Equitably Rebuild Markets and Revitalize
How can we lead market change?
Leading neighborhood change is not a linear process, but a series of closely interrelated steps and activities:
- Understanding neighborhood change. Understanding what is going on from a housing market perspective and tracking market change in the neighborhood over time;
- Building the market. Framing and implementing strategies to build a stronger real-estate market in weak-market areas;
- Promoting equitable revitalization. Framing and implementing effective strategies to ensure that lower-income neighborhood residents benefit from neighborhood change; and
- Changing strategies over time. Understanding how to shift strategic directions as conditions change, and recognizing which strategies are most suitable at what points in a neighborhood’s course of change.
Why is it important to think about neighborhoods dynamically?
The framework for strategic change, shown graphically in Figure 2, is a dynamic way of thinking about housing markets that helps to build strategies that foster change and seek to direct it into the most sustainable and equitable channels.
The process of strategy-building begins with understanding the real estate market conditions of the neighborhood that is the target of the strategy. Those conditions will determine the extent to which moving the market – as distinct from managing it – is likely to be an important goal, and which strategies are most likely to be effective.
That information leads to the next step, framing goals for neighborhood change. Just as it is difficult to frame those goals before one has a clear picture of existing conditions and trends, it is difficult – if not impossible – to frame an effective strategy without a clear idea of where one is heading.
How significant is the difference between a focus on building the market vs. protecting residents from the market?
Carefully articulated goals for neighborhood change are a critical foundation for ensuring that the right strategies are chosen, the right financial resources are secured, and the right indicators of change are tracked to measure success. Because most of the resources and tools in our industry are lumped together under the title “community development,” it can be difficult to discern which are ideal for a particular market condition, and which might actually be detrimental.
For example, the development of a hundred units of housing for low- to moderate-income buyers in a neighborhood with 30 percent vacancy rates, in a city at 60 percent of its peak population, may not be useful. Yet without an articulated goal of building market demand for existing housing stock, such a strategy could very well be employed because of the availability of tax-credits, developer fees and excess development capacity in the nonprofit sector.
The approaches to building markets and to protecting people from the market are different, and the time to understand and articulate which is most appropriate to your current market conditions is before you create programs and secure resources. Table 1 contrasts the two approaches to assist you in discussing them and their implications.
Table 1: Contrasting a Market-Building Approach with a Market-Protection Approach
When you discuss the goal for neighborhood change that is right for a particular neighborhood’s market conditions, the topic of gentrification will likely come up. Gentrification is defined as the process of buying and renovating houses and stores in deteriorated urban neighborhoods by upper- or middle-income people, thus improving property values but often displacing low-income families and small businesses through rent and property tax increases.
The word “gentrification” is highly charged and used as code for a variety of fears regarding race and class. This strategy seeks specifically to manage neighborhood change so that unintended consequences of neighborhood improvement have the least detrimental effect on existing neighborhood residents. However, practitioners of neighborhood revitalization should be prepared to engage in a conversation about it.
Developing a Strategic Mix
Having established the baseline conditions for the strategy, the next steps can be taken more or less simultaneously. The user must frame strategies to move the neighborhood real estate market, and/or frame market-sensitive strategies to foster equitable revitalization, in the manner most appropriate to the neighborhood’s conditions and the user’s goals. In most cases the strategic mix should include some strategies or activities that address both issues. A CDC may find, however, after studying the neighborhood’s current real-estate market conditions and trends, that the market is already moving strongly and requires no further intervention to become self-sustaining. In that case, its resources can be redirected toward strategies to ensure that further change takes place in an equitable fashion.
At the same time, the user must develop a process for tracking change on a regular basis, tied to the specific strategies that are being pursued. The need to track change, using the best available indicators, grows out of the fundamental premise of this framework; namely, that the most appropriate strategic priorities, and the effectiveness of specific actions will change depending on the nature and extent of the housing-market change taking place in the area.
Implementation is an ongoing, long-term process that demands routine evaluation of the strategies against changes in the area’s market conditions. As market conditions change in a neighborhood, both the feasibility and the effectiveness of given strategies change. Once the market is moving strongly, it becomes less appropriate to spend resources on market-building and important to redirect resources to strategies that preserve affordability or minimize displacement. Similarly, as market conditions change, the relative effectiveness of equitable revitalization strategies changes. Just as a retail store regularly monitors sales data to find out what is selling and adjusts its product lines and displays accordingly, implementation must include ongoing integration of the housing-market information being tracked and the process of framing, modifying, and affecting the strategies for neighborhood change.
Changing Strategies Over Time
Different strategies may work well, poorly or not at all, depending on the state of the neighborhood’s housing market, and the neighborhood’s place on the continuum of neighborhood change. Market-building strategies are driven by the baseline market characteristics of the neighborhood, at a particular point in time. Understanding trends is important, but less so, because the goal is to create a trend, working from the area’s existing conditions. Strategies to preserve or create affordable housing are driven more by the trend of market-driven change, because these strategies are designed to anticipate or respond to change, rather than create it.
Determining whether a strategy is suitable at a particular time and place requires weighing three separate factors in light of the changes taking place in the neighborhood:
- Is the strategy relevant? Will it address a problem that already exists, or is it needed to anticipate a problem that is likely to arise in the future?
- Is the strategy effective? Is it likely to yield the desired results, and will the positive outcomes significantly outweigh any negative outcomes?
- Is the strategy efficient? Is the cost of implementing the strategy reasonable in light of the benefits derived, and is the balance between public costs and benefits comparable to or better than alternative strategies?
All three questions have to be asked, and answered, regularly for every market-building or market-sensitive equitable revitalization strategy being pursued.
Building Markets: If a neighborhood’s residential real-estate market is weak, the neighborhood is unlikely to be healthy in other ways. Organizations working in such neighborhoods should see building a stronger housing market as a key part of their strategy for neighborhood change. Market-building is about changing the features of the neighborhood that affect the likelihood that people will choose it rather than somewhere else as a place to put their money and make their personal commitment.