employment for more conventional businesses.

Anyone who needs a job can come to Greyston, put their name and contact info on a list, and when there’s an opening, they get a call to come in and begin paid training immediately as part of a six-month apprenticeship. As head of human resources for the bakery, Abigail Saunders made that first call to many of the current bakers at Greyston.

With nearly three decades of experience in HR, Saunders has been through a lot, but nothing like she has since joining Greyston in 2015. She’s helped employees experiencing homelessness find housing, and spends more time away from her desk — coaching and spending time with workers out on the bakery floor — than any other job she’s had before. Attendance is the biggest issue, often connected to trouble outside the workplace, often housing or healthcare. A few years ago she brought in a social worker to help her colleagues navigate such challenges.

The newest addition to Saunders’ HR toolset: emergency loans for employees. Through a partnership with a local bank, Greyston Bakery employees, including management, can access personal loans up to $2,500 with no credit check required. Repayments come directly off the employee’s paycheck. The program is open to employees who have been at Greyston for at least one year. About 30 of Saunders’ colleagues have used the program since Greyston formed the partnership in 2018.

“A lot of HR professionals don’t understand financial problems at home might affect performance,” Saunders says. “The process is very painless. For whatever they need, it’s great. One of the employees took a loan out to help out a family member.”

The loans come from nearby Spring Bank, the only bank based in the South Bronx. Since launching this program for employer-based loans in 2015, it’s made a thousand of these loans through more than twenty employers including nonprofit organizations, local businesses, and Jetro Restaurant Depot, a major wholesale supplier for bodegas with 3,000 employees throughout the New York City area. The average loan size is around $2,100.

Spring Bank’s employer-based loan program is just one example of a larger trend bubbling up across the country. Recognizing the scourge of predatory payday lenders and other alternative financial services providers weighing down on employees, companies are offering employer-based loans as an alternative. You don’t need a credit check. Just a job.

There’s platforms like TrueConnect, which has more than a thousand companies on its employer-based loan platform. The structure is similar: Employees take out a small loan from a bank (in TrueConnect’s case, it’s Twin Cities-based Sunrise Banks), and repayments come directly out of the employee’s regular paycheck. Billed as a competitor to payday lenders, which often charge as much as 300 or 400 percent annual interest, TrueConnect charges 24.9 percent — still higher than most credit cards, but more accessible to people who may not qualify for a card.

One critic told the Los Angeles Times that employer-based loan programs and other “financial wellness benefits sound pretty gimmicky and of dubious value to workers, and sound more like employers wanting to continue not offering wage increases to attract workers.”

Higher wages would certainly help workers at all levels, but they’re not a guarantee against the unforeseen. Some 60 percent of households experienced an unexpected financial shock in the previous 12 months, according to a study by Pew Charitable Trusts — and the median financial shock was $2,000.

While these numbers have gone down over the past five years, in a 2019 Federal Reserve survey 27 percent of Americans said they would have to borrow money or sell something to cover an unforeseen expense of just $400; another 12 percent they would not be able to cover it at all.

As a result, the market for alternative financial products — payday loans and other financial services provided outside the banking system such as check cashing — continues to grow year after year, to a projected $188 billion in 2018, according to the most recent Financially Underserved Market Study from the Center for Financial Services Innovation.

In New York, the usury cap is 16 percent — which is what Spring Bank charges on its employer-based loans. As a result of the state’s strong usury protections, Spring Bank isn’t facing the same competition from payday lenders as in other parts of the country. It’s possible to get a payday loan in New York state through an online provider, and it does happen, but it’s not nearly as prevalent as places where payday lenders operate out of storefronts, usually in low-income and predominantly black or Latinx communities.

When an employer signs up for the Spring Bank program, director of consumer lending Melanie Stern and loan officer Carol Guzman typically go out and make a presentation to the employees of the company. Often, by the time they get back to the office, employees of that company have already submitted applications. Guzman says over the past few months she’s consistently seen around 20 applications a week from all of Spring Bank’s participating employers. Approval can take up to seven days — still not quite as instant as many payday loan providers promise.

Stern designed the program to break the debt trap. When Spring Bank approves an employer-based loan, the loan amount goes into a savings account in the employee’s name. It can be withdrawn the same day, in-person — their main branch is located along two major subway lines in the South Bronx. The loan repayments are set up as a direct deposit from the employee’s regular paycheck into the savings account. Some employees choose to keep the direct deposits going even after repaying the loan, getting them started on a path to building savings.

On more than one occasion, Guzman says, employees have applied for a second loan, not realizing they had already paid off the first loan but kept paying into their savings account. She’s told these applicants they don’t need a second loan because they had already saved up more than the amount they requested.

“They come for another loan and they didn’t even know they had money there,” Guzman says. “One had $1,500, another had $1,800 in their savings account.”

So far, the median annual income for borrowers in Spring Bank’s employer loan program is $36,000. The bank also reports the on-time payments on each borrower’s credit history, resulting in a 50-point credit score bump after repaying an employer-based loan, according to Stern.

“Where we really see a nice impact is for people who didn’t have a prior credit history at all,” Stern says.

One obvious risk is that borrowers leave the company before repaying a loan. Spring Bank requests a back-up bank account to use for repayments in case that does happen, but it doesn’t require that. So far the losses have been less than Stern expected — at program launch in 2015, she forecasted ten percent of loans going bad, but so far it’s only been three percent, which is on par with other employer-based loan programs.

There are some key limitations. Specifically, people currently paying child support cannot access Spring bank’s employer-based loan program. Child-support payments take precedent over loan repayments, making those borrowers just too risky to access this program. Saunders, of Greyston Bakery, says that has definitely been an issue for some of her colleagues.

Technology has been a key piece of the puzzle — as well as an expense. Spring Bank partnered with tech startup Happy Mango Credit to build and operate an online platform that provides access to the employer-based loans as well as other Spring Bank financial products. The same platform also integrates tools for some household financial planning as well as setting up appointments for financial counseling.

Stern hopes to add another ten employers to Spring Bank’s employer-based loan program over the next year.

This article is part of The Bottom Line, a series exploring scalable solutions for problems related to affordability, inclusive economic growth and access to capital. Click here to subscribe to our Bottom Line newsletter. The Bottom Line is made possible with support from Citi Community Development.