After decades of population loss, Niagara Falls has found a way to draw young people downtown by offering to pay off their student loans.

Now comes the challenge of drawing the businesses the young creative types will demand.

The honeymoon capital this year will place the first of 20 recent graduates into homes and apartments near the falls, the first step in building a market for what officials hope will become an Elmwood Village of the north.

The idea is to inject young people into a downtown area that edges closer toward disrepair each year. Federal urban renewal funds will pay two years of the graduates’ student loan bills if they move into a targeted tract just blocks from the falls. The program has already attracted more than 200 applicants from across the country.

In turn, leaders hope the young blood will attract the sort of businesses common to a thriving commercial strip – coffee shops, bookstores, restaurants and bars.

Attracting businesses to the downtown area is no easy task, leaders acknowledge.

Many of the commercial buildings in the Main Street/Third Street area have been sitting vacant for years, and some blocks resemble a plywood wall of boarded-up businesses and broken dreams.

And while the state has made years of infrastructure improvements in the downtown tourist strip, significant business investment has yet to materialize.

But the state has pledged new money toward revitalizing the area where the young graduates will live, including $200,000 for property acquisition, $160,000 for demolition of blighted structures $60,000 for administrative costs and $30,000 in matching grants for storefront improvements.

“You’re taking away blight in the surrounding area, and at the same time you’re rehabbing storefronts in your commercial district,” said Seth A. Piccirillo, the city’s director of community development. “That’s important for current residents, new residents and tourists.”

“Ultimately, what we want is [investors] seeing new people moving in, they see strategic commercial improvements. What we want is seeing the people privately investing on their own in the area,” he added.

The loan program is the first step in addressing the lack of downtown housing in Niagara Falls, according to leaders who see it as an untapped market.

Recent developments, like the $30 million Niagara Falls Culinary Institute, have attracted college students downtown, and officials from local colleges and universities say they need a more permanent solution than renting out hotel rooms for the students.

A key step in attracting the young people downtown – and making them want to stay longer than two years – is making them feel safe.

That’s one of the reasons why city leaders were thrilled when Sen. Charles E. Schumer recently announced a new partnership between city police and federal anti-crime officials to cut down on violent crime in city neighborhoods and property theft in the downtown tourist district.

“To put it simply, this amounts to a one-two punch for Niagara Falls,” Schumer said in November. “Not only does it cut crime, it will attract new tourists and businesses to this subsequently safer landmark city.”

The program is also designed to help ensure the city doesn’t dip below a population count of 50,000 for the 2020 Census, when it would lose key state and federal funding that is based on population figures.

Those interested in the residential component of the program have already sought one of the 20 spots that will be filled in the program’s first year.

More than 200 people from as far away as Hawaii have asked about renting or buying a home in the city since officials announced the program in June.

Half of those interested are from upstate New York, with the others coming from California, Oregon, New York City and other coastal areas.

The applications are being reviewed by five officials from the city, its library, a local business association, Niagara University and Niagara County Community College.

Graduates who have received two-year or four-year degrees within the past two years, or those in graduate school, would be eligible, and the city promises to cover up to $3,500 per year of student loan payments for two years.

The graduates would need to rent a market-rate apartment – or buy a home – within the downtown area. If they meet all of their loan and rent or mortgage commitments after the first year, they would be reimbursed the cost of their student loans for that year. The same thing would happen after the second year.

City leaders say they plan to start moving the students into the neighborhood in summer, and soon after they will know whether their strategy pays off in real business investment.

The city has received three business inquiries since word of the program went national.

“If we can see in 2013, three new businesses, I think that is very positive,” Piccirillo said. “Some people say, ‘What’s three new businesses in a city that needs many businesses?’ I say it’s momentum.”