Towards A New System of Community Wealth
Bottom Line: Distressed communities are being revitalized not from the top-down but from the bottom-up. A focus on low-income rental housing, federal tax incentives, federally encouraged bank debt, and direct federal subsidies has given way to the quiet revolution of a new "Community Wealth" system focused on developing people rather than buildings, with a blend of public, private, civic and community leadership and capital. This organic system could bring hundreds of billions of market and civic capital off the sidelines into productive use and drive transformative outcomes for disadvantaged communities across the country.
Most urban neighborhoods, even those blocks away from reviving downtowns and robust waterfronts and university areas, are characterized by high poverty, low social mobility, weak market demand and growing income, health, education, and wealth disparities. Urban communities are also past and present victims of institutional racism. They sit on the “wrong side of the color line;” access to quality capital and mentoring to help residents purchase homes and build businesses remain scarce while parasitic capital for dollar stores, payday lenders and check cashers is plentiful.
However, across America there are local entrepreneurial efforts that show promise. Key players in the existing community development system are broadening their scope to go beyond housing. They now innovate on business demand as well as financial practices and instruments. At the same time, a new class of investors is entering the community space, focused on growing entrepreneurs and building strong local economies. Both the evolution of the old system and invention of the new have been accelerated by the latest federal tool, Opportunity Zones.
There's been a quiet revolution that is changing American communities in three major ways:
- It is disturbing market and civic dynamics, moving talent, capital, and ownership from the national level (where the environment no longer allows effective leadership) to the local level, where mayors and local government are coming together with business and community leaders in unexpected ways;
- It is encouraging forward-thinking leaders in the old system of community development to re-tool and upgrade, while bringing in an inspiring new class of investors and intermediaries, and;
- It is bridging a divide from what we call a “two-pocket” system, where business and philanthropy largely exist in separate spheres, to a “one-pocket” system, where they work in conjunction to accomplish similar goals.
This Community Wealth revolution aims to build equity by:
- Growing the individual incomes and assets of neighborhood residents by equipping them with marketable skills and enabling full or partial ownership of homes, commercial properties, and businesses;
- Growing the collective assets of neighborhood residents by endowing locally-run organizations with the ability to create, capture, and deploy value for local priorities and purposes;
- Improving access to private capital that has high standards, fair terms, a long-term commitment to the neighborhood, and reasonable expectations around returns and impact; and
- Enhancing inclusion by bringing fairness and transparency to neighborhood revitalization so that community voices are heard and respected and trust is restored. This will help local residents have the opportunity to participate in wealth that is created.
The study identifies seven priorities of this Community Wealth revolution:
- Uncover community assets and market dynamics;
- Enhance local business demand;
- Strengthen neighborhood nodes;
- Expand businesses owned by people of color:
- Create access to “one-pocket” capital;
- Share value creation; and
- Support next-generation institutions.
A commitment to this new system has the potential to bring hundreds of billions of market and civic capital off the sidelines and spark transformative outcomes for disadvantaged communities across the country.
Read the full study HERE.