Karamu House, Incorporated was established in 1915 as the Playhouse Settlement, one of Cleveland's many settlement houses for migrant and immigrant communities. Initiated by the Men's Club of the Second Presbyterian Church, in 1915 Oberlin College and University of Chicago social work graduates, Russell and Rowena Woodham Jellliffe were hired as the founding directors. Originally located at 2239 East 38th Street, the Playhouse Settlement offered children's theater and other social, recreational, and educational activities. It soon developed a partnership with the Dumas Dramatic Club, a local African American theater company that later became known as the Gilpin Players.
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After partnering with the Dumas Dramatic Club, the Playhouse Settlement began to produce adult theater productions. In 1924, educator and Gilpin Player Hazel Mountain Walker named the theater "Karamu," a Kiswahili term for "place of joyful gathering." After a fire in 1939, the new theater and institution opened a new facility at East 89th and Quincy Avenue. Alumni of Karamu House art, education, and social work programs include poet Langston Hughes; actors Minnie Gentry, Ron O'Neal, Robert Guilliaume, and Arsenio Hall; artists Charles Sallee, William Smith, and Hughie Lee Smith; and social worker Marjorie Will Johnson.