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The Evolving Role of Community Economic Development in Planning

Abstract and Keywords

This article examines the evolution of the role of community economic development (CED) in urban planning. It provides an overview of the economic context that has forced the launch and growth of CED, and describes the practices at the heart of today's CED, including the core toolkit for planners entering the subfield. The article argues that to support a metropolitan CED, the federal government will need to revisit the poverty-based funding criteria it uses for many of its programs and develop a set of place characteristics related to economic security more broadly.

Keywords: community economic development, urban planning, funding criteria, federal government, economic security

1. Introduction

the subfield of community and economic development (CED) addresses efforts to enhance local economies in order to increase wealth, income, and employment, as well as to improve local quality of life. As is implicit in its title, CED is primarily concerned with the normative question of who benefits from economic development—that is, how planning and policy can improve the capacity of disadvantaged local residents to participate in the mainstream economy. Such economic opportunity is not inherent in local economic growth, but comes out of intentional actions and relationships that connect marginalized populations, communities, and places to economic activity (Giloth 2006).

The field of CED emerged out of the convergence of the fields of economic development and community development in the 1970s. As waves of economic restructuring and government spending cutbacks hit cities, local interest in economic development increased. At the same time, community development (p. 478) sought to expand its domain from the “bricks and mortar” development that had been its focus. Thus, CED came late to urban planning; as late as the 1960s, no U.S. planning school taught local economic development (though regional planning dealt in part with economic issues); and few municipal planning departments connected their work to economic development goals and methods (Teitz 2008). Likewise, mainstream planners had little regard for community development, which had essentially splintered off into social welfare after the Progressive Era.

In many ways, the late entry of the subfield created an uneasy relationship between CED and planning. Physical planners had long taken growth for granted. Since economic growth was exogenous to population models and land-use plans, planning needed only to accommodate it, not foster it. Adding the onus of economic development to planning presented new challenges. A planning conversation that had previously been about how to guide growth had to shift to how to redistribute the benefits of growth—or even deal with decline. This, in turn, forced planners to address topics—poverty, race, empowerment—that were a little uncomfortable, particularly given past failures such as urban renewal. Even the conventional tools of planning—subdivision development, growth management, eminent domain—seemed a little blunt in the face of the new social and economic issues that planners faced. Raising the question of who benefits also brought new political attention to planning, creating a climate in which political exigencies often outweigh criteria of efficiency and equity (Dewar 1998; Wolman 1996).

The challenge of integrating CED into planning, though potentially present in many political contexts, is particularly acute in the United States because of its liberal governance mode. Even as the subfield of CED was crystallizing out of the 1960s War on Poverty, the public sector was increasing its reliance on extra-governmental actors to carry out policies and programs. The gradual retrenchment of the welfare state in the 1970s and 1980s was accompanied by the outsourcing of functions to both the market and nonprofit sectors (Smith and Lipsky 1993). Arguably, this framework of state-market-nonprofit relationships created a set of local institutions more responsive to the needs of disadvantaged constituents. Yet, it has meant that the service delivery system for CED programs is largely separate from the local government apparatus for planning. Plus, with little left of the labor-management social bargain of the 1950s, much less the social safety net, the growing income inequality in the United States creates much more of a need for CED than in other advanced industrial countries.

In this chapter, I begin with an overview of the economic context that has forced the launch and growth of CED. I then examine practices at the heart of today's CED, the core toolkit for planners entering the subfield. Since no field is without its ongoing controversy, the next section outlines a number of debates that, despite years of experimentation, have not yet been resolved. A final section examines issues on the horizon for this ever-evolving and emergent practice.

(p. 479) 2. Context

Various forms of CED existed in the United States and other industrializing countries in the nineteenth century, though economic development and community development remained separate domains. Early efforts at infrastructure development—particularly roads and canals—were meant to foster economic growth; for instance, the 1808 Gallatin Plan explicitly linked transport investment to growth prospects for the United States (Goodrich 1958). Local and state governments in the United States—unlike their counterparts in Europe—played an aggressively entrepreneurial role in attracting and helping to subsidize economic development (Sbragia 1996). In contrast, community development conventionally finds its roots in the efforts of pioneers, mainly women, who sought to tackle poverty directly in the slums of New York and Chicago in the last quarter of the nineteenth century (Wirka 1996). The settlement house movement attempted to assuage the worst excesses of urban industrial capitalism by bringing new immigrants into the American mainstream.

But it was the demise of the labor–management social bargain that fueled the rise of the joint subfield as we know it today (Osterman 1999). After World War II, the United States emerged as the world's dominant economic power, with a huge internal market and high and rising labor productivity. Led by manufacturing growth, the oligopolistic U.S. economy maintained labor peace by sharing the productivity “dividend” among its high- and low-skilled workers. The result was rising living standards and income equality—as well as high expectations for the economy.

After 1970, profound changes occurred, with much debate about their causes. Whether due primarily to the 1973 collapse of the Bretton-Woods system of monetary controls, the rise of international competition in manufacturing, the sectoral shift toward information technology and low-wage service industries, or the influx of women into the workforce, what was clear was that the postwar boom was over and a period of rapidly increasing income inequality had begun. From 1979 to 2005, income growth for the poorest households grew by only 1.3 percent pretax, while income for the top fifth grew 75 percent and households in the top 1percent saw their income triple over these years, up by 200 percent pretax (Mishel, Bernstein, and Allegretto 2006).

Though globalization and technology indeed appear to be the main culprits, the situation in U.S. cities was more complicated than suggested by the images of the “giant sucking sound” of free trade (as labeled by presidential candidate Ross Perot) and the rise of “symbolic analysts” to replace manufacturing jobs (Reich 1991). Service sectors never experienced the productivity growth of manufacturing, meaning that instead of sharing the dividend, firms obtained profits and bolstered investor confidence by cutting labor costs. Large-scale labor force detachment and discouragement was one result. Cyclical fluctuations (in 1979–81, 1990–93, and 2001–2) exacerbated structural shifts, with plant closures as the most immediate impact.

(p. 480) But most important, differences in local and regional abilities to respond to restructuring magnified conditions of inequality. Overall, there was an acceleration of local shifts in population and industrial production from the Northeast and Midwest (Rustbelt) to the South and West (Sunbelt), which left older regions, particularly those specialized in manufacturing, vulnerable. Federal policies underwrote the inefficient extension of infrastructure into the suburbs and subsidized business relocation, ignoring sunk costs in infrastructure and housing in the shrinking cities left behind (Dreier, Mollenkopf, and Swanstrom 2004). Within metropolitan regions, the older inner cities and suburbs found themselves ill-equipped to reconfigure their obsolete sites and compete for new businesses.

Meanwhile, local fiscal stress also constrained the opportunity space for cities. An era of federal program devolution and fiscal federalism had begun under Richard Nixon. From the 1970s on, the federal government consolidated its categorical grant program into larger block grant programs (such as the Community Development Block Grant [CDBG] program) administered by the states. The increase in state discretionary powers over policy direction and program implementation was in theory to increase program efficiency and responsiveness, but in practice was accompanied by unfunded mandates that many cities struggled to meet. Meanwhile, a national citizens’ tax reform movement (most notoriously, Proposition 13 in California) limited the ability of cities to raise more revenue through the property and sales taxes they depend on.

At the same time, a new program and policy apparatus was slowly emerging to address inequality through both community and economic development. Already, largely in response to the social upheavals of the mid-1960s, Lyndon Johnson had expanded the government's role in social welfare from education to health care to economic opportunity generally. Community development, which had been largely the domain of political advocacy groups following Saul Alinsky, suddenly became the focus of federal funding through Model Cities and the array of programs around it. By the 1970s, a parallel world of nonprofit and local governmental agencies had emerged. Moreover, as cities targeted particular neighborhoods for poverty alleviation efforts, and community development corporations (CDCs) emerged to provide economic opportunity (and soon, housing), the community development field took on more of an economic focus. As the decade saw a parade of federal programs that attempted to mitigate the effects of economic shocks—from the direct employment subsidies under CETA, to project subsidies under UDAG—city governments created organizational vehicles to manage them, and thus built local capacity and leadership. In academia, policy and planning programs began cobbling together a new CED curriculum, building on development studies and social policy courses (Teitz 2008).

With this CED infrastructure in place, the subsequent decades of government retrenchment were difficult, but not devastating. The budget cuts of the Reagan era, followed by the further erosion of the social safety net in the ‘90s and ‘00s, were met by new capacity and expansion in the third sector (Salamon 2003). Less hampered by bureaucratic silos, the new organizations further bolstered the connection between (p. 481) community and economic development. Part of the integration was by necessity. Community-based organizations (CBOs) and CDCs lost funding for social programs and organizing, and sought to move beyond “bricks and mortar” housing development into programs that built community economic capacity or even a profit-making double bottom line (Stoutland 1999). Simultaneously, economic development organizations gained interest in endogenous approaches, turning inward to local entrepreneurial capacity (Eisinger 1988). Though the ongoing CED activity hardly compensated for the government cutbacks—just for instance, funding for job training declined 75 percent from 1978 to 2000 (Giloth 2004a)—it did indicate that organizational seeds planted in earlier decades had come to fruition.

Also at this point, the trajectory of the subfield in the United States began to depart definitively from that in other countries. Although the growth of the nonprofit sector in advanced industrialized countries paralleled that in the United States, its role has varied. In social democracies, where the welfare state stayed largely intact, the nonprofit sector has complemented the public sector, while the advent of neoliberalism in other countries has meant that nonprofits substituted for government, in some cases competing with the private sector and tightening budgets (Anheier and Salamon 2006). Only developing countries see a significant share of nonprofit activity devoted to development, and owing to the strong role of the state in many countries, only a small share of nonprofits provide services (Anheier and Salamon 2006). For the most part, functions related to community and economic development have remained within government, and though new interest in “workfare” programs linked some social programming to economic development, the two areas largely have stayed separate.

Just as CED has (arguably) come of age, its domain is shifting. There continues to be a need to develop long-term strategies to help communities and individuals deal with rising income inequality, disinvestment, and restructuring. However, issues of community economic stability and family economic security are no longer contained within the kinds of impoverished neighborhoods that the War on Poverty targeted. Instead, the increasing suburbanization of poverty shifts the policy focus from core urban areas to the entire metropolitan region (Berube and Frey 2002). Likewise, with the very stability of the middle class at stake, the need for economic development programs has extended well beyond households under the poverty line.

3. The State of the Art in Community and Economic Development

Given the political stakes in CED, the programs that predominate may serve political purposes as much as—or more than—CED goals. Nevertheless, there (p. 482) are clearly successful CED practices today that are “investing in people through place” via strategies that foster job opportunities, build assets and wealth, and improve neighborhood economies and quality of life (Giloth 2007). Decades of experience with solely place- or people-focused programs have shown that conceptualizing CED as an either-place-or-people proposition falls short (Crane and Manville 2008). Place-based programs targeting disadvantaged neighborhoods, such as enterprise zones, fail to benefit local residents consistently, while people-based approaches such as human capital development promote individual mobility at the expense of community goods, resulting in inefficient use of land and inequitable distribution of amenities. A more comprehensive approach targets individuals through jobs and asset-building approaches, but recognizes that investment in place makes economic benefits more accessible and provides the local public goods, both services and community, that improve life chances for neighborhood residents. Robert Giloth (2006, 6) has characterized this approach as “neighborhood saturation”: “It is about how people-focused interventions and relationships attain neighborhood saturation so that the immediate environment of family-strengthening opportunities and behaviors is transformed.”

As a hybrid of economic development and social policy, CED usually remains administratively separate from planning, and to a much greater extent, its implementation occurs outside of government agencies. The landscape of CED actors cuts across geographies and sectors: it includes municipal city halls and community development, planning, redevelopment, and social service agencies; stand-alone CBOs, CDCs, and community development financial institutions (CDFIs); local labor and faith-based organizations; government- or business-led economic development organizations (such as economic development corporations or chambers of commerce); and their counterparts at county, state, and federal levels. An influential private-sector support industry includes site-location consultants, bond counsel, redevelopment lawyers, economics consulting firms, and others. Given this crowded field of stakeholders, the public sector often ends up following the lead of private and nonprofit sector actors even as it takes credit for positive impacts.

The following examines some of the practices at the heart of the CED subfield today. This is not meant to be a comprehensive description. Rather, it selects the proven approaches that are continuing to evolve. Largely left out are legacy CED programs that may continue out of inertia or political concerns, but are not particularly effective, such as enterprise zone programs or reverse commuting programs to improve access to jobs (U.S. Government Accountability Office [GAO] 2006; Roder and Scrivner 2005). Other approaches have matured better. Specifically, this chapter chronicles various efforts to support existing businesses (the endogenous development approach); the rise of intermediaries in workforce development; asset-building programs; the scaling up of CDCs and CDFIs; various commercial revitalization efforts; the equitable development movement; and regional community organizing networks.

(p. 483) 3.1 Endogenous Development

A new emphasis on endogenous development, generated in part by the realization that globalization was diminishing the opportunities for new “smokestacks” to chase, has framed the rise of CED (Teitz 1994). Endogenous development (also called autonomous or demand-side economic development) is the idea of “development from within,” targeting businesses sometimes in specific neighborhoods but more commonly throughout a city or region (Bingham and Mier 1993; Eisinger 1988). After difficult postrecession recoveries in the early 1980s, the prospects for recovery through external investment declined. A growing perception that new small firms were acting as engines of innovation and job growth, though hotly disputed, supported the idea of endogenous development (Birch 1987; Harrison 1994; Saxenian 1994).

Localities, regions, and states have widely adopted such strategies, creating programs for the support of small enterprise, developing loan funds and other sources of capital, initiating business incubators, seeking out new markets or assisting with exports, and declaring small business a key element of their economic development (Blakely 1989). One of the most popular approaches is building cluster initiatives that link related businesses to organizational resources, identifying existing local businesses that have either developed as a group organically or show potential for evolving into a cluster. Though demand-side approaches are most common at the higher levels of government (e.g., see Eisinger 1995), they have also permeated CED practice due in large part to the influence of Michael Porter (1995).

Building on his work on competitive advantage and location, Porter put forth an argument that inner cities could compete if, with the help of government deregulation, they took advantage of their convenient location, integrated better with regional clusters, met emerging local demand, and put local underutilized human capital to work. Porter's work elicited a vigorous critique from CED veterans, who argued that Porter was ignoring previous decades of work, underestimating the barriers to economic development, and overestimating private-sector capacity to address complex inner city issues (Boston and Ross 1996). Despite the objections, Porter's work likely helped chain stores recognize the potential of core locations and created the policy momentum that resulted in the New Markets Tax Credit. Yet, a recent study by Porter's own nonprofit spinoff suggests that only a small handful of cities have been able to attract inner-city retail growth, ironically mostly due not to deregulation and better information about markets but to aggressive public-sector involvement and/or an influx of immigrants (Coyle 2007). Though the idea of new markets has attracted retailers, there is little evidence that core locations have competed successfully within other types of regional clusters, as Porter suggested they could, with the possible exception of health care.

Yet, endogenous strategies will likely persevere, albeit in different forms, over coming decades. The new awareness of the importance of intervention in support of small local business left a legacy of programs that seem to have become (p. 484) more effective over time, although systematic evaluation is rare (Markusen and Glasmeier 2008). A sampling of program outcomes suggests generally positive assessments. For instance, there are over 500 microenterprise development organizations in the United States providing technical support and loans largely targeted to the disadvantaged (Edgcomb and Klein 2005). Despite concerns about the efficiency of their operations, these programs have yielded a positive economic return on investment, income gains that can raise families out of poverty, and firm survival rates comparable to the rest of the economy (Edgcomb and Klein 2005; Servon 2006). Though there is little evidence of the effectiveness of revolving loan funds, they seem to have a catalytic effect particularly when targeted at projects unable to compete for market loans (see, for instance, U.S. GAO 2004 on brownfields redevelopment loans). A growing number of programs, from traditional loan programs to entrepreneurial support networks to public markets, also assist minority-owned or ethnic entrepreneurship (Hum 2006; Morales 2009). Despite concerns that such businesses are overly prone to failure or exploitation, there is some evidence that these businesses hire disadvantaged local residents who otherwise might not be employed, and particularly if accompanied by some higher education, can lead to upward mobility (Bates 1997; Boston 2006; Boyd 1990).

3.2 Targeting Individuals: Human Capital Development and Asset Building

A growing number of CED strategies target the individual capacity for self-sufficiency through participation in the labor market and/or the accumulation of assets. Both types of policy approaches are becoming more sophisticated, focusing not just on how to get a job or start saving but also on how to build a career and wealth. Both also are beginning to look beyond individual economic outcomes to link programs to community economic development.

Though economists have long shown the importance of human capital for economic growth, it is only recently that CED practitioners have begun to demonstrate how to effectively link workforce development to economic development. Many initiatives have sought to meet both workforce and economic development goals simultaneously, but multiple contradictions complicate efforts to link the two. First, workforce and economic development goals and styles typically differ. Workforce development typically works in a long-term framework to improve the capacity of disadvantaged residents to participate in the economy. In contrast, economic development is primarily concerned with increasing jobs and the tax base— in other words, generating a quantitative increase in output—through efficient and productive use of resources. Most of government's business assistance programs are responding to demand from businesses that wish to start up, relocate, or expand and as such are short term and ad hoc (following the “shoot anything (p. 485) that flies, claim anything that falls” philosophy [Rubin, 1988]). Second, workforce development needs to argue for attracting high-growth industries that offer many jobs paying self-sufficiency wages, yet economic development to create regional competitive advantage typically entails developing industries that offer high-skill, high-wage jobs.

Nevertheless, numerous workforce intermediaries, with the Center for Employment Training (CET), Project QUEST, and the Wisconsin Regional Training Partnership (WRTP) among the most documented, have succeeded at meeting some economic development goals as well, such as job and wealth creation (Giloth 1998, 2004a; Harrison and Weiss 1998; Melendez 1996). Most of these programs adopt sector initiatives, targeting specific industry sectors in order to create a win-win situation by restructuring employment practices in a way that is beneficial to both employers and low-wage workers (Marano and Tarr 2004). A recent set of evaluations (e.g., Chapple 2005; Elliott et al. 2001; Zandniapour and Conway 2003) has shown that these and other workforce-development intermediaries have significant and positive impacts on the employability, wages, and upward mobility of their participants. Though evaluations are only just beginning to address the benefits for employers systematically (e.g., Aspen Institute Workforce Strategies Initiative 2005), these initiatives are seen as demand-responsive—that is, linked to firms, sectors, and clusters in the regional economy, and thus able to facilitate economic development. For instance, the WRTP arguably improves the productivity of its partner firms (Dresser and Rogers 1998), and CET employers benefit from ready access to a trained workforce (Melendez 1996). However, there seem to be several shortcomings (Fitzgerald 2006). Sector initiatives work well only with certain industries: the most consistent successes have occurred in health care and manufacturing. These sectors are unique in that they have difficulty with recruitment and retention (owing to the difficulty of advancement), feature heavy union involvement, and typically have a supportive corporate culture. Further, they are not rapidly growing sectors, generating jobs and wealth.

More recently, new programs have tried to address long-term upward mobility through career-ladder initiatives. Program experiments take several different forms, from increasing the pay of existing jobs, to creating new tiers within occupations, to using education and training to advance workers into occupations with better pay (Fitzgerald 2006). The idea of career-ladder initiatives is to outline the skill sets that lead to a progression of occupations and thereby solve two labor market failures: the problem for employers of recruiting and retaining qualified workers (particularly in high-turnover, low-wage industries like health care), and the difficulty for workers of gaining more responsibility and wages within a given sector. Typically, these models are built around the community college system and begin with remedial education. Yet, the most thorough evaluation of these programs, by Fitzgerald (2006), cautions that they are unlikely to be widely replicated without serious employer interest in reorganizing the workplace, as well as the complete realignment of the job-training system. It seems that many initiatives fail (p. 486) to solve either labor market failure (retention or advancement), perhaps because job training is not enough to foster upward mobility.

Though programs that support employment generally have positive outcomes and tend to reinforce long-term labor market attachment, they do not necessarily help families get ahead. Several factors make it difficult for wage earners to retain their income: for instance, program benefit cliffs may penalize families that increase their income by denying subsidies for child care, housing, or other work supports, and reliance on payday and refund anticipation loans may make it impossible to get ahead (National Center on Child Poverty 2004). Moreover, chronic asset poverty—lacking the accumulated wealth to help subsidize education, housing, or other costs of living—makes it even more difficult to save. Data on asset poverty suggest that more than one-fifth of households—and a disproportionate share of minority families—are asset poor, double the rate of income poverty (Corporation for Enterprise Development 2009). Even when poverty is declining, as in the 1990s, asset poverty has continued to increase. Arguably, the use of work supports to alleviate poverty has meant a focus on accommodating (and regulating) the labor market rather than addressing pervasive racial and income inequality (Oliver and Shapiro 1995, Piven and Cloward 1971).

Individual development account (IDA) programs have emerged as the most direct way to build assets, catalyzed in part by the research of Michael Sherraden (1991). Growing rapidly, from just four programs in 1994 to 500 in 2005, IDA programs offer matched savings accounts that can be used to develop wealth via purchasing a home, obtaining higher education, or starting a small business (Corporation for Enterprise Development [CFED] 2005). The best programs not only provide a small match (a few thousand dollars) toward a savings account but also offer financial literacy training, advice on repairing credit, and job-search assistance. The one systematic evaluation of the program to date (in Tulsa) has shown long-term (four-year) positive impacts on home ownership rates and completion of nondegree educational courses (Abt Associates 2004). Although the housing crisis of the late 2000s has cast doubt on the viability of home ownership as a wealth-building strategy, IDA advocates point out that IDA clients are unlikely to go into foreclosure and might be protected from housing market volatility by diversifying their asset portfolios (CFED 2009).

Building assets for individuals can, under certain circumstances, lead to CED outcomes more generally. When new home or business ownership leads to improvements (e.g., occupying a vacant structure, renovating a building, or building a successful business), positive externalities result: the changes attract new investment and improve the quality of life for existing residents. This raises the question of how the community can retain the benefits of asset building—that is, the households who have become more affluent and wish to leave the community, or the successful businesses that want to relocate to more affluent areas. Several programs, most notably the Dudley Street Neighborhood Initiative, have built incentives to stay into their asset-building programs—for instance, by using shared-equity models, which cap the gains from selling an asset, or require reinvestment of profit in the community (Weber and Smith 2003).

(p. 487) 3.3 Revitalizing the Neighborhood

The idea of neighborhood revitalization finds its origins in the settlement house movement, but did not really take off until the War on Poverty. In Robert Kennedy's “Marshall Plan,” community development corporations would play a major role in rebuilding housing, public facilities, and parks, with job set-asides for local residents and opportunities for local business ownership. Revitalization is asset building writ large: community reinvestment builds up neighborhood markets and land values, and thus helps to protect and grow family assets. Lowering crime, improving schools, and supporting home improvements all contribute to stimulating asset appreciation and neighborhood markets, but in terms of CED, it is the CDCs, CDFIs, and other community development intermediaries (such as the Local Initiatives Support Corporation or LISC) that have become the major vehicles for neighborhood commercial revitalization.

Thirty years after Kennedy helped launch the CDC movement in low-income communities, it had arguably become a “community development industry system” (Yin 1998). There are over 3,300 urban CDCs in the United States, 40 percent of which were launched after 1986 (Melendez and Servon 2007). Over time, the diversity of both their funding sources and activities has increased (Melendez and Servon 2007). Though housing remains the predominant activity of CDCs, the majority also engage in other revitalization work such as commercial real estate development, commercial district revitalization, business assistance, social services, and job training.

The almost 700 CDFIs range from national banks and credit unions, to community development intermediaries, to small loan funds and venture capital providers, all with the mission of supplementing the conventional lending system with financial products and counseling targeted at low-income individuals and communities (CDFI Data Project 2003). This development finance industry has doubled in size in the last decade owing largely to the establishment of the CDFI Fund in 1994, which provides capital to CDFIs both directly and indirectly through investments from mainstream banks (CDFI Data Project 2003; Benjamin, Rubin, and Zielenbach 2004). The CDFIs support an array of financial services for both businesses and individuals, such as IDAs, checking accounts, home loans, microloans, and business loans. But perhaps their largest impact has been through the intermediaries such as LISC and the Enterprise Foundation that focus their efforts on building the capacities of CDCs and other CBOs. Intermediaries can provide the riskiest project financing to CDCs and thus enable their borrowing from other banks, while training CDC staff to manage projects (Benjamin, Rubin, and Zielenbach 2004; Liou and Stroh 1998). There is much more demand for CDFI services than they can accommodate, as well as a growing need to capitalize new CDFIs in underserved areas.

Intermediaries also help attract investors to low-income neighborhoods via projects funded by tax credit programs like the Low Income Housing Tax Credit (LIHTC) or New Markets Tax Credit. In general, tax credit programs have had (p. 488) varying impacts on community economic development, with few quantifiable impacts on local income or employment (Chapple and Jacobus 2009). With over 1 million housing units built, the LIHTC has become the de facto affordable housing program in the United States; since over one-fifth are built by nonprofit developers, the program has helped build CDC capacity (Schwartz and Melendez 2006). The worst performer, in nearly all evaluations, is the federal government's Empowerment Zone program (as well as related state programs), which has had no greater success in reducing unemployment or poverty or creating jobs and businesses than comparison areas without zone designation (California Budget Project 2006; Dowall, Beyeler, and Wong 1994; U. S. GAO 2006; Oakley and Tsao 2006; Rich and Stoker 2007; Wilder and Rubin 1988). Though only preliminary results are available on the New Markets Tax Credit, it seems to be an inefficient vehicle, with the funding going to private intermediaries swamping the benefit to recipients (U.S. GAO 2007). One of the most effective tax credit programs is the Historic Preservation Tax Credit, which has had strong positive impacts and multiplier effects despite its small scale (Mason 2005).

For a variety of reasons, including the growing awareness of “new” markets, shifts in consumption habits, a resurgence of historic preservation, and the “back-to-the-city” movement of young professionals, local governments and CBOs have become increasingly proficient at strengthening neighborhood retail. Different strategies employed include commercial real estate development projects supported by the public sector through direct financing or various tax incentives; “market-led” development strategies that rely on market research and promotion to attract new retailers to underserved areas; and coordinated commercial revitalization programs that combine business attraction with “softer” activities such as safety and cleanliness efforts, consumer marketing, business assistance, and smaller scale improvements to the physical infrastructure (Chapple and Jacobus 2009). Of these strategies, only commercial district revitalization strategies, such as LISC's CDC commercial revitalization programs or the National Historic Preservation Trust's Main Street program, have a demonstrably positive effect on retail revitalization (Carlson 2003; Seidman 2004). Less is known about the effectiveness of public-led commercial development and market-led retail attraction strategies (Chapple and Jacobus 2009). No matter which approach is adopted, leveraging public investment seems to be key. Commercial district revitalization programs are also the most promising in terms of improving neighborhoods, perhaps because they focus on quality-of-life issues such as crime and safety.

3.4 Organizing the Community—and the Region—for Job Quality

Arguably the most dynamic form of community and economic development at present is occurring in the form of community organizing for economic justice. (p. 489) Decades of community battles over redevelopment projects and gentrification have built local organizing capacity and political savvy. Supported in part by labor- and faith-based organizations, which have refocused their approach at the community level, these activities have helped to connect marginalized groups and neighborhoods to economic opportunity, particularly (but not exclusively) in strong-market regions. Advocates argue that these efforts add up to a regional equity movement, a new “social movement regionalism” promoting more equitable development patterns (PolicyLink 2003; Pastor, Benner, and Matsuoka 2009).

The new economic-justice movement evolved from dual roots: a response to the thirty-year advent of globalization, capital mobility, devolution, and neoliberalism; but facilitated by local community development capacity. The deindustrialization and “u-turn” of America (as so aptly labeled by Harrison and Bluestone 1990) weakened the labor movement, and a search for new approaches resulted in new union coalitions with faith-based and other community organizations. Two parallel strategies emerged: the movement to improve job quality at the municipal level, best represented by the living-wage coalitions that have passed laws in over 140 cities (see Fairris et al. 2005); and the movement to ensure that the local community received some of the benefits of real estate development, whether via linkage policies, first-source agreements, or community benefits agreements. The focus on making development accountable for its impacts brought new advantages to the labor movement: the institutionalization of environmental review processes had built community capacity to participate in the development-approval process, and communities already routinely mobilized to protest development. Though many communities were not motivated or prepared to work for organized labor, the neighborhood lens created a new space for joint mobilization.

Linkage policies, first-source agreements, and local hire ordinances stem from the slow-growth movement of the 1980s. Linkage policies, enacted in a handful of cities across the country, tie large-scale commercial development to its negative effects, requiring compensating side payments, most frequently for housing but sometimes also for other social needs, such as employment training, daycare centers, and social service funding (Molina 1998; PolicyLink 2002; Smith 1989). Much more common are local hiring ordinances, which typically mandate that publicly funded developments and businesses (over a certain size threshold) reserve a certain percentage of jobs for local residents. Local hire ordinances are sometimes accompanied by first-source employment programs, which help employers meet their percentage local hiring goal by referring qualified local job seekers to them in a timely manner. In practice, these policies have not had a substantial impact on community and economic development, either because they are not implemented widely (as in the case of linkage) or because they affect mostly construction jobs (as in the case of local hire).

Community benefits agreements (CBAs) descend from these policies and, though also not widespread, tend to affect community and economic development more directly because of the targeted nature of benefits. The CBAs are legally enforceable contracts negotiated between a prospective developer and community (p. 490) representatives. The CBA exacts community economic-development commitments from the developer (e.g., local hires at living wages, affordable housing units, neighborhood amenities) in exchange for the community's support of its proposed development (Gross, LeRoy, and Janis-Aparico 2005). The CBA tends to focus on job quality, perhaps in part because the landmark Staples Center CBA in Los Angeles was rooted in a growing union–community coalition. Negotiated in almost fifty development projects across the United States, these CBAs are increasingly found in weaker markets like Albany and Pittsburgh, in addition to strong market coastal regions (Meyerson 2006; Salkin 2007). Though critiqued for not being inclusive and transparent (since some community groups may be left out at the negotiating table), the general principle of a contractual agreement (rather than a citywide exaction policy) seems to be withstanding the test of time (Salkin 2007).

Though many of these economic-justice movements focus on the specific community impacts of development projects, their proponents are using the region as their strategic arena to organize their constituents (Pastor, Benner, and Matsuoka 2009). Over time, strategies are spreading across the country through the regional networks of national organizations, many faith based, such as the Gamaliel Foundation, the PICO National Network, the Industrial Areas Foundation, and the Association of Community Organizations for Reform Now. Ultimately, however, their success at creating community economic development seems to depend on their ability to exercise power at higher levels of government—for instance, by obtaining federal authorization for local-hire ordinances in infrastructure projects (Swanstrom and Banks 2009; Weir and Rongerude 2007). In the absence of a federal employment policy that boosts job quality, this kind of multilevel organizing is proving critical to leveraging federal resources for CED.

4. Ongoing Debates in the Field

Though a comparatively young field, CED has already undergone several decades of policy experimentation and learning. Yet, several major debates remain unresolved. First, despite a prolific literature on the effectiveness of different economic development approaches, CED practice, at least at a municipal level, seems forever wed to a “smokestack chasing” approach (Rubin 1988). Second, the neoliberal-era push for more market-based CED has left many organizations confused about their mission. And third, a concurrent push for accountability has suggested that CED policy may not be very effective at shifting private-sector behavior. The following briefly examines each debate in turn.

The inward gaze of the postindustrial era brought about new awareness of the potential for endogenous or demand-side development, which was followed first by calls for more sustainable, or at least environmentally sensitive, economic (p. 491) development, and then by a focus on human capital development (or the “creative class”; Eisinger 1988; Fitzgerald and Leigh 2002; Florida 2002; Teitz 1994). There is mixed evidence that these so-called waves of economic development have actually occurred on the ground, though examples of each abound (Eisinger 1995; Fitzgerald and Leigh 2002; Florida 2008). In practice, cities, counties, and states still rely heavily on the use of tax incentives and bidding wars to attract businesses, despite evidence that most job growth comes from existing, not new, businesses (Markusen and Nesse 2007; Kolko and Neumark 2007). Even the movement to improve urban quality of life in order to retain “creatives” is more about attracting new business than developing endogenously. Since much CED practice occurs outside official economic development agencies (though often with agency financial or tactical support), a dual system of economic development may even be working at cross-purposes. How these two systems can become better aligned is not clear, since the political considerations driving the bureaucracy of economic development are not likely to lessen (Dewar 1998).

The last few years have seen the advent of a more market-based CED. Attempts to introduce market logic into the field have met with mixed results. Despite initial enthusiasm about social enterprises, or nonprofits with a revenue-generating sideline, they may stray too far to have a real impact on CED and seem to thrive only when the economy is strong (Giloth 2004b; Shuman and Fuller 2005). That even the best CDFIs yield fewer profits than mainstream financial institutions should suggest the limits of the market in some areas (Benjamin, Rubin, and Zielenbach 2004). As described above, the efforts of intermediaries to restore markets (or find “new markets”) in low-income communities through better information have largely proved ineffective, except in new immigrant neighborhoods (Chapple and Jacobus 2009). Perhaps the most successful market-based community development programs have been those that introduce new products and services, such as savings accounts or healthy food, into underserved communities. But the recent financial crisis has shown that catalyzing markets may be less about stimulating and deregulating the market than about connecting disadvantaged communities to mainstream market alternatives through a combination of education and accessibility strategies. For example, financial deregulation created bank interest in low-income home ownership via high-risk loans, but loans brokered by the nonprofit housing industry, which came with mandated financial literacy counseling, have been much less likely to be foreclosed (Immergluck 2009).

Are CED policies and programs even effective? Evaluating these interventions has proved difficult, and there is little systematic information about what works. Evaluation questions extend beyond the technical difficulties of determining whether policy interventions are effective to the meta-issue of what CED is trying to accomplish. Economic development processes may have several different outcomes, and the question is which is the goal of interest, and for whom (Reese and Fasenfest 2004)?

Take the simple case of a successful business-attraction policy that results in employment growth. New jobs mean lower unemployment, higher local income, less (p. 492) poverty, and more demand for goods and services. These outcomes are easy to understand, measure, document, and convey to voters. But even if local politicians can take credit for job growth, what is the local economic development benefit? The new jobs do not necessarily go to local unemployed or impoverished residents, particularly if they require high educational levels. Most likely, most of the new jobs will be taken by in-migrants to the area (as shown by Bartik 1991), and the remaining will go to the most qualified local job applicants. Moving down the job chain, their jobs may be taken by underemployed locals; only as job vacancies move down the chain will the unemployed finally benefit. Meanwhile, the new area residents may put pressure on local housing prices, making housing less affordable. Though they purchase new goods and services locally, this multiplier spending may create low-wage jobs that require new public subsidies (e.g., for health care) to support, while generating profits for nonlocal owners. The policy has met its CED goals of creating new jobs and expanding the tax base, but because of new expenditure needs, it is unclear whether there is a net benefit, and if so, whether it has reached disadvantaged local residents.

Another issue is how to understand the impacts of a specific CED project, in terms of both the extent of the impacts and the role of public policy. A new supermarket development developed by a CDC in a low-income neighborhood might bring new jobs and sales tax revenue (direct impacts), new businesses nearby (indirect impacts), and a new community identity that attracts new residents and investors (neighborhood impacts). These direct and indirect impacts are readily measurable, but other effects are often too intangible or long term to quantify or identify. First-order outcomes might be followed by hard-to-measure second-order outcomes, creating opportunities that only later are the basis of a tangible benefit: for example, work experience for locals that gives them confidence to apply to college, or new community capacity to manage real estate development.

Moreover, largely because of the lack of local area data and resources for program evaluation, few CED evaluations ascertain whether the impact would have happened without the intervention. Though such studies are possible through matched-pair comparisons of neighborhoods, only studies of enterprise zones systematically employ quasi-experimental designs with control neighborhoods—and even these studies may be tainted by selection bias, since the neighborhoods that have obtained public investment often are the best off or most organized to start with. In the absence of data on the effectiveness of policies and programs, successful CED may be attributed to any number of factors, such as overall economic growth, shifts in economic activity between neighborhoods or groups, or increased efficiency of local firms or organizations. Is it problematic if CED is a zero-sum game, transferring growth from one place to another without directly impacting economic growth in the aggregate? Economists would argue that any policy that results in a more efficient spatial distribution of goods and services, particularly the shift of jobs from low-unemployment to high-unemployment areas (as might happen via CED policy), will increase output and create social benefits (Bartik and Bingham 1995). Political scientists might add that even if CED is zero sum in economic terms, it creates net political gain (Reese and Fasenfest 2004; Wolman 1996).

(p. 493) In the end, does the set of programs and policies that constitute community economic development make a difference in how the market behaves? The quick answer is that the scale of these programs is so small relative to the size of the national economy that they probably only change firm behavior at the margin, with minimal impacts on aggregate indicators of distress. Much more powerful are the various economic development incentives that cities and states offer—an estimated $50 billion per year—but even those do not have significant impacts on firm decision making about hiring and location (Peters and Fisher 2004). Just as the market finances good and bad projects, CED funding goes to both successes and failures. Perhaps the better metric by which to judge CED programs and projects is whether they have better connected marginalized groups and places to economic activity. Few would question that at least some have benefited.

5. Issues on the Horizon

The field of community and economic development faces some large challenges in the coming years. Although advanced capitalism is taking different forms across the globe, it will undoubtedly continue to leave some groups and places behind. Different forms of CED have emerged in many countries, with some notable successes, such as microenterprise development. But the lessons of the field in the United States, where it continues to expand in scale and scope, are likely to be relevant to all countries dealing with the ups and downs of the business cycle.

CED emerged in part to deal with the challenges of concentrated poverty, itself a legacy of government housing and transportation policy (Dreier, Mollenkopf, and Swanstrom 2004). But the nature of poverty in the United States is gradually evolving. Increasing income inequality at the national level has meant a decline in middle-income families and an increase in both low- and upper-income families. Spatially, this has manifested itself as a growing share of high-poverty neighborhoods in the suburbs and increasing diversity in both low- and high-income neighborhoods (Galster et al. 2005). These new configurations strain the social safety net and complicate CED. The growing ranks of the working poor need a different set of programs—for example, wage subsidies, health care, and food stamps—from the bread and butter of CED. Investing in people through place is not so simple in an environment that is both diverse and dispersed; CED's reach, its web of relationships and actions, must become much broader in order to connect households throughout the region to economic opportunity. To support a metropolitan CED, the federal government will need to revisit the poverty-based funding criteria it uses for many of its programs, instead developing a set of place characteristics related to economic security more broadly.

(p. 494) If CED were to broaden its scale and scope, it would need greater organizational and financial capacity. Many of the community organizations that have innovated in CED are the legacy of Johnson-era interventions, from the Economic Opportunity Act to Model Cities, that built community capacity for a coordinated attack on inner-city poverty. Though many of these CDCs have now come of age, they are not fully prepared for twenty-first-century community economic development struggles. Not only are they disproportionately concentrated in older central cities, but also they tend to focus more on housing and commercial development than on the community organizing and leadership development skills that are increasingly important to leverage resources at the federal level.

It is also unclear how an expansion of CED programs would be financed. In a climate of government retrenchment and devolution, charitable foundations stepped up to fund many of the most successful policy experiments of previous decades, in the hope of a federal role in disseminating and scaling up best practices. Though this model has worked for some high-profile programs (e.g., the Harlem Children's Zone) or bipartisan policies (e.g., IDAs), other worthy candidates for funding, such as commercial-corridor revitalization programs, never seem to gain a constituency.

One alternative to the foundation pilot–government expansion model is collaboration among foundations in order to reach scale. On a global scale, the collaborations between charitable initiatives like the Bill and Melinda Gates Foundation and the Clinton Global Initiative have the potential to make an impact. In CED, one example is the Casey Foundation's National Fund for Workforce Solutions, which has twenty-two sites and some 300 funders involved. The fund is a national venture-capital pool that invests in and supports local pools that in turn invest in workforce partnerships that better align workforce funding with employer needs.

As its subfields have grown increasingly specialized, urban planning has become more of a conglomerate than a field, with its components cemented together but also in competition (Teitz 2008). Yet CED, given the lessons it has learned, has much to offer its sister fields—and vice versa. Unlike traditional land-use planning, it has experimented much more with organization, gaining new resilience from its reliance on the third sector and caution from its experiments with markets. For its very survival, it has learned to connect to different issue areas and policy venues—as, for instance, labor activists target the federal transportation bills for quality jobs. The next generation of CED programs will flourish best if they contribute to other planning goals, such as creating sustainable urban development patterns. If CED can help reduce greenhouse gas emissions—for instance, by aligning community development finance better with regional transportation planning—urban planning may finally overcome its reluctance and embrace CED.


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