As long as you can prove the costs are directly related to restoring the driveway to its original condition, it's reasonable to charge the tenant for these damages using their security deposit.

One condition of this grant is that we cannot sell the property for five years, and if we refinance, we can’t take any cash out—it must be reinvested into the property.

Rents are determined by condition and location. 

We bought properties in some of the nicest areas in town, focused on appreciation, and houses that just didn't need much from us because they are in excellent condition.

I am not opposed to people turning homes they lived in into rentals under the right condition. 

Are you still working to satisfy any Conditions/Stips (such as providing documents, etc)?

Airbnb handles the payment so I don't worry about it and I've found that the typical tenant that is willing to pay 2x the LTR rate is going to keep the property in good condition.

You might consider giving a notice to the entire building that you will be doing a walk-through on a certain date to check the condition of the property - you have a right to maintain your property and access all units if they are home or not with proper notice.Also, make sure that your notices have a person named as UNKNOWN OCCUPANTS listed.

What are the most promising alternative lending strategies for financing RE developments given the rising interest rates and tightening credit conditions?

The condition, age, and future capex issues are more important in my opinion.