Without a full-scale campaign to stabilize urban neighborhoods and rural communities, the fallout from the subprime foreclosure mess is likely to wipe out three decades of solid, successful community revitalization work in the next few years.
Foreclosures lead to abandoned, vacant properties, which lead to declining home values, which lead to more foreclosures, and further declining values. Combined with a lack of available credit, and the meltdown of financial markets, there is a vicious downward spiral that is wider in scope than any since the Great Depression. We need to short-circuit this downward spiral by intervening more quickly and at a greater scale.
While the federal government contemplates another stimulus package, the competition for dollars is already intense. Bloomberg News estimates the bailout of the financial-services industries could cost taxpayers $8 trillion. The auto industry needs bailing out, and members of Congress are talking about an infrastructure package of around $200 billion. Meanwhile, homeowners have no large-scale program to address their plight, which underlies the financial meltdown and risks hobbling our economy for years.
Threatened by funding cuts, reduced revenue streams, downward pressure in the real-estate market, and a shifting real-estate, credit, and funding landscape, many community development corporations are ill-prepared to lead the rescue of neighborhoods they’ve painstakingly built up. And without CDCs, communities lose their most effective local stabilization mechanism.
This time of economic uncertainty presents an opportunity for the community development movement to reinvent itself. While CDCs are doing important work in foreclosure mitigation, parallel efforts to deal with foreclosure-ravaged neighborhoods are insufficient.
CDCs can take three immediate steps toward retooling for the current crisis and beyond. First, they can begin to focus on putting vacant properties back into use and rescuing troubled properties. The construction of new affordable housing is not as important as rescuing existing buildings that are in trouble. Second, they should take charge of making change in their neighborhoods, rather than just providing some needed services. Third, CDCs should unite to create new institutions that can operate in the real-estate market purchasing foreclosed properties in bulk and amassing capital.
But, as the articles in this issue make clear, public and private funders and government agencies also must recast themselves to meet the challenges of our economic upheaval. Local and state government community development agencies need to reprioritize toward community stabilization. The major intermediary organizations must refocus their programs toward the same end, driving resources downward toward the problem.
Current programs providing loan capital to CDCs for acquisition and rehabbing of properties are inflexible and hard to access. Government subsidy programs need to be redesigned to be flexible and compatible with scattered-site acquisition and rehab work. Intermediaries need to provide assistance and training programs for neighborhood-level organizations on how to strategize and lead the changes required to save our communities.
CDCs should lead efforts to stabilize their communities. We need to find ways to mobilize bigger forces, attract more capital, draw more partners, and raise the scale of our response to the size of the threat. It’s our best chance to protect the gains we’ve made and to provide decent, affordable housing and a vibrant community for everyone.