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Mayor James Mueller’s administration wants to provide money to nonprofit developers to build a large number of new homes in two of South Bend’s poorest neighborhoods.

The city plans to provide repayable loans to support the construction of a total of 122 new single-family homes. The Indianapolis-based nonprofit Intend Indiana would build 92 of the homes in the Lincoln Park neighborhood, which is west of downtown, between Lincolnway and the City Cemetery.

And South Bend-based nonprofit 466 Works would build 30 homes in the southeast neighborhood.

Sixty-nine of the 122 homes, or 57 percent, would be available to lower-income buyers. The rest would be sold at market prices.

The city would loan the two groups a total of $8.5 million, but they would not have to repay the money if they meet private investment and schedule goals.

Caleb Bauer is the city’s executive director of community investment. He says much of the city’s work on affordable housing involves reducing or eliminating the appraisal gap, which occurs when a home in a troubled neighborhood costs more to build than it’s worth because there are so few comparable newer homes.

That gap has shrunk over time in the Near Northwest Neighborhood because the nonprofit development group there has worked for years to build new homes. Bauer hopes to replicate that success in those two neighborhoods by creating a mix of subsidized and market-rate new homes.

“When you work with a community development corporation, you help provide some of those gap subsidies if there’s still an assessment gap,” Bauer said. “They’re building homes. Over time, the values ​​and assessments in that neighborhood may converge on those construction prices, which means that at some point, less or even no subsidies may be needed for them to build new homes in the neighborhood.”