Scale, Schmale. What About Impact?

If you think what’s wrong with CDCs today is their failure to “go to scale,” you are looking in the fundamentally wrong direction, asking the wrong questions.

While I do believe it’s essential for CDCs to be well capitalized and capable of transacting real estate business to be effective, I also believe that a CDC’s worth lies with: (1) its chosen role within its community, (2) the set of strategies chosen to achieve the desired impact, and (3) the methods it employs on behalf of those strategies. The bottom line is the impact that results from this practice.

Chasing Units

The modern community development field had its roots in the neighborhood revitalization movement of the 1970s, in reaction to the decline of urban neighborhoods and a rejection of government-sponsored urban renewal as a solution. Activists and progressive local government officials saw redlining, disinvestment, and suburbanization had pulled the rug out from under healthy urban neighborhoods and they sought to fight back. A stable, healthy community was their goal.

Some of the most exciting work at the time was the result of the congressionally chartered Neighborhood Reinvestment Corporation (now NeighborWorks America) and their local chapters, called Neighborhood Housing Services. NHS groups organized residents, government representatives, and the business community around goals related to neighborhood stability and revitalization. They were not real estate developers. They were community leaders.

During the 1980s, a shift in emphasis began. It seemed that since private sector initiative could not be relied upon to lift declining neighborhoods, CDCs needed to acquire hard business skills to be able to develop the much needed real estate that would drive the neighborhoods along a path to a better future. As a result, CDCs were urged to reshape their organizations and their approach. The Local Initiative Support Corporation (LISC) led the way, and within a decade, CDCs — old and new — were in the real estate business.

Soon, success was measured by output over impact. Funding flowed to the production of units and expanding a CDC’s housing production capacity became the mantra. The drive to create more units fueled the creation of intermediaries devoted to expanding real estate skills and organizational capacity. The era with its roots in community organizing had come to an end.

Not that opinion makers of the time thought that CDCs, tapping into limited government housing subsidies, would be the answer to housing affordability for poor Americans either. Nobody really thought this shift would make a dent in the housing crisis.

And yet, now, years later, the lack of impact by CDCs is defined as inability to “go to scale” — that is, to be able to transact larger deals to create more subsidized apartments and houses, across broader geography.

A Neighborhood Change Model

In the mid ’80s I was part of a local movement that had fought successfully for tenants’ rights and which gave birth to a “neighborhood-change” organization in Orange, N.J., a small post-industrial city bordering Newark.

Building on our experience in community and political organizing, we founded a new organization that combined community organizing and real estate expertise to take on a new problem: neighborhood decline. Housing and Neighborhood Development Services, Inc. (HANDS) had the stated mission “to ensure that the neighborhoods of Orange and East Orange, N.J., remain good places to raise a family.”

I and the other founders of HANDS struggled to identify a role that our organization could play to have the greatest impact on deteriorating neighborhood conditions. We chose to focus on vacant, deteriorated houses that were potent symbols of the declining quality of neighborhood life and foretold an even worse future. We reasoned that unless patterns of neighborhood decline were reversed, residents and business owners would never believe in better days ahead and would not see themselves there in the future. They would plan to leave — and through the ’80s and ’90s plenty did.

HANDS set out to rid Orange neighborhoods of vacant problem properties. But we needed to define the organization’s role, a strategy, and methods that would get those results.

Here’s what we came to:

  • The Role: HANDS would be the leader of the movement to rid Orange’s neighborhoods of vacant, troubled properties. (This unauthorized leadership role was not without its pitfalls.)
  • The Strategy: Become the catalyst for others to act—private sector, public sector, property owners, investors, lenders.
  • The Methods: Create measurable, positive physical change by redeveloping the pivotal, hard-core problem properties in targeted neighborhoods. Advocate for local government action and legislative action to change a system where property rights prevented effective solutions.

From this approach, flowed a wide variety of strategic initiatives. In order to rehabilitate the worst eyesores in target neighborhoods, HANDS staff had to become experts in clearing title, because they all had title issues. We organized block association leaders and CrimeWatch captains into the Community Problem Property Task Force to press City Hall for action. HANDS staff helped write the Abandoned Properties Rehabilitation Act, which gave dramatic powers to municipalities to deal with vacant, deteriorated properties, and we lobbied the legislature and the governor for its passage. Orange was the first city to use it. HANDS also pioneered a demonstration program that rewrote the rules that had made the use of housing subsidies for scattered site rehab practically impossible.

The Results: Impact

After nine years the decline had stalled and momentum had begun to shift in a positive direction. In 1995, one in ten homes in Orange was vacant and deteriorated—392 in total. HANDS worked its strategy and redeveloped 66 of the worst eyesores in target locations. By 2008 the total number of vacant problem properties had been reduced to 49.

By that time we had already begun to employ a similar strategy aimed at redeveloping vacant industrial and commercial sites. Stakeholders were gathered together around comprehensive neighborhood revitalization plans that would increase jobs and tax ratables, expand arts and culture, increase youth programming and invigorate public spaces. HANDS acquired industrial and commercial properties for redevelopment and incubated two new community organizations to drive a revitalization vision forward. The foreclosure crisis and the economic downturn have disrupted progress, but HANDS’s pivotal role in this community is a vital piece of its resilience in the face of the current downturn.

Admittedly, there were moments when HANDS’s “small scale” was a disadvantage. But we handled that with partnerships. At one point we had taken on one too many complex sites and couldn’t possibly handle the redevelopment and build out. After completing all the environmental, zoning, flood management, and redevelopment approvals for a four-acre (220-unit) site, we brought in private sector partners to develop it with us. Beyond that site, we will work with those same partners to develop more sites in that area. While we would have preferred working with nonprofits, none fit the bill as suitable partners for the project.

The Future of CDCs

There is skepticism about the value of CDCs, even among the people who care deeply about urban revitalization. Some of that is deserved, because so many organizations have been reluctant to take the risks associated with leadership within their communities. If those organizations and their supporting partners are prepared to commit themselves to assuming leadership, playing a catalytic role, and employing the strategies that will yield measureable impact, then CDCs will have claimed their rightful place in the movement for livable, more equitable cities. If not, then support will continue to erode and supporting those organizations will become that much harder.

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