Partners, Volume 14, Number 1, 2004

Revitalizing Neighborhoods Through Social and Economic Integration

Central cities have been losing upper- and middle-income households to suburban communities in recent decades. Although some urban neighborhoods are once again flourishing, this trend is not universal.

Many city communities still suffer from concentrated poverty, blight and private sector disinvestment. The question of how to revitalize these areas persists, and city officials, community development corporations, and the private sector continue to debate the appropriate strategies for addressing the problem.

New strategies for urban revitalization

In the past, revitalization strategies focused on improving the opportunities for the low-income residents living in underserved communities. Although individual households have benefited, these strategies have not succeeded in improving the economic composition of the communities as a whole, nor has the private sector provided the outside investment essential for growth.

A different approach to urban revitalization takes advantage of renewed interest in urban living to encourage economic and social integration. Out-migration from cities was originally driven by expanding highway systems, the availability of housing, and better school systems. The result was a declining economic base that coincided with changing racial composition in the central cities, as many white households moved out to the suburbs leaving a concentrated low-income, minority population. However, a growing suburban population, highway congestion and the rising cost of living have diminished the relative benefits of living in the suburbs, and some households are now rediscovering urban neighborhoods. These households are recognizing the convenience of urban living, the amenities associated with cities and the historic character of certain neighborhoods. Folding these new residents into existing communities is one approach to urban revitalization.

This strategy works to increase job and income opportunities for existing residents while simultaneously encouraging in-migration of higher income residents. The goal is to achieve greater economic diversity that will spur additional public and private investment needed to revitalize an entire community instead of helping just one family at a time.

Diversity strategy offers benefits, raises concerns

Studies indicate that increasing economic diversity in central cities brings both fiscal and social benefits. The most obvious fiscal benefit is a higher property tax base as higher income households purchase more expensive homes or add value through renovation. Higher income households will also support existing retailers and draw new businesses, increasing commercial property tax and sales tax revenues.

Social benefits are also associated with this strategy. Research suggests that the presence of middle- and upper-income households can help reduce social isolation in inner city communities. Higher income households can help build social structures in neighborhoods by reinforcing mainstream values and thus offset problems associated with concentrated poverty such as crime, drug abuse and illiteracy. Greater social capital in a community may also help lower income residents connect with employment opportunities outside of the immediate neighborhood. However, realizing these social benefits requires extensive social interaction between the new and the old residents, and this is often hard to achieve.

A strategy focused on increasing economic and social diversity also raises significant concerns. The biggest is the possibility that existing residents will be replaced by the new, higher income households. Displacement can occur if existing subsidized housing units are demolished to build market rate units or if new households moving into a neighborhood drive up rents or housing prices to such an extent that housing, including property taxes, is no longer affordable for the existing residents. Residents may also be displaced when landlords opt to sell rental housing for conversion to owner–occupied housing.

Gentrification, which usually refers to the economic and racial changes in a neighborhood associated with the in-migration of higher income households, is often seen in a negative light because it can lead to displacement. It is important to note, however, that gentrification is not necessarily synonymous with displacement, and that gentrification without dis-placement can provide benefits to existing residents. If a community has a large supply of vacant property or abandoned housing, gentrification is less likely to uproot existing residents.

Loss of affordable housing units is another significant concern associated with promoting economic diversity. For example, subsidized housing units may be demolished to build mixed-income or market-rate housing, or vacant land suitable for assisted housing development may be targeted for more profitable housing. The federal HOPE VI program faced such problems. Created to address the problem of concentrated poverty in public housing projects by redeveloping this housing with lower density, mixed-income housing, HOPE VI has been effective in helping some communities achieve greater economic and social diversity; but the overall supply of assisted housing units has also been reduced.

Finally, the political feasibility of diversity strategies is questionable. Cities may promote economic diversity by using public subsidies to encourage higher income families to locate in targeted neighborhoods. However, conflicting views exist regarding this use of public resources. Many feel that public money should only be used for direct help to the neediest of families. Another challenge is that revitalization strategies focusing on both existing and new households will have to speak to the needs of both, and critics contend that the concerns of existing residents are often overshadowed by those of the newer and higher income residents.

Building blocks for a diversity strategy

A successful strategy to promote economic diversity must be two-fold. First, existing residents must be encouraged to build and retain social and economic capital in their neighborhood. Secondly, the in-migration of higher income households must be encouraged. To achieve these two objectives, revitalization strategies must focus on both “push and pull” factors: factors that push households out must be reduced while qualities that pull households back into the city must be enhanced.

Schools: Improving public schools is the cornerstone to any revitalization strategy, especially if the goal is to keep or attract families with school-aged children in the city. Public schools are one of the largest problems in urban areas and one of the biggest obstacles to overcome for successful urban revitalization. The problem with schools is self-perpetuating: as families with school-age children leave the central city to find better schools in suburban communities, central cities are increasingly dominated by households that are unable to support the level of taxation and public expenditure needed to improve the schools. Several mechanisms for improving schools can be considered, such as expanding magnet schools into disadvantaged communities and giving neighborhood residents priority for enrolling.

Economic opportunity: Expanding economic opportunity is also critical, particularly for existing residents. Job training programs can help existing residents expand their skills so they can compete for better jobs and increase their incomes. A necessary complement to job training, however, is increasing the number of job opportunities in a community, as well as improving transportation systems to expand access to jobs outside the community. Cities can expand employment opportunities in central cities by supporting small businesses and micro-enterprise programs as well as by recruiting new businesses.

Range of housing opportunities: Neighborhood stability is enhanced by greater rates of homeownership. Encouraging existing residents to purchase homes and attracting new higher income home buyers will help achieve both economic diversity and greater neighborhood stability. Developer subsidies, homebuyer education, downpayment assistance and below-market financing are all tools used to promote homeownership. Homebuyer education or private-sector financial incentives are often more politically feasible than direct public subsidies for homeownership.

In promoting diversity, it is equally important to offer a full range of housing options. Developing attractive, high-quality rental housing (assisted and market-rate) as well as single-family homes in the same community makes it possible for residents to meet their changing housing needs as their lives evolve.

Expanding amenities and reducing drawbacks: Improving neighborhood amenities may encourage greater economic and social diversity. Promoting the cultural opportunities unique to a city, developing infrastructure, and improving parks, recreational facilities, and shopping districts all make neighborhoods more appealing. Encouraging new retail and service businesses in central cities is also crucial.

The Row 8.9n townhomes in Nashville have attracted an economically and socially diverse group of buyers with its loft-style architecture and high-quality amenities.

At the same time, cities need to address the drawbacks associated with urban living. Improving blighted properties, cleaning up public spaces and working with police, local businesses and community residents to reduce crime make central city communities more attractive. Improving amenities and addressing disamenities is also a more politically feasible strategy, since this approach will benefit both new and existing residents.

Community marketing: While it is critical to address the obvious problems in central city communities, it is also necessary to deal with the perception of these problems. Difficulties in low-income communities often appear on the evening news, so it is important to balance negative impressions with attention to improvements and amenities. Revitalization strategies must also target the appropriate market. For example, since improving schools may be the hardest issue for a community to address, neighborhoods may wish to focus initially on attracting households without school age children, such as young professionals and empty-nesters.

Developing a successful strategy

A strategy that promotes economic and social diversity is just one approach for revitalizing urban communities, and it may not be the best strategy for every community. It is easier to incorporate new, higher income households in a community, for example, if adequate vacant land or housing stock exists to support new residents without displacing existing ones. It is also important to consider whether a community can support economic change. Job training for existing residents may help individuals, but without new economic opportunity in the community, it will be hard to improve the employment status or incomes of existing residents significantly. The strategy must be politically feasible and resources must be shared between existing residents and incentives to attract new households.

Because one component of a revitalization strategy in isolation will not bring about the widespread change needed to achieve economic diversity, a holistic approach is essential. It is also important to maintain a long-term vision. Achieving economic diversity is likely to be easier than creating social diversity, and it may take longer still to see real social interaction between neighborhood residents.

Leadership of the revitalization process must cut across all sectors, and all stakeholders should be represented. To minimize the conflict between competing and conflicting objectives, existing residents, potential new residents, businesses, and government must be included in developing and implementing strategies. The foundation for the success of this or any other strategy is developing partnerships and building consensus among all stakeholders.

This is part one of a three-part series exploring the issue of communities in transition in the Sixth District.
By Jessica LeVeen, regional community development manager in the Atlanta Fed’s Nashville Branch.

Row 8.9n Townhomes: A New Model for Diversity?

The recent completion of Row 8.9n townhomes by Affordable Housing Resources (AHR) in Nashville’s Hope Gardens neighborhood brings the first market-rate housing to the area in years. Located within walking distance of the state capitol and downtown, the neighborhood was slated for revitalization by the Tennessee Housing Development Agency (THDA) in the 1990s, when it was designated as the state’s first Bicentennial Neighborhood. AHR has been working in partnership with the state, the city and other nonprofit and for-profit developers since then to rejuvenate the neighborhood with new, affordable single-family housing.

The AHR project initially added approximately 50 new homes, creating opportunities for homeowners in the neighborhood and filling many of the vacant lots. However, these homes have not attracted economically diverse buyers. According to AHR, most of their homes have sold with significant subsidy to a typical buyer who is a single mother with two children. Leaders of the revitalization efforts recognized that attracting higher income households was critical to bring about real change in Hope Gardens.

In September 2001, AHR broke ground on Row 8.9n. The 29-unit mixed-income townhome project in Hope Gardens gets its name from its location between 8th Avenue and 9th Avenue North. A $5 million project, the development is a public-private partnership, with funding from a number of federal, state and local sources. Priced between $130,000 and $170,000, with subsidies available for 11 of the units set aside for affordable housing, these homes appeal to a new market. In the past new homes in the neighborhood sold for under $95,000. The loft-style architecture and brownstone exterior of the Row 8.9n homes represent a new look for the neighborhood. All of the units, regardless of price, feature the same high-quality amenities.

The Row 8.9n homes have attracted an economically and socially diverse group of buyers not seen elsewhere in Hope Gardens. The new homeowners’incomes range from $20,000 to more than $70,000, and the community is home to a spectrum of professionals from entry-level architects to musicians to executives. To encourage a wide economic range of buyers, AHR partnered with a local financial institution to offer below-market financing to all buyers, regardless of income.

The success of this project encouraged AHR to start Ireland Street townhomes, a second mixed-income housing project in Hope Gardens. With prices ranging from $149,000 to $199,000, this 28-unit project includes fewer affordable units. Interest in the new project is strong, and more than 50 percent of the units have been pre-sold.

Row 8.9n and Ireland Street are bringing new homebuyers into Hope Gardens, and the neighborhood demographics are slowly changing. Crime has dropped, and the city has completed other infrastructural improvements in the neighborhood. According to Steve Neighbors, Director of the Home Company, the development subsidiary of AHR, “Change happens slowly. We can encourage the economic changes but the social integration and real interaction will have to happen over time.”

Encouraging greater social and economic diversity throughout the neighborhood continues to be a challenge for revitalization efforts, but these two projects provide a great foundation to prove that it is possible.


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