July 1, 2002 - From the July, 2002 issue

"Managing Change In Urban Neighborhoods" A Bank of America Hosted National Symposium

Last fall, Bank of America hosted a group of nearly 100 community development leaders from across the country to discuss neighborhood revitalization efforts and the impact of gentrification on these efforts. The symposium, "Managing Change in Urban Neighborhoods," focused on initiatives in cities where neighborhoods are simultaneously declining and improving, with negative outcomes for some people. TPR is pleased to excerpt the report stemming from this symposium.

Neighborhoods, much like the people who inhabit them, go through their own life cycles. Some are healthy and bustling with activity. Yet others are stagnant or in decline. Within this continuum it is no surprise that declining neighborhoods suffer the most. Potential homebuyers and businesses steer away from neighborhoods experiencing a downturn because they are perceived as bad investments. People with limited resources and buying power are not great enough to stem the tide of declining real estate values.

In contrast are neighborhoods that are experiencing dynamic growth and change. As people with economic strength move in, real estate prices often skyrocket. These neighborhoods are undergoing what is known as gentrification. Paul Leonard and Maureen Kennedy, co authors of Dealing with Neighborhood Change: A Primer on Gentrification and Policy Choices, have done extensive work on the topic of gentrification. According to Leonard and Kennedy, gentrification is the "process by which higher-income households displace lower-income residents of a neighborhood, changing the essential character and flavor of the neighborhood." For a neighborhood to meet this definition, the process also needs to occur over a relatively short span of time.

Between these two extremes is a range of neighborhoods with different characteristics that define their current state of economic health. Where they fall in this range depends on whether they are improving or declining, as well as how quickly these changes occur. John Kromer from the University of Pennsylvania Fels Center of Government categorizes neighborhoods into groups based on their private sector assets.

At one end are "high-value assets"-neighborhoods considered a city's best. Houses get built or rehabilitated with private financing and without funding assistance from the public sector; a broad array of retail services are available; the city infrastructure is well maintained; and other assets, like public schools, provide stable choices for area residents.

At the other end of the range, Kromer places "no-value assets"-characterized by physically isolated neighborhoods, publicly owned housing in which no private funds are invested, limited retail services and public transportation options. In between are intermediate neighborhoods that have a mix of characteristics depending on their degree of blight or health. The topology describes the potential for private investment and the requirements for public subsidy to improve each type of neighborhood.

Statement Of Principles And Practices Concerning Community Revitalization

Neighborhood revitalization of distressed neighborhoods is both a desirable public policy goal and a private sector business opportunity. In weak-market neighborhoods, more investment is needed-of both public and private capital. Carefully crafted interventions, with the two sectors working in tandem with community leadership, show the most promise in reaching successful outcomes. The opportunity to invest in recovering neighborhoods is particularly relevant to financial institutions, since there is profit to be found in these areas. The challenge to financial institutions is to provide capital for recovery with an eye toward avoiding gentrification.

Bank of America has published a Statement of Principles and Practices Concerning Community Revitalization. An expression of the bank's commitment to avoid gentrification, the statement sets forth practices for effectively managing neighborhood change. Among them:

• Growth initiatives-Revitalization efforts are concentrated in, but not limited to, the bank's market areas targeted for business growth.

• Financial returns-The bank continues to drive neighborhood revitalization efforts within the context of financial return and community impact.

• Integration-Revitalization efforts and the need to avoid gentrification must focus on integration among the bank's business units, identification of opportunities and communication across a broad base of associates.

• Strategic Alliances-Alliances, whether with public-sector or private-sector entities, are based on the common vision and values the bank shares with alliance partners. These alliances leverage resources to support revitalization goals.

In addition to viewing neighborhood revitalization as a business opportunity, it is essential to distinguish neighborhood revitalization from gentrification. Bank of America distinguishes between the two as follows:

• Revitalization leads to increasing investment in a community as its needs evolve. Gentrification occurs when the level of investment is so high, it triggers negative consequences.

• Revitalization leads to a stronger tax base and rising property values. Gentrification occurs when rents and property values increase so fast, residents and businesses are displaced.

• Revitalization is most effective when all stakeholders are involved in the planning process. Gentrification is purely a market phenomenon (there is no planning process) and often results from a process that excludes some key stakeholders.

• Revitalization is concerned with improving a community as a place and the well-being of its residents. Gentrification is a phenomenon related only to place. It does not take into consideration the negative outcomes for existing residents.

• Revitalization leads to broader and better amenities and services. Gentrification radically changes the character of a community to the benefit of some and the detriment of others.

• At its best, revitalization leads to racially and ethnically diverse communities with a mix of incomes. Gentrification leads to communities that are largely higher-income and homogenous.

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Case Studies: Fitting The Approach To Neighborhood Conditions

Conference attendees got to hear first-hand about innovative approaches to managing neighborhood change from hot markets such as Montgomery County and Southeast Baltimore in Maryland, and St. Louis, Missouri. Each location has developed an approach to meet its very specific needs.

Montgomery County

Montgomery County is a high-growth county bordering Washington D.C. The Maryland county saw large numbers of immigrants move to the area during the 1990s. This immigration population shift, plus healthy growth through domestic migration, resulted in rapidly escalating prices in most of Montgomery County.

Thirty years ago, the county began to take steps to provide affordable housing. These steps have been augmented by the allocation of county funds into a housing trust fund. The problem in Montgomery County is very clearly identified as housing affordability, not neighborhood recovery. In almost every area of the county, market forces are causing neighborhoods to improve.

The county has been using an inclusive zoning approach that gives density credits to developers of housing that include an affordable housing component in every subdivision or apartment complex they build. The housing authority in Montgomery County has been an active purchaser of this affordable housing. More recently, the county voted to appropriate funds for affordable housing through its affordable housing trust fund.

Southeast Baltimore

Southeast Baltimore consists primarily of the contiguous neighborhoods of Highlandtown, Canton, and Patterson Park-all mostly tidy, working-class row-house neighborhoods. These areas exemplify situations in which market conditions can differ considerably in adjacent neighborhoods.

Over the past 25 years Highlandtown has shown a decrease in homeownership, changing racial patterns and a decline in property values. Neighborhood-based groups are working together to determine the destiny of this community by taking responsibility for the management of change.

Canton, the southernmost community, borders on Baltimore's harbor, where market conditions improved dramatically over the past 10 years. Houses in this neighborhood meet Kromer's definition of a "high-value asset" because housing is built and rehabilitated without any need for public subsidy. Prices for new homes in Canton range from $230,000 to more than $600,000.

Just north of this robust area lies Patterson Park, where some of Canton's market strength has spread. This market strength has led to the purchase and rehabilitation of row houses, now priced in the $80,000 to $120,000 range. The value of some homes in Patterson Park is far lower depending on the location and the condition of those blocks. Some public subsidy is being used in this area to encourage homeownership.

The Patterson Park Community Development Corporation is actively purchasing and rehabilitating homes to control the market in order to stimulate and create homeownership by buying homes that might otherwise be converted to rental housing. This community-based nonprofit is receiving support from Bank of America, other banks, and local governments and foundations. To date, the group has purchased 200 homes, and property values are improving in targeted areas.

Patterson Park is one of six "healthy neighborhoods" sponsored by the Baltimore city government because of the neighborhood's market strength and growing capacity for homeownership.

St. Louis

Like Baltimore, St. Louis lost considerable population in the 1990s. The population fell from 397,000 to 348,000 in a 10-year period. While this was a slower loss than in earlier decades, it brought the Missouri city to a size well below its 1950 peak of 850,000 residents. St. Louis'population loss was almost entirely due to rapid suburbanization and sprawl. Between 1950 and 1990, the overall region grew by 35 percent, but the amount of developed land in the region grew by 355 percent.

The key strategy in St. Louis has been to stimulate the market for inner-city living. This effort is sponsored by Sustainable Neighborhoods, a citywide nonprofit organization supported by foundation and government funds. Sustainable Neighborhoods holds the largest concentration of private capital ever directed at neighborhood revitalization in the St. Louis region. Eighteen banks have committed $751 million in investments and loans to nine neighborhoods for new and rehabilitated housing, new business development and job creation.

Each of these case studies is an example of a tailor-made approach to managing neighborhood change based on market conditions. The programs in St. Louis and Baltimore are aimed at stimulating investment. Because Montgomery County has an abundance of market investment, the county's goal is to ensure that a significant segment of the housing stock developed is affordable for the many low-and-moderate-income people who want to live there.

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© 2020 The Planning Report | David Abel, Publisher, ABL, Inc.