Painting I'd say something to the effect of 'sure you can paint the interior whatever color you like but it needs to be restored to the original color and quality before you move out'.

My lease states (removed the parts not at all applicable):Deductions:(a) damages to the Property, excluding normal wear and tear, and all reasonable costs associated to repair the Property;(b) costs for which Tenant is responsible to clean, deodorize, exterminate, and maintain the Property;(f) unpaid pet charges;(q) cost to restore walls, flooring, landscaping or any alteration to the Property not approved in writing by Landlord; and(r) damages to the Property caused by smoking, including but not limited to stains, burns, odors, and removal of debris.Here's a photo of one of the door frames, for example.

I really like Howard Products Restor-a-finish. 

restore or replace kitchen cabinets and countertops,new toilets and bathroom tile,new vanity sink,reglazed the bathtub or showers,etc.

We want to restore its beauty and build equity while improving the block's attractiveness.

We use the reserve for the service call, but it is restored when the tenant pays rent, and their obligation.  

There is a Federal Program (Administration for Community Living) that provides funding and technical support to Community Development and Housing Preservation organizations throughout the country that focus on building or restoring housing that can then be used for Supportive Housing (http://www.acl.gov/About_ACL/FederalInitiatives/Ho...)The challenge is that the majority of this funding is targeted to the chronically homeless, Veterans, and people with HIV/AIDS.

Did they say how they plan to come up with the rest, or did you not bother to go there ;)I had a tenant call for our $1100 a month unit and say she could only afford $1000 a month.

I would talk to them to clarify that, and propose to them that not only will you be there during the project to oversee the process, and will be there to clean up after them, and pay for any work needed to restore their side of the yard if needed. 

I know this is a difficult process to go through.I'm an investor, flip fire-damaged properties and own a restoration company that specializes in emergency services/boardup.