A 20-Year Shift in Neighborhood Investing

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brooklynA new condo building stands in the the lower east side of Manhattan. Source: Getty Images.

Where we live, the kind of homes we occupy and the quest for a place of our own remains closely tied to that goal on the horizon we call, The American Dream. Consequently, our nation’s leaders, including those at the local level, devote tremendous energy to issues relating to housing and neighborhoods.

A scan of the last twenty years illustrates some significant and notable shifts in approach to these issues – with implications for the kind of housing that gets built, who pays for development and at what level and who has choices in the marketplace and who does not.

For example, let’s look back at 1994 when the Home Investment Partnership Program (HOME) was in its fourth year. The HOME program provides formula grants to states and localities that communities use – often in partnership with local nonprofit groups – to fund building, buying and rehabilitating affordable housing for rent or ownership or providing direct rental assistance to low-income residents.

This program remains a staple of the local landscape and a bulwark in support of housing opportunities for those seeking to reach a critical rung on the ladder to the middle class. In fact, during evaluations of this program during 1994, the value and scope of HOME was not in question; the debate centered on the ease and efficiency of program administration and reporting.

PullQuoteIn the same year, the Department of Housing and Urban Development (HUD) launched a bold effort called the National Community Development Initiative. Brought to the table was a coalition of 10 major corporations and foundations collaborating to raise $87.65 million in partnership with HUD to accelerate central city neighborhood renewal in 23 cities. Through this remarkable partnership, $20 million from HUD was matched by $15 million from Prudential, $15 million from the Rockefeller Foundation and $12 million from J. P. Morgan, among other partners.

By 1998, research from the respected Urban Institute, and its team of researchers Christopher Walker and Mark Weinheimer (Weinheimer & Associates), offered the first solid evidence of program progress. For community development corporations in the 23 target cities, the report found that housing unit production was up, budgets were larger, management structures were vastly improved and funding sources were more diversified.

Views about community lending also were different in 1994. At that time, the Community Reinvestment Act (CRA) was being lauded as a valuable tool to ensure access to credit throughout a community.

Passed into law in 1977 and amended several times, there remained an expectation that this measure increased the ability of advocacy groups, researchers, and other analysts to “perform more-sophisticated, quantitative analyses of banks’ records,” to paraphrase Federal Reserve Chairman Ben Bernanke some years later.

There was an expectation that over time, community groups and nonprofit organizations would establish “more-formalized and more-productive partnerships with banks,” thereby influencing the lending policies of banks.

A Different Kind of Partnership

Jumping forward to 2004, you can hear the alarm bells sounding. The HOPE VI program was coming under considerable criticism as a tool to build affordable housing for those most in need. Public housing advocates increasingly needed to rely on private sector investment to serve those who were not able to pay market rates for rent.

Charles Lyons of Arlington, Mass., President of the National League of Cities that year, was so concerned about the “inequality in our communities due to a lack of affordable housing,” that he launched the Divided We Fall campaign to focus on the growing disparities in cities.

partnerpullDisparities continue to confront Americans today, not only in housing and neighborhood amenities but in educational attainment, income and wealth generation, poverty rates, and criminal sentencing.

Despite these disparities, a lively, engaging federal-local partnership on national priorities remains absent. Rather than a partnership with the federal government, all that localities have now is the prospect of federal leverage. This leverage comes in the form of small pools of dollars offered mostly on a competitive basis and encumbered with enough restrictions and conditions to all but eliminate the possibility for experimentation and truly creative thinking from local decision makers.

If we accept the fact that government alone cannot solve the significant challenges that confront communities and that partnerships are the essential ingredient to success, then the only operative question to ask is, ‘What type of partnership will yield the greatest success?’ To that question, the balance of historical fact argues for a partnership of equals, dedicated to achieving consensus, led by those with the proximity and the experience to mobilize community resources in order to achieve positive outcomes for all the stakeholders. It is this recognition and acknowledgement of a wider shared responsibility to the public interest, rather than to any private interest, that is the required component to establish “a more perfect Union.”

It can only be hoped that by the time the National League of Cities stands to celebrate its centennial, the much desired federal-local partnership will be a reality.

Brooks, J.A. 2010About the Author: James Brooks is NLC’s Director for City Solutions. He specializes in local practice areas related to housing, neighborhoods, infrastructure, and community development and engagement.  Follow Jim on Twitter @JamesABrooks.