Transcript Market Based Approachesx

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MARKET BASED
APPROACHES
Community Development Policy
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Economic Develop in the Inner City
• ED 101
• Service Economy
• Base or Export Economy
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Economic Develop in the Inner City
• ED 101
• Service Economy
• The part of the economy that serves the local population and
businesses
• Corner store
• Local restaurants
• Dry cleaners
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Economic Develop in the Inner City
• ED 101
• Export Economy
• The part of the economy that serves population and businesses
external to the local area
• Regional shopping mall
• Wall street banks
• Chinatown restaurants
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Economic Develop in the Inner City
• ED 101
• The goal of local ED is typically to maximize the Export
economy
• Brings additional resources to area
• Larger multiplier
• Multiplier measures the extent to which each dollar is recirculated within
the local economy
• By definition service economy is limited to capacity of local area
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Economic Develop in the Inner City
• ED 101
• Developing an export economy is challenging
• Requires some comparative advantage
• Comparative advantage is sometimes an accident
• Wall Street
• Sometimes the result of planning
• Silicon Valley
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Economic Development in the Inner City
• Developing an Export Economy
• Ideally, one would develop a new comparative advantage
• Might settle for exporters relocating from elsewhere
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Economic Develop in the Inner City
• ED 101
• Service economy will typically flourish on its own absent
market failure or extremely low incomes
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Prospects for Economic Development in
Inner City
• Export economy
• Developing comparative advantage possible?
• Service economy
• Is the local market underserved?
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Theory
• Businesses want to be near inputs and
customers
• Inputs
• Skilled labor
• Natural resources
• Professional networks
• Customers
• Retail clients
• Business clients
• Visibility
• Inner city communities might fall short on all these
measures
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Theory
• Market Failure
• Investors and customers simply don’t know what is happening in
the inner city
• Segregation, crime,fear
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Enterprise Zones
• Initially proposed in UK Greenlining the inner city
by Peter Hall inspired by the success of Hong
Kong and Singapore
• Remove heavy hand of government
• Relax regulations
• Work regulations
• Minimum wage
• Work safety requirements
• Unionization
• Land use regulations, permit more as of right
development
• Lower taxes
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Enterprise Zones
• Impacts
• Modest at best
• A number of studies have found no or even negative
impacts
• A few studies have found increased earnings and job
growth in California and Florida, respectively
• Why no impacts?
• These are distressed communities
• Tax Incentives might be too small
• Tax incentives not that important to start ups
• Hard to design a credible study, is there a real control
group?
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Community Development Block Grant
• Nixon used to consolidate various community development and housing
programs
• The annual CDBG appropriation is allocated between States and local
jurisdictions called "non-entitlement" and "entitlement" communities
respectively. Entitlement communities are comprised of central cities of
Metropolitan Statistical Areas (MSAs); metropolitan cities with populations of
at least 50,000; and qualified urban counties with a population of 200,000 or
more (excluding the populations of entitlement cities). States distribute CDBG
funds to non-entitlement localities not qualified as entitlement communities.
• HUD determines the amount of each grant by using a formula comprised of
several measures of community need, including the extent of poverty,
population, housing overcrowding, age of housing, and population growth lag
in relationship to other metropolitan areas.
• Citizen Participation
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Community Development Block Grant
• Eligible Activities
• Over a 1, 2, or 3-year period, as selected by the
grantee, not less than 70 percent of CDBG funds must
be used for activities that benefit low- and moderateincome persons. In addition, each activity must meet
one of the following national objectives for the program:
benefit low- and moderate-income persons, prevention
or elimination of slums or blight, or address community
development needs having a particular urgency
because existing conditions pose a serious and
immediate threat to the health or welfare of the
community for which other funding is not available.
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Community Development Block Grant
• Amount
• 3-5 billion per year
• Used often for housing, infrastructure, job training
• In response to the foreclosure crisis the NSP has been
implemented
• Impact?
• At least one study in Richmond found targeted use of CDBG funds
has a positive impact on property values
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Benefits of CDFI Fund
New Markets Tax Credit Program (NMTC)
Programs
CDEs must make qualified
loans or investments in lowincome communities, such as:
CDFI Fund
CDE must offer
credits to investors
within 5 years
Financing
operating
businesses
Community
Development
Entity
Private
Investors
Qualified equity investments
must stay invested in CDE
for 7 years
Financing
commercial
real estate
Financing
community
facilities
Financing
for-sale
housing
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The Porter Model
• Strategy
• Integrate the inner city into the wider economy
• Allow the private sector to produce wealth and employment
opportunities
• An economically thriving business sector will help address
challenges facing inner city communities
• Priority should be given to the needs of business
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The Competitive Advantage of the Inner
City
• Underserved retail markets
• Strategic location
• Close to CBD
• Close to population centers
• Developed infrastructure
• Abundant labor??
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Porter’s Model
• Role of CBOs
• Build networks with mainstream businesses
• Don’t set up duplicate programs, make connections
• Create a “business friendly” environment
• Provide job readiness programs
• Site assembly and planning where appropriate
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Porter’s Model
• Role of Government
• Markets inner city
• Infrastructure investment
• Public safety
• Eliminate tax on capital gains from inner city investment
• Streamline regulation
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Obstacles to Inner City ED
• Red tape
• Poorly maintained infrastructure
• Distorted or lack of information to private sector
• Political Demands on Business
• Hire residents
• Donate to local charities
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Is Porter’s Model Plausible?
• Does he correctly identify the causes of the dearth of
inner city development?
• Policies that favor suburbs sunbelt
• Redlining
• Discrimination
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Is Porter’s Model Plausible?
• Should businesses be required to empower inner-city
residents?
• Provide a living wage?
• Provide better than dead end jobs?
• Cede control to residents?
• Support social services?
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Is Porter’s Model Plausible?
• Porter’s approach is essentially a supply side approach
• Do equity considerations favor a supply side vs. a demand side
approach?
• Do efficiency considerations favor a supply side vs. a demand side
approach?
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An Alternative: Place based People
strategy
• Promise Neighborhoods
• Modeled on the Harlem Children Zone
• Started by Geoffrey Canada
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An Alternative: Place based People
strategy
• Harlem Children’s Zone
• In early 1990s, HCZ ran a pilot project that brought a range of
support services to a single block. The idea was to address all the
problems that poor families were facing: from crumbling apartments
to failing schools, from violent crime to chronic health problems.
• HCZ was in the vanguard of nonprofits that began carefully
evaluating and tracking the results of their work.
• In 1997, the agency began a network of programs for a 24-block
area: the Harlem Children's Zone Project. In 2007, the Zone Project
grew to almost 100 blocks. Today the Children's Zone® serves
more than 8,000 children and 6,000 adults. Overall, the
organization serves more than 10,000 children and more than
7,400 adults. The FY 2010 budget for the agency overall is over
$75 million.
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Promise Neighborhoods
• Focuses on life chances of children in
distressed communities by:
• Defining and measuring relevant outcomes and ensuring the
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outcomes are communicated and analyzed
Supporting institutions that are focused on building a college-going
culture in the neighborhood;
building a continuum of academic programs and family and
community supports, from the cradle through college to career, with
a strong school or schools at the center;
integrating programs and breaking down agency "silos" so that
solutions are implemented effectively and efficiently across
agencies;
Supporting efforts to "scale up" proven, effective solutions across
the broader region beyond the initial neighborhood; and
Use Evidenced based practices
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Promise Neighborhoods
• To effectively improve the outcomes for children
in distressed communities, schools, academic
programs, and family and community supports
must include the following core features:
• The capacity to collect, analyze, and use data to evaluate the
success of their efforts.
• Close integration so that time and resource gaps that contribute to
children missing academic and developmental milestones do not
occur.
• A leader and an organization that can engage the community and are
accountable for results.
• A "place-based" approach, which leverages investments by focusing
resources in targeted places, drawing on the compounding effect of
well-coordinated actions.
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Promise Neighborhoods
• Planning Grants were awarded in June 2010
• Among the awardees
• Abyssinian Development Corp.
• Lutheran Family Health Centers / Lutheran Medical Center (Brooklyn,
NY)
• Dudley Street Initiative
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Choice Neighborhoods
• To help public, private and nonprofit partners extend
neighborhood transformation efforts beyond public
housing - as they are already doing on their own, in spite
of the fact that their government is often a barrier.
• Public Housing Authorities (PHAs), local governments,
nonprofits, and for-profit developers that apply jointly with
a public entity.
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Choice Neighborhoods
• Rationale: a Hope VI development that is surrounded by
disinvestment, by failing schools or by other distressed
housing has virtually no chance of truly succeeding.
• Many neighborhoods of concentrated poverty contain
distressed public and/or HUD-assisted housing in need of
repair or replacement. Prior to the creation of Choice
Neighborhoods, HOPE VI was the only major source of
revitalization funding available to these areas. This
funding was only available to the public housing stock.
• Expands the range of activities eligible for funding and
capitalize on the full range of stakeholders we know are
needed.
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Choice Neighborhoods
• Public Housing Authorities (PHAs), local governments,
nonprofits, and for-profit developers that apply jointly with
a public entity.
• Eligible Areas
• 20% poverty rate and;
• Per capita violent crime rate at least 1.5 times the per capita of the city.
• Long-term vacant or substandard homes is at least 1.5 times higher
than that of the city.
• Low-performing public school in target area
• Severely distressed public and/or HUD-assisted
housing
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Choice Neighborhoods
• Activities
• Housing Improvement (new construction & Rehab)
• One for one replacement
• Community input
• Partnering with local educators
• Relocation assistance & right to return
• Supportive Services
• Job training & creation
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Choice Neighborhoods
1.
2.
3.
Housing: Transform distressed public and assisted housing
into energy efficient, mixed-income housing that is physically
and financially viable over the long-term;
People: Support positive outcomes for families who live in
the target development(s) and the surrounding
neighborhood, particularly outcomes related to residents’
health, safety, employment, mobility, and education; and
Neighborhood: Transform neighborhoods of poverty into
viable, mixed-income neighborhoods with access to wellfunctioning services, high quality public schools and
education programs, high quality early learning programs
and services, public assets, public transportation, and
improved access to jobs.
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Choice Neighborhoods
• Collaborate across federal agencies
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Department of Education’s Promise Neighborhoods program.
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Environmental Protection Agency’s Smart Growth program
•
Department of Transportation’s proposed Livable Communities
Initiative.
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Discussion Questions
• Do Obama’s initiatives represent a new
approach or old wine in new bottles?
• Tax incentives alone would likely simply reshuffle
the deck and not expand the economic pie. Is
this ok?
• Entrepreneurship is key to ED. How can we
foster entrepreneurship and innovation in the
inner city?
• One of the greatest threats to community is
modern capitalism
• Requires mobility
• Capital is mobile (e.g. Detroit)
• How should we address this dilemma while trying to
promote CD?