9 AGENTS OF NEIGHBORHOOD CHANGE

The Many Roles of City Government

Over the past more than one hundred years, city governments in the United States have evolved into complex, multifaceted entities employing thousands of people whose work affects those who live in, work in, visit, or own property in the city, often in ways little appreciated by those who benefit or are harmed by them. The impact of city governments is often hidden by the fact that more and more of their functions are performed not through the city or general governmental entity but instead through a proliferation of special-purpose authorities created by state or local governments as well as governmental partnerships and contracts with private-sector actors.

When it comes to neighborhoods, local government affects their fate through three distinct systems: infrastructure and service delivery, regulation, and intentional intervention. Neighborhoods as we know them would be impossible without local government provision of essential (or desirable) public services and infrastructure. Cities build and maintain water and sewer systems, roads and bridges, street lighting, and public transit systems. They provide urban amenities, including parks, libraries, community centers, swimming pools, hiking, and biking trails. Local government, usually acting through independent boards of education, provide K–12 public education and often pre-K and community college education as well. Cities also provide the day-to-day services neighborhoods depend on, including police and fire protection, trash collection, and snow removal. Many local governments provide essential public health services such as inspecting restaurants and vaccinating children.

Local governments also exercise legal authority granted by the states to regulate many activities deemed as being relevant to the public health, safety, and general welfare.¹ Building codes set standards for construction, while zoning codes dictate what types of structures, of what dimensions, and for what uses may or may not be built. Housing and health codes dictate the standards for existing housing and the obligations of landlords to tenants. Local police enforce criminal laws, exercising broad discretion over which laws to enforce and in what fashion.

Decent public services and effective regulation are both critical elements of a good neighborhood. Good schools and public safety, both heavily dependent on local government, are consistently ranked among the most important factors, if not the most important factor, influencing people’s satisfaction with their neighborhood or their desire to move into or remain in a neighborhood. Seemingly mundane matters such as whether a neighborhood’s streetlights are working powerfully affect neighborhood quality. During Detroit’s financial crisis, street lighting deteriorated so much in 2013 that a reporter wrote, “The darkness has created a sense among some residents that leadership has lost control long ago and that parts of the city have become an urban version of the Wild West. Forget about effects on property values, some residents say. They just want peace of mind.”² By that point, at least half of the city’s streetlights weren’t working. Mayor Mike Duggan, who was elected at the end of 2013, made a commitment to have every streetlight in Detroit working again, a pledge that was realized by 2017.

We are not suggesting that effective governmental services by themselves can create good neighborhoods. Many other factors play equally important roles. But without the underpinning provided by an adequate level of local public goods and services and responsible regulation, those factors are unlikely to be enough. Decent governmental services are a necessary if not sufficient condition for good neighborhoods.

The resources available to local government to provide services vary widely. While some cities’ finances are on firm grounds, many cities suffer from long-term structural fiscal stress, threatening their ability to provide the basic services neighborhoods need. A study of three hundred local governments found that 32 percent had to take drastic action to cope with fiscal stress after the Great Recession, including blanket reductions in employee salaries and significant cuts in services.³ Hollowed out by cuts, few local public health departments were able to respond effectively to the COVID-19 outbreak.⁴ While conditions gradually improved after the recession, many cuts have never been restored, especially in older Rust Belt cities with declining populations and weak economies, a reality brought home by Detroit’s 2013 bankruptcy, the largest municipal bankruptcy in American history. Fiscally stressed cities find it challenging to provide basic city services, let alone fund targeted neighborhood development programs.

Given limited local resources, federal aid to cities has long been the principal source of funding for intentional policies to stabilize and revitalize neighborhoods, particularly through Community Development Block Grant Program, which not only enables cities to invest in distressed neighborhoods but also requires them to do so. As we noted earlier, however, Community Development Block Grant funding is down 75 percent in inflation-adjusted dollars from its peak in the late 1970s.

During the 1960s and 1970s, a generation of mayors portrayed themselves as champions of neighborhood empowerment. One of the first, Kevin White, was elected mayor of Boston in 1967 with the support of neighborhood groups opposing urban renewal. His successor, Raymond Flynn, elected in 1983, remained committed to a proneighborhood, affordable housing agenda until he left office in 1994. Rather than subsidize downtown developers, Flynn’s administration imposed fees on large commercial developments to fund affordable housing. By 1993 those linkage fees had generated over $70 million, helping build ten thousand units of affordable housing.⁵ Other proneighborhood mayors include John Lindsay in New York in the 1960s, Dennis Kucinich in Cleveland in the late 1970s, and Harold Washington, the city’s first African American mayor, in Chicago from 1983 to 1987. These mayors emphasized neighborhood economic development, although they were rarely antibusiness, as was sometimes claimed.

By the 1980s, however, urban populism was widely seen as ineffective if not outright inappropriate. As we discussed in chapter 4, perhaps the most influential book on urban policy of the time, Paul Peterson’s City Limits, argued that because city boundaries are permeable, putting cities in competition with one another, they must concentrate on enhancing their economic competitiveness.⁶ Redistributive policies should be shunned, Peterson argued, since they attract poor people while generating no offsetting economic or political benefits for the city. It was only a short step from that logic to the conclusion that cities should not invest in poor or declining neighborhoods but instead should concentrate resources on strengthening downtowns and other high revenue-generating nonresidential areas while encouraging gentrification in nearby neighborhoods.

Besides shunning redistributive policies, according to Peterson, cities need to focus on developmental policies, incentivizing investment, and seeking out export industries to generate investment in the local economy, along with its attendant multiplier effects.⁷ While few would dispute the importance of cities’ efforts to build a new economic base to replace their disappearing manufacturing sector, it was a narrow focus that took many cities down unproductive paths, particularly when investments were driven by narrow interests of the cities’ corporate partners rather than yielding sustainable economic growth.

Since the 1980s, cities and states across the nation have invested vast sums in corporate-driven downtown projects, most visibly in the forms of sports stadiums and convention centers, few of which generate returns commensurate with the sizable public subsidies they receive. Many are impressive structures, to be sure. Mercedes-Benz stadium in Atlanta, home of the National Football League’s Atlanta Falcons, was completed in 2017 at a total cost of $1.5 billion, with taxpayers contributing over $700 million. Among other things, the stadium incorporates a four-story–tall stainless steel falcon, reputedly the largest freestanding bird sculpture in the world, and a retractable circular roof supposedly inspired by the Roman Pantheon featuring a pinwheel design consisting of eight translucent, triangular panels that open and close like a flower.

Although the argument for public subsidies for stadiums is that they generate jobs and economic growth, the research is overwhelming that the economic benefits of stadium subsidies are minimal if not nonexistent.⁸ For the most part, professional sports franchises are not true export industries but instead are entertainment for metropolitan-area residents that displace dollars that would have otherwise been spent on alternative forms of entertainment, such as movies, bars, and restaurants. Public investments in stadiums are not developmental policies, in Peterson’s terms; they are reverse redistributive policies that shift money from the mass of taxpayers to the wealthy owners of sports franchises.⁹

Notwithstanding the logic of Peterson’s argument, the empirical evidence suggests that cities’ ability to significantly influence their growth trajectory through public subsidies and incentives is severely limited. In his insightful 2016 book City Power, Richard Schragger challenges Peterson’s thesis, which had all but become conventional wisdom. Calling the imperative for cities to focus on economic development a “false constraint,” Schragger writes, “any claim that cities have transformed themselves through improved policies of capital attraction and retention is seriously overstated.”¹⁰ We agree. As we observed in chapters 4 and 5, cities have gone from economic free fall during the era of urban crisis in the 1970s and 1980s to enjoying new vitality in the downtowns, tech corridors, and gentrifying neighborhoods in the new century. This is primarily the result not of city policies but instead of the changing economic function of cities.

The new urban economy has also changed the old conflict between neighborhoods and downtowns that fueled the political appeal of urban populist mayors. Not only have downtowns themselves become neighborhoods, but many cities have come to view strong neighborhoods as conducive to economic growth in the new economy.¹¹ Investing in neighborhoods, especially those in and near growth corridors, is increasingly seen not as a distraction from development but instead as part of a larger economic development strategy. As a recent book on neighborhood politics put it, “The once-calamitous disregard of older neighborhoods has somewhat faded.… In the new postindustrial geography neighborhoods with market potential can readily become revitalization targets.”¹²

City governments may be motivated to subsidize neighborhood development as part of an economic development strategy but less often for the sake of the people who presently live in them. Echoing Schragger, we contend that cities have relatively little power to shape their economic growth trajectories. They can support the efforts of, for example, a Johns Hopkins facility or the Cleveland Clinic to grow, create jobs, and draw revenues into the city, but they cannot create such entities, nor can they direct their efforts. This means that efforts to change the economic trajectory of cities are at best marginally effective. It also means, however, that cities can engage in efforts to improve the quality of life in neighborhoods and redistribute opportunity to those who have been left behind by the postindustrial economy without undermining their economic prosperity. To the extent that such efforts build human capital, they can have positive economic effects. The revitalization of the South Bronx in New York City, where city government partnered with CDCs, developers, and lenders, is an example of this. We will return to it after discussing the role of CDCs in neighborhood revitalization, picking up the networked governance thread from chapter 4.

The Promise and Pitfalls of CDCs

Community development corporations, nonprofit organizations dedicated to improving a specific neighborhood geography, can be distinguished, at least in principle, from the settlement houses and social service providers from which they sprung by their mission of not just providing services but also empowering residents to positively affect the trajectory of their neighborhood. This, of course, can lead them to take on multiple and often seemingly conflicting missions. How central CDCs are in the present and future of the American urban neighborhood is debatable. Most neighborhoods do not have CDCs, and the effect of many CDCs on their neighborhoods where they do exist, as we will discuss, is often limited. At the same time, we think they are important as much for their aspirations as for their accomplishments and as a distinct, and distinctly American, approach to fostering positive neighborhood change.

As figure 9.1 shows, CDCs can have multiple, seemingly contradictory, goals or missions. Critics argue that they cannot reconcile these tensions and end up embracing one end of the continuum at the expense of the other. Howard Husock, a prominent right-wing critic, argues that CDCs, by embracing community change over individual mobility, trap residents in debilitating dependency. “Rather than encouraging upward mobility and genuine self-reliance, the implicit message of the CDC movement to the poor is: Stay put and organize for government benefits. As a result, CDCs are bad for cities.”¹³ In “The Myth of Community Development,” Nicholas Lemann argued that CDCs do not revive poor neighborhoods but instead only “gild the ghetto,” providing better housing and services for residents but offering little opportunity for residents to improve their lives and economic prospects.¹⁴

Reflecting these concerns, others have argued that it is preferable to invest in dispersal strategies rather than community development, helping people to move in search of better opportunities.¹⁵ CDCs have been criticized for building expensive housing in segregated high-poverty neighborhoods, reinforcing economic and racial segregation and effectively giving suburbs a free pass to block construction of affordable housing in more integrated opportunity-rich environments.¹⁶ Finally, CDCs are criticized for having drifted away from their mission of empowering communities, focusing instead on executing complex real estate transactions with professional staff “who often live outside the community and are more likely to emphasize the technical details of development over community empowerment.”¹⁷

There is some truth to all these criticisms. CDCs are rarely successful at turning around concentrated poverty neighborhoods. They often build affordable housing projects in areas of concentrated poverty, racial segregation, and limited opportunity. Distracted by the demands as well as the financial rewards of real estate development, many have de-emphasized community organizing and empowerment. At the same time, we do not believe these tensions are inherently irreconcilable. The CDC model is not doomed to failure. Without shortchanging the daunting challenges, many CDCs have been successful at reconciling or at least managing these tensions and thereby becoming effective promoters of good neighborhoods.

Under the right conditions the multiple missions of CDCs can be complementary. The term “community development” itself suggests a potential synergy between strengthening community bonds and developing the local economy. Strengthening community connections, for example, can positively affect real estate values. People want to live and buys homes in neighborhoods with strong identities and a vibrant communal life. Extensive community engagement by CDCs may slow down the development process, but strong buy-in from residents can lead to development projects that enjoy greater public acceptance and are more attuned to local design and public space preferences.

Measuring CDCs’ impact is made difficult by their multiple objectives. A 2005 study by the Urban Institute sought to objectively measure CDC impact by focusing on the sole outcome of change in property values, arguing that “sales prices are the generally recognized proxy measure for many other indicators of neighborhood quality, such as crime and poverty rates, because these other aspects of neighborhoods are capitalized into the values of its properties.”¹⁸ The study was intentionally skewed toward finding impact by cherry-picking five neighborhoods having CDCs with “strong national reputations for effective community development work.”¹⁹ The researchers used sophisticated statistical techniques to isolate the impact of the CDC on single-family home values, controlling for characteristics of the target neighborhood, such as location near a park and well-performing schools, that could influence home prices. The results of the research were discouraging: in only two of the five neighborhoods (Denver and Portland) did property values in neighborhoods with a CDC outperform comparable low-income neighborhoods without a CDC. Moreover, the context of these neighborhoods raises serious questions about the definition of “success.”

Tellingly, the two “successful” cases were neighborhoods in cities with strong real estate markets, including strong latent market demand for housing and retail services, as well as seriously undervalued assets, such as an underperforming commercial corridor or light rail stop. By improving neighborhood conditions and removing negative features depressing demand, the CDCs were effectively able to unlock that demand. Since 2000, not only had property values in Denver’s Five Points neighborhood risen to where the median neighborhood sales price in 2017 was $420,000, but the median household income had tripled, and the Black and Latinx population share was cut in half from 79 percent to 39 percent.²⁰ In other words, Five Points gentrified.

That was not the CDC’s goal—indeed, it has worked hard to preserve affordable housing—but most people would not call this successful community development. Improving a place can hardly be considered successful community development if many longtime residents were forced to move out. We are not saying that these CDCs are failures because property values increased, but we insist that rising single-family home values should not be the only yardstick for measuring success, nor should the absence of rising values automatically signify failure.

The Urban Institute study also examined Slavic Village Development in Cleveland, a strong CDC operating in a weak market. Once home to Polish and Czech immigrants, Slavic Village had experienced significant population loss and economic decline. Unlike Portland and Denver, however, Cleveland had been losing population, and the study found no “striking departure of prices … after the CDC intervention.”²¹ This is not surprising. Although the area has some assets, such as attractive parks, highway access, and a pedestrian-oriented retail center, Cleveland’s housing supply outstrips housing demand, and outside of a handful of enclaves property values are consistently low. At the same time, as the study noted, “Slavic Village had built or restored more houses than any other CDC in Cleveland,” without which the neighborhood “would have had 400 more vacant lots.”²² Given the negative effects of vacant housing on quality of life, this is noteworthy. The work of the Slavic Village CDC may well have resulted in a better quality of life for the neighborhood’s residents but without measurably improving the market.²³

Any effort to isolate the impact of CDCs on neighborhoods is problematic. As we have emphasized throughout this book, neighborhoods are complex systems with many factors operating simultaneously, generating complex feedback effects. CDC evaluations are plagued by what statisticians call the problem of “endogeneity,” the idea that many of the outcomes of interest are systemically linked to the CDC itself. Neighborhoods with CDCs are typically among the most distressed in a city, reflecting the fact that CDCs are often formed in response to neighborhood decline. CDCs therefore are often located in neighborhoods with the most intractable problems. It is not surprising that a review of forty-eight foundation-funded comprehensive community initiatives in the 1990s found that they improved the well-being of individual residents but did not produce population-level changes, such as reductions in neighborhood poverty rates.²⁴

Often, CDCs cannot move the needle on housing values or poverty rates, but research has shown that they can build community ties and improve the quality of life in low-income neighborhoods. Another study surveyed residents of three neighborhoods served by CDCs in Newark, Boston, and Minneapolis, comparing responses on housing satisfaction, safety, and community building to responses by residents of similar neighborhoods without a CDC.²⁵ Residents of neighborhoods with a CDC were more satisfied with their housing, and two out of three of these neighborhoods showed improvements in real and perceived neighborhood safety compared to the non-CDC neighborhoods, though the overall crime victimization rate was still high by national standards. In two of the cities, CDCs were able to “have measurable effects on the social fabric of their neighborhoods.”²⁶ Consistent with our emphasis on the importance of weak ties, CDC activities nurtured casual connections, not close ties or friendships. These connections help the neighborhood feel safer and build informal social controls that limit crime. More recently Patrick Sharkey and his colleagues have reinforced this point, showing that the presence of neighborhood-based nonprofits, including CDCs, significantly contributed to the stunning drop in violent crime rates beginning in the 1990s.²⁷

An impressive example of a successful partnership between city government and CDCs is the South Bronx in New York City.²⁸ In the 1970s and early 1980s, the South Bronx was a poster child for urban decline and neighborhood decay, drawing visits by Presidents Jimmy Carter and Ronald Reagan. But it was not just a political prop. It had frighteningly high rates of violent crime, in an extreme manifestation of the crime wave that swept American cities from the 1970s to the 1990s, along with widespread arson and property abandonment. During the 1970s alone, the population of the Bronx dropped by three hundred thousand, or 21 percent.

The area’s rapid decline set the stage for a remarkable partnership between local government, CDCs, and other players in the system we call networked governance. By 1979, New York City had taken possession of over 100,000 units of vacant and occupied housing after the owners failed to pay their property taxes, giving the city control over valuable assets that could be leveraged for neighborhood renewal.²⁹ In 1985, Mayor Ed Koch announced what came to be known as the city’s Ten-Year Plan for Housing, which led the city to spend $5.1 billion between 1987 and 2003 to rehabilitate 173,961 vacant and occupied housing units; over 75,000 of the new or rehabilitated units were in The Bronx alone. In some sections of the South Bronx, over 30 percent of all housing units in the area were assisted.³⁰

The city’s control of the housing inventory and its access to capital were necessary but not sufficient conditions for success, which also required the active cooperation of CDCs, intermediaries, private developers, and banks. Using city funds, groups such as the Mid-Bronx Desperadoes and Banana Kelly rehabilitated thousands of housing units. A closer examination of one section of the South Bronx, Hunts Point–Longwood, shows the dramatic results. During the 1970s this neighborhood hemorrhaged population, losing a jaw-dropping 63 percent of its residents in one decade (figure 9.2).³¹ With crime, drugs, and gangs rampant, the urban fabric was in shreds. Everyone who could do so had left.

Today, Hunts Point–Longwood provides rich soil for growing good neighborhoods. The population has rebounded and crime has plummeted. In 1990 there were forty-four murders in the area; in 2021 there were eleven. Robbery and burglary are down by similar amounts.³² The streets are full of people, and the major retail corridors, such as Southern Boulevard and Prospect Avenue, are bustling. A vibrant food scene includes Caribbean, Mexican, Central American, and West Indian restaurants. In 2018, the vacancy rate was only 1.6 percent. While prices of the few owner-occupied houses in the neighborhood are high, by New York City standards the neighborhood is affordable. Ninety percent of the neighborhood’s households are renters, and most rents are affordable to working families thanks to the presence of 6,188 subsidized housing units.³³ In short, Hunts Point–Longwood is in many respects a cluster of good neighborhoods, benefiting from excellent subway service connecting residents to job-rich areas in New York City while remaining relatively affordable to working-class families.

It is important to acknowledge, however, that good neighborhoods cannot solve the problems of poverty and economic inequality. Many families in Hunts Point–Longwood are still struggling. In 2018 median incomes were only 40 percent of citywide levels, and the poverty rate was more than double the citywide rate. Many children in the local public schools still perform well below grade level. While rents are affordable by New York standards, in 2018 one-third of the households were “severely rent burdened,” meaning they paid more than 50 percent of their income for housing, leaving little for other necessities such as food, clothing, and transportation.³⁴ Life is far better for the poor residents of the South Bronx than when the area was in free fall, but it is far from perfect. Good neighborhoods can improve the quality of life for poor households and help them stretch their limited budgets but do little to address the underlying problems caused by poverty and poorly paid jobs.

The success of the South Bronx and its CDCs is inspiring but not easily replicated because it benefited from conditions that few cities can match. New York City is a global powerhouse with unusually strong job and housing markets. The city has also been a magnet for immigrants, propelling the demand that filled the South Bronx’s vacant apartments and vacant lots. By the early 2000s, a remarkable 60 percent of New York City’s population were immigrants or their children. The city’s strong housing market enabled New York City to borrow billions of dollars for housing supported by rents from Battery Park City, a planned development built on Hudson River landfill in Lower Manhattan through a public-private partnership. In most other cities, agents of neighborhood change must work with fewer resources and under far less advantageous circumstances.

The ability of CDCs to grapple successfully with their multiple missions also depends on their organizational capacity, which is wildly uneven. A 2008 survey found that 10 percent of CDCs have 125 or more full-time staff members but the median CDC employs only 7.5 staff members. One-third had 4 or fewer employees.³⁵ This highlights the challenge facing CDCs trying to navigate the complex demands of network governance. In the South Bronx, a national intermediary, the Local Initiatives Support Corporation, provided ten CDCs in New York City with training and technical assistance, with strong financial support from the city. According to Alexander von Hoffman, during the ten years of the city’s housing program, “the number of viable CDCs in New York City grew from a handful to over a hundred.”³⁶

Most CDCs do not have the advantages of New York City’s strong housing market and the Local Initiatives Support Corporation’s capacity-building efforts. Successful CDC performance is both expensive and complex, and the unevenness in the distribution of CDC resources is likely to lead to uneven neighborhood outcomes. Few funders cover operating costs, the basic glue of any organization. One of the most successful CDCs pursuing a multifaceted mission is the Youngstown Development Corporation in Youngstown, Ohio. Although its leadership and strategic thinking are exemplary, a critical underpinning of its success is the fact that a local foundation has made a long-term commitment to providing the organization with a core of general-purpose operating funds. Elsewhere, in order to keep their staff paid, many CDCs find themselves chasing grants for specific projects regardless of whether those projects address community needs or priorities.

CDC operating shortages can be addressed by real estate development. Successful Low-Income Housing Tax Credit (LIHTC) projects yield generous development fees. A completed one hundred-unit LIHTC apartment project, for example, may yield a CDC $2.5 million to $4 million in fees with few strings attached, providing flexible funds for future operations. As a result, CDCs, especially in weak housing markets, often prioritize the development of LIHTC projects; while they provide better-quality housing for residents, they often cannibalize limited demand for existing housing and increase vacancy elsewhere in the area, exacerbating racial and poverty concentration.³⁷

Local CDC-centered network governance systems vary tremendously across the nation. Almost every older city in the country has at least one CDC, but the number and strength of CDCs varies widely. Cleveland has some of the strongest and most active CDCs and one of the most vigorous systems of network governance in the nation.³⁸ Local foundations have spent millions of dollars building CDC capacity, funneling their funds through a local intermediary, Cleveland Neighborhood Progress. Skilled professionals move back and forth between CDCs, government, foundations, and intermediaries, all of which builds trust, essential to the community development system. Few cities can point to anything comparable. At the same time, it is not clear that Cleveland’s sophisticated community development network has resulted in significantly better market outcomes for the city’s neighborhoods, although they undoubtedly improved the quality of life in many neighborhoods.

In the final analysis, it is difficult to reach a conclusion about how effective CDCs are at building and sustaining good neighborhoods. CDC impacts need to be evaluated in context and along multiple dimensions, without any romantic illusions that they can rebuild local economies or address underlying issues of poverty and inequality. With their grassroots connections and local knowledge, CDCs embody our theme that context matters. Even the strongest CDCs, however, cannot by themselves turn around neighborhoods characterized by concentrated poverty and housing abandonment that lack the assets found in Denver’s Five Points. But too often the concept of turning around is defined as rising real estate values. If CDCs bolster social connections, address crime through community policing, and improve the quality of life for people who live in disinvested neighborhoods, as we discuss in chapter 12, this may be more important.

Anchor Institutions and Private Corporations as Agents of Change

The mission of CDCs is to sustain and rebuild neighborhoods. The mission of local government is, broadly speaking, to provide for the general welfare of the people who live, work, and do business in the city, a mission that generally includes at least sustaining and at times rebuilding neighborhoods. That both should be agents of neighborhood change is logical and arguably inevitable. At the same time, there are other institutions whose central mission is far removed from fostering neighborhood change but that have become engaged as agents of neighborhood change for various reasons.

With all such institutions a question inevitably arises: To what extent is their engagement with a neighborhood a means to achieve some goal connected with their central mission, and to what extent is it intended to benefit the neighborhood? It is not that those goals are inherently in conflict; indeed, the involvement of universities or medical centers in nearby neighborhoods is usually driven by a conviction that those goals are congruent. Yet, the institution may define neighborhood benefit differently than its neighbors or have different priorities than they do.

The story of the Cincinnati Center City Community Development Corporation (3CDC) is instructive. Created by Cincinnati’s major corporations with the strong support of city government, 3CDC’s mission is to “strengthen the core assets of downtown by revitalizing and connecting the Central Business District and Over-the-Rhine.”³⁹ Over-the-Rhine is a mixed-use neighborhood immediately adjacent to downtown Cincinnati dominated by historic mid-nineteenth-century architecture. Once home to German immigrants, it declined after World War II and was subsequently largely abandoned to the point where most buildings were empty and its population was less than 20 percent of its postwar peak. The interventions of 3CDC have resulted in dramatic change to the area, but it is hard not to conclude that for 3CDC, Over-the-Rhine was more a real estate opportunity based on its proximity to downtown than an opportunity to rebuild a neighborhood socially or economically on behalf of its residents. While receiving many plaudits, 3CDC’s activities have also spawned controversy.⁴⁰

The most prominent members of this cluster of agents of change are large educational and medical anchor institutions. Many of America’s larger older cities are home to important universities and medical centers, legacies of their industrial heyday and the generosity of their industrial barons. In 1873, philanthropist Johns Hopkins endowed a university and hospital in Baltimore that pioneered medical education and public health research. Today, Johns Hopkins University’s medical complex is among the largest in the world and by far the largest force in Baltimore’s economy. It epitomizes what have come to be known as anchor institutions, “institutions that, by reason of mission, invested capital, or relationships to customers or employees, are tied to a certain location.”⁴¹ Anchor institutions have a strong stake in the future of the neighborhoods around their campuses.

Prior to World War II, urban universities and medical centers, while valuable local assets, tended to be relatively small and largely self-contained, with little impact on either the local economy or their surrounding neighborhoods. After the war, the expansion of health care and higher education resulted in dramatic growth of these institutions. Controlling for inflation, the United States spent twenty-five times as much for health care in 2014 as it did in 1950, although the population of the country only doubled. Medical research, which is concentrated in a handful of major centers such as Johns Hopkins, increased by fifty times. From 1965 to 2014, university enrollment grew from six million to over twenty million. Education and health care have become the dominant economic sector in most cities, with anchor institutions as the dominant employers. In 2018, the education and health care sectors made up 38 percent of all jobs in Philadelphia and 37 percent in Baltimore, not counting thousands of jobs in tech spin-offs and support services.⁴² Even in cities with highly diversified economies, such as Los Angeles and Seattle, health care is the largest single employment sector.

In the urban crisis years, urban universities and hospitals were rarely viewed as benefactors by their neighbors. Landlocked in dense urban areas and under intense pressure to expand, they often found themselves on a collision course with their neighbors. Moreover, while anchor institutions were expanding, many of the neighborhoods around them were struggling under the weight of white flight, poverty, and crime.

The weakness of cities’ real estate markets and the antiurban tenor of the times meant that anchor institutions had little interest or incentive to foster residential or retail growth in surrounding neighborhoods. Instead, universities and hospitals worked with city governments to acquire and clear adjacent blocks or entire neighborhoods, using eminent domain and federal dollars to create increasingly self-contained complexes. Amendments to the urban renewal laws in 1961 allowed university and hospital development expenditures to count toward local matching requirements for federal urban renewal grants, giving city governments a strong incentive to partner with them. A history of the University of Pennsylvania’s urban renewal efforts noted that it “gave urban universities nationwide a virtual blank check to ally with local redevelopment authorities to clear swaths of city blocks for institutional expansion and commercial redevelopment in campus areas—largely at federal expense.”⁴³ Universities, always somewhat insular, grew more so. The fortress-like architecture of urban universities and hospitals of the time, with windowless brick or stone walls facing city streets, reflected their state of mind. In order to wall themselves off from rising crime and decay, streets were closed and barriers were put up to create policed, landscaped campus oases with their own cafeterias, bookstores, and theaters.

In the mid-1960s, the University of Pennsylvania was the driving force behind a $100 million urban renewal project that leveled twenty blocks in Philadelphia’s Black Bottom neighborhood to build the nation’s first inner-city technology center, displacing thousands. A few years later the university displaced another 1,220 people in the Hamilton Village neighborhood to build a “so-called Super Block, including a stretch of looming concrete high-rise dormitories.”⁴⁴ In New York City, Columbia University purchased ninety-two buildings in surrounding neighborhoods between 1962 and 1968, displacing 6,800 mostly African American and Puerto Rican residents.⁴⁵ As universities continued to expand, neighborhood opposition grew, often with the involvement of students inspired by the protest movements of the 1960s. In 1968, plans to take public parkland to build a gymnasium for Columbia University blended with anger over its involvement in the Vietnam War to fuel student protests and occupations of university buildings.

By the 1990s both urban conditions and attitudes toward city living had begun to change, however, creating the possibility of a different relationship between anchor institutions and their neighbors. Urban crime had begun its remarkable decline. Students and young professionals had begun to seek out pedestrian-friendly, mixed-use urban neighborhoods. Rather than being a burden, universities and hospitals began to realize, their urban location could become an asset they could leverage to recruit students and staff. Instead of turning their backs to the city, they began to embrace their urban location, breaking down the barriers between campus and city. Often working with private developers, they began reaching out into surrounding neighborhoods, making the transition from enclaves to anchors.⁴⁶

As nonprofit institutions, universities and most hospitals have obligations that reinforce their anchor mission. Although they benefit from local public services, such as police and fire, they do not pay local real estate taxes. Recognizing this problem and under increasing local government pressure, some hospitals and universities have agreed to make payments in lieu of taxes to local governments. While Yale only pays taxes on about 3 percent of its $3 billion in real estate to the City of New Haven, mostly on its retail properties, it makes a substantial payment in lieu of taxes to the city, recently increased to $21.5 million per year from 2022 on.⁴⁷

Some nonprofit hospitals also make payments in lieu of taxes, while in exchange for their tax exemption the Internal Revenue Service requires tax-exempt nonprofit hospitals to provide community benefits. A 2021 New Jersey law requires nonprofit hospitals to pay a “community service charge” equal to $3 per bed per day to the municipality.⁴⁸ The 2010 Affordable Care Act goes a step further, requiring nonprofit hospitals to include in their mission services to the urban communities where they are located.

To encourage community outreach by universities, in 1994 the Department of Housing and Urban Development established the Office of University Partnerships, which made grants to universities working to create partnerships with local communities. Land-grant universities have broadened their mission beyond agriculture to fund urban extension agents who bring university resources to local communities. Finally, universities are increasingly embracing service learning, the idea that students can learn by directly engaging with community problems. Many service-learning projects take place in communities neighboring college campuses.

The University of Pennsylvania was one of the first major institutions to embrace an anchor mission. Both the university and its much larger medical complex are in West Philadelphia, just east of Center City across the Schuykill River (figure 9.3). Relations between the university and the surrounding community had long been hostile, reflecting fallout from the university’s urban renewal efforts years earlier. Under Judith Rodin, who became the university’s first female president in 1994, things began to change. Over the next ten years, Rodin led the university’s efforts to build bridges with the community and revive nearby neighborhoods, concentrating on the smaller area within West Philadelphia known as University City. To leverage its investment, the University of Pennsylvania brought eleven major institutions together in 1997 to form the University City District, a not-for-profit entity funded by institutional contributions. More recently, while the university has maintained its commitment, much of the leadership linking the academic world to the West Philadelphia community has shifted to Drexel University, which has played an increasingly important role since John Fry, who had worked under Rodin at Penn, became Drexel’s president in 2010. Key elements in the strategy have included:

• Neighborhood safety and physical improvements: These include safety ambassadors (unarmed officers who report crime and track public hazards), streetscape improvements, enhanced street lighting, extra park maintenance, and an inexpensive shuttle service.
• Local procurement and hiring: The University of Pennsylvania began to direct more contracts and purchases of goods and services to minority-owned companies in West Philadelphia. Between 1996 and 2003 the university tripled its contracting with local businesses, from $20.1 million to $61.6 million.⁴⁹ By 2009 an estimated 26 percent of its contracts went to minority- and women-owned firms, and approximately 35 percent of all construction workers on its projects were women or minorities.⁵⁰
• Public school partnership: The University of Pennsylvania took the lead in creating a new K–8 public school in University City, run through a collaboration of the school district and Penn’s Graduate School of Education. Opened in 2001, the Penn Alexander School has been highly successful both educationally and as a driver of neighborhood change.
• Real estate development. The University of Pennsylvania has invested heavily in retail development in University City, including a thirty thousand–square-foot Barnes and Noble superstore that doubles as the university bookstore, a Hilton Hotel, art galleries, a yoga studio, a bakery, and restaurants along the 40th Street corridor. By 2004 the university had invested $170 million in these retail developments, attracting another $370 million in private investment.

The University of Pennsylvania has been accused of gentrifying the area, making it unaffordable for low-income families and people of color.⁵¹ The catchment area for the Penn Alexander School, which includes about 30 percent of University City’s population, has experienced rising median household incomes and soaring home values. From 1998 to 2011, house values inside the school’s catchment area increased at more than double the rate of the rest of University City and four times the rate of the city as a whole.⁵² A 2018 article in the Philadelphia Inquirer was headlined “The Penn Alexander Effect: Is There Any Room Left for Low-Income Residents in University City?”⁵³

The remainder of University City has experienced trends that also look like gentrification. Crime is down, home values are up, and the streets are alive with upscale retail activity. From 2000 to 2019 University City’s Black population dropped by about a third, while per capita incomes rose at more than twice the rate of inflation. At the same time, however, more than a third of the population of University City lives below the poverty line, and per capita income still lags significantly behind the city.⁵⁴ Given the appeal to today’s young adults of walkable urban neighborhoods with attractive older homes, much of this change would undoubtedly have happened without the intervention of the University of Pennsylvania and its partners, although probably at a slower pace and without many of the child-rearing families drawn by the Penn Alexander School. Moreover, the rest of West Philadelphia appears to have seen little benefit from the anchor initiative. From 2000 to 2019 the population of the rest of West Philadelphia fell steadily, and the poverty rate increased from 25.6 percent to 31.3 percent.⁵⁵ The “eds and meds effect,” as it might be called, drops off rapidly with distance.

The University of Pennsylvania’s anchor strategy has made it possible for University City to become an island in the city with enhanced public goods and services. The university and its partners fund the University City District, which provides additional police services, sanitation, lighting, landscaping, and public transit, similar to the many business improvement districts that have been established in urban downtowns, typically funded by a surcharge on district property owners’ property tax bills. While the value of such entities to those funding them is manifest, it is equally clear that they create a two-tiered municipal governance structure, with wealth—in the form of anchor institutions or corporations—funding enhanced services in select neighborhoods while other neighborhoods languish.

A further issue in anchor initiatives is democratic accountability. Rodin writes that the University of Pennsylvania did not turn to CDCs to manage the process because “they lack sufficient organizational capacity reliably to lead and manage a complex, long-term reinvestment effort.”⁵⁶ This is undoubtedly true. There are few CDCs anywhere that could match the University City initiative in terms of its comprehensive nature and sustained strategic investment over decades. Yet, this is remote from the network governance model of community development. The University of Pennsylvania, the University of Pennsylvania Medical Center (Philadelphia’s largest employer), and Drexel do not just participate in the networks; they dominate them.

Carolyn Adams makes a compelling case that third-sector organizations in Philadelphia, such as the University of Pennsylvania, have effectively replaced the city as planner for University City and similar inner-city neighborhoods and are largely insulated from public scrutiny.⁵⁷ While a case can be made that the transformation of University City has benefited the city of Philadelphia as a whole, the decisions about the future of the area were made neither by the city nor area residents. Instead, they were mostly made by a handful of major, mostly tax-exempt, institutions for which neighborhood change was first and foremost about supporting their missions as institutions, not as neighborhood change agents. The lofty language of their mission should not obscure the effective absence of government with its decision-making processes, however inadequate, grounded in representative democracy.

Although it is among the most sophisticated and comprehensive, the University City venture is but one of many similar eds and meds–led neighborhood change initiatives around the United States. In Detroit, a similar effort spearheaded by a cluster of institutions including Wayne State University and the Detroit Medical Center led to the creation of University Cultural Center Inc. in 1976. Now known as Midtown Detroit Inc., it has had a transformative effect on Detroit’s Midtown and New Center neighborhoods. In a usage more meaningful perhaps than intended, its dynamic long-term executive director Susan Mosey is widely known as the “mayor of Midtown.”

A similar venture was launched by a cluster of institutions in Cleveland including Case Western Reserve University and University Medical Center, which has dramatically changed the University Circle area on that city’s east side. A major concern today of University Circle Inc. is how to create linkages to nearby lower-income neighborhoods to enable their residents to benefit from their proximity to the University Circle area. A more modest but more democratic initiative is the Northside Urban Partnership in Syracuse, where St. Joseph’s Hospital, a large community hospital rather than a major research institution, partnered with neighborhood residents, religious institutions, and a regional nonprofit, CenterState Corporation for Economic Opportunity, to pursue the community’s revitalization. Ironically, it is likely that St. Joseph’s smaller size and more limited resources prompted it to form such a partnership rather than attempt to exert direct control over the future of the Northside neighborhood.

Anchor institutions, particularly the great universities and medical centers in cities such as Philadelphia, Cleveland, and Detroit, bring valuable assets that can potentially provide benefits well beyond the neighborhood scale. The University of Pittsburgh Medical Center is the largest private-sector employer in Pennsylvania, and its potential to create opportunities, through training, jobs, purchase of goods and services, and contracts to the disadvantaged residents of the city and region is immense. Yale University has provided generous subsidies to enable over one thousand of its employees to buy homes in selected New Haven neighborhoods while underwriting the New Haven Promise, a program that pays the college tuition of graduates of New Haven’s high schools.

Whether anchor institutions become neighborhood change agents in a larger, more meaningful sense depends on their ability to address two challenges. The first is how to extend their resources beyond their immediate surroundings into disinvested neighborhoods of color farther from the institutions themselves. In Cleveland, University Circle Inc. is grappling with this question but still searching for an answer. A second challenge is how to truly collaborate with neighborhoods. A case study of the relationship between the University of Pittsburgh and the Oakland neighborhood is subtitled “From Conflict to Cooperation, or How the 800-Pound Gorilla Learned to Sit With—and Not on—Its Neighbors.”⁵⁸ The disparity in resources and power between the residents of disadvantaged urban neighborhoods and an institution such as the University of Pittsburgh is so immense as to be all but unbridgeable. In the absence of a strong role for local government or a strong neighborhood organization willing and able to negotiate from a position of strength with anchor institutions, one is left relying on nothing but the institution’s goodwill. History suggests, to paraphrase the prophet Jeremiah, that it is little more than a broken reed.

The same challenges apply to for-profit developers that present themselves as community or neighborhood builders, of which a good example is the St. Louis–based firm McCormack Baron Salazar (MBS). Over nearly fifty years MBS, probably the largest developer of affordable housing in the United States, has built more than twenty-two thousand units largely in urban and often distressed neighborhoods. While MBS bills itself as “the nation’s leading for-profit developer, manager and asset manager of economically-integrated urban neighborhoods,” that is a misnomer.⁵⁹ The MBS strategy is very different from the CDC model, which attempts to build on the fabric and assets of a neighborhood. MBS goes into an existing low-income neighborhood, often a dilapidated public housing project, tears it down, and then builds an entirely new affordable housing or mixed-income community from scratch. According to one estimate, only about 20–30 percent of the original residents make it back into the new community.⁶⁰ The requirements that MBS establishes mean that “the most motivated and stable residents move to the new community,” with the rest ending up in traditional, less desirable, public or private housing elsewhere.⁶¹

MBS does extensive community engagement with the residents of its units, but the fact is that as a for-profit developer beholden to investors and shareholders, its imperative is not just to lead but also to control any environment in which it has a financial stake. Any dilution of that control in the interest of true neighborhood engagement puts the corporation’s core investments at risk. To its credit, MBS raises funds for wraparound services that are run by a spun-off nonprofit, Urban Strategies, but these services are done for residents, not by them.

We are reluctant to criticize MBS. It is extraordinarily successful at competing for federal grants and obtaining financing, and its developments are generally well designed, safe, healthy, and well maintained; it is rare to see graffiti in an MBS development. For the original residents who get to come back, it is undoubtedly a positive step. As often as not, however, MBS “neighborhoods” are self-contained enclaves within larger urban neighborhoods, with little relationship to their surroundings. Indeed, they are generally owned entirely by MBS and branded with new names to distinguish themselves from the surrounding neighborhoods.

The Challenge of Equity and Accountability

The foregoing discussion has brought out some of the strains as well as the potential in the networked governance model. The shift from a government-led model to a tools-based policy system that relies on iterations of public, private, and nonprofit partnerships may have increased flexibility and engaged new actors, but it has also created new problems of equity and democratic accountability. It is fundamentally competitive, bringing some of the features of a market into a setting historically seen as one driven by social benefit. The neighborhoods with the strongest CDCs, or the greatest proximity to a major anchor institution, are able to compete more effectively and get the most attention. And while some CDCs may be models of grassroots democracy, many are far from representative of their neighborhoods. Their boards are likely to contain well-connected bankers, lawyers, or anchor institution executives—and for good reason, since their business model is driven by access to capital and political resources. For all the good work CDCs do, they are not a solution to the challenges of inequity and uneven access to resources that bedevil urban neighborhoods.

The issues become even more troubling when we turn to anchor institutions and private corporations. Reflecting the neoliberal ideology of the past few decades and driven by their severe fiscal constraints, cities have made a devil’s bargain with those institutions and corporations. In return for their investment of capital in the city’s neighborhoods, local governments have effectively ceded large parts of the city to those entities’ control, in the end further fragmenting the city’s social, economic, and political structures. While anchor institutions and large corporations bring extraordinary resources of both money and talent to community development, they often deploy these resources in ways that prioritize their corporate or institutional agendas over conflicting resident agendas. And while they may in theory be part of a networked system, the power imbalance between them and the other players in the system, in the absence of a strong and effective public sector, is so great that instead of a networked system, power has simply shifted from one base to another. That base, moreover, lacks political legitimacy or accountability to justify its exercise of power outside its core mission.