Will a Neighborhood Impact Investment Fund turn Baltimore around?

"We are not a second rate city, we just act like one" 

(Ryan Dorsey, Councilman on Twitter)

What a difference a few years make: Mayor Martin O'Malley used "building from strength"  as his blueprint based on Paul Brophy's paper, Great Neighborhoods-Great Cities published in 2009 by Goldsecker. Brophy and many others propagated investment in "Middle Neighborhoods" and "triage strategies".  Building from strength remained a lauded strategy until recently. Even in 2016 Brophy still published "on the Edge", a small book about "America's Middle Neighborhoods. The strategy suggests that cities need to spend their scarce money wisely, i.e. not where the needs are the highest but in those "Middle Neighborhoods" where fewer dollars can create a "tipping point", and prevent a stable neighborhood from sliding. In that line of thinking even public dollars need to create a noticeable return on investment (ROI) and should go where they have the biggest effect.

Build from market strength wherever it can be found. The long-standing governmental intervention strategy to try to improve the most distressed city neighborhoods has been challenging for populationlosing cities.5 What’s been missing is an understanding of neighborhoods in their market context. Increasingly, city planners and neighborhood improvement specialists are reporting that neighborhood improvement approaches that build from market strength are more likely to be successful than when that market strength is absent. (Paul Brophy, Goldsecker series Great Neighborhoods, Great Cities)

The building from strength strategy was in many ways a response to Jim Rouse's attempt of fixing Sandtown which he considered as a worst case scenario (if you can fix Sandtown, you can fix anything). As we know, over a $100 million spent on Sandtown disappeared like the famous drop in the bucket without resulting in a convincing turn-around.

The persistent concentration of vacant structures in Baltimore

Still, after the unrest of 2015 which ironically originated in Sandtown, the tide has turned again and the new focus is equity. In 2017 Baltimore's Planning Department analyses the Baltimore cities public budget and finds (in the words of the Baltimore SUN):

Over the past five years, the budget allocated an average of $15 million for projects in Baltimore neighborhoods where more than 75 percent of residents are white. In areas where more than 75 percent of people are minorities, the figure was $8 million.

It was rightly observed that such a lopsided spending of public dollars widens the already wide gulf of discrepancies and increases the inequity that those numbers not only prove but have caused through history. The equity lens moves away from economic terms and puts the focus back on needs.

So what strategy is right? Should the public dollars not be spent as investments that yield a return but as equity payments designed to eliminate the vast imbalances between neighborhoods? That is certainly what Morgan Professor Lawrence Brown suggests in an interview with the SUN:

“Equity means investing the most where people have the least, or in communities that have the least to help address historical injustices or imbalances. When you’re giving more to those who have more, it really begs the question: Where is the focus on equity?”

No city ever demolished itself to prosperity (or equity)

The building from strength strategy juxtaposed with the equity lens matches a number of other binary narratives, such as downtown versus neighborhoods, white L versus black butterfly, rich investors versus the people, all "alternatives which are all too familiar to anybody interested in the question how Baltimore should move forward . But are these true alternatives, describe these poles describe the choices accurately? Is the choice between Venezuela and Dubai, to use two countries that stand for similar extremes? Sure, the choice of Venezuela as an example is loaded, the explanation that Hugo Chavez' attempt of spreading the wealth has bankrupted the country isn't shared by all. But it is instructional for a discussion about how to reconcile justice with economic viability. Lately an idea tested in other cities has surfaced in Baltimore, the community investment fund.

Mayor Catherine Pugh on Wednesday said she was taking steps to create an investment fund to help lure development to Baltimore’s most troubled neighborhoods. The Democratic mayor said she planned to raise $55 million by leasing several city-owned parking garages and use the money to establish what she calls the Neighborhood Impact Investment Fund. (Luke Broadwater, Baltimore SUN)

This gets us back to Baltimore and the Mayor's idea of a neighborhood impact investment fund fueled by money from lucrative city garages (through sale or lease) and some of the other competing ideas for an affordable housing fund or for an equity fund: All those ideas are focused on the source of money and based on the desire to spend it in areas where "the market" wouldn't do it. At least not without a kick-start.
But how and where should such money be spent? Where it leverages other investments and brings a return (for example an increased tax base) or where the needs are the biggest?  While these funds are debated and introduced as bills, the question of how and where the money should be spent hasn't been asked with any kind of urgency, the blatantly obvious needs being so overwhelming that the answer seems obvious.

The fund will be designed to focus on the city’s historically-neglected neighborhoods that the federal government defines as “severely distressed” — a swath of the city that includes much of East and West Baltimore. SUN

This looks like it leads right back to Jim Rouse's Sandtown conundrum. There must be a new way of looking at this. Maybe it is unproductive to juxtapose economy and ethics in a binary manner, maybe those alternatives do nothing but poison the public debate. The pairing isn't even logical because comparing an economic approach with a moral approach is mixing apples and oranges. As if no economically sensible approach could be moral or as if no moral approach could ever be economically feasible.

Cincinnati: Preservation and investment fund  in Over the Rhine. (
Photo: Philipsen)

The criteria that the private reinvestment fund established for the renaissance of Barclay/Greenmount West and Oliver are instructive. They were applied in vulnerable communities, not in affluent white communities, and not even in "middle" communities, but in communities of color with a history of severe disinvestment, abandonment and crime (just remember the arson to kill the Dawson family for snitching in Oliver). They combine socially responsible investment, equity and economic development. That fund did not just sprinkle money around, but invested strategically until enough properties were rehabilitated so that a market emerged that allowed homes to be priced at least at the cost of construction and development.  In other words, the fund owners saw their investment appreciate and begin to show a return.
 
From Reinvestment Fund website:

• Scarce public subsidies alone cannot create a market where none exists;

• Public subsidy must leverage or clear the path for private investment;

• Public subsidy in distressed markets should build from local nodes of strength, (i.e. transportation hubs, parks, public amenities, and anchor institutions);

• Decisions about places must be informed by empirical data; and

• All city residents are consumers who expect quality services.

The strategy worked because the communities where the private reinvestment fund operated where not islands in a sea of misery and they were not vast areas themselves. Instead they bordered areas of relative strength or areas that were clear geographic boundaries and back-stops, such as the Greenmount cemetery, a railroad or the Charles Street corridor. The reinvestment in Oliver did rely on the presence of the vast public/private investment of EBDI in spite of all the social and political baggage this renewal program carries. The fact is, without the massive interventions and investments in EBDI, by the non-profit,  the private and the public sector, East Baltimore wouldn't see the Food Hub, Hunanim, the Gay Street corridor revitalization or the rebirth of Oliver. There wouldn't be a investment team interested in Oldtown, Somerset and Perkins Homes.

The believers in the old binary have already lined up to denounce all of these investemnts as gentrification and essentially insinuating  that Baltimore would be better off if these projects would have never happened. Surely, in one way or another all these projects challenged the status quo, and mean change for the existing residents, even where they were protected as in Barclay and Oliver. But there are big differences in the projects and how they were conceived and executed. While EBDI barged in with massive relocation and displacement, Oliver and Barclay kept every household that wanted to stay in place. because  the status quo just is so terribly unacceptable, any path forward will have to change it by definition, including dislodging the entrenched poverty not through displacement but through empowerment.  If better housing, access to transportation, better access to jobs and services are truly baked into the revitalization of neighborhoods, then those investments can have a return for investors and for residents who are finally enabled to participate in the urban economy.

At Reinvestment Fund, our mission is to build wealth and opportunity for low-wealth people and places through the promotion of socially and environmentally responsible development.(website)

Investments funds that will do that, would unlock the biggest treasure Baltimore has to offer: Its large population of people who have been locked away without hope, access and opportunity. Baltimore has barely moved the needle on its poverty rate in 50 years. It won't change a thing, though, if reinvestment money (whether it is private or public) is simply thrown at the biggest issues without a very clear strategy on how those public dollars eventually leverage private investment and create lasting value which in turn must be shared.

Barclay: Investment on Greenmount Avenue (Photo: Philipsen)

There is plenty of private money sloshing around the globe and there are plenty of investors eyeing second tier cities such as Baltimore for an opportunity to put their money to work. It is up to the community and their political representatives to ensure that those investment combine economical sustainability with moral values. As the Mayor rightly observed, successful investment funds have been created in many other cities. Community Architect reported in some detail about Cincinnati's investments in the two neighborhoods which define Over the Rhine, an instructive example in which the private sector resolved to take charge in a socially responsible manner and as an answer to social unrest in their city.

Equity is not just about fairness and social justice. Equity drives economic growth—smart and sustainable growth. Equity is about working together, honestly and openly, to create a new, single snapshot of a city where everyone has a spot to fill and an active role to play. (All in Cincinnati)

Targeted investment in this manner is a far cry from Baltimore's prevailing practice of the past where it is open doors to "anything goes" coated with give-aways of hard earned public funds. This was the way how development of any kind was long welcomed here. Eeven in Vacants to values investors were not screened enough so that a revolving door emerged in which incapable or irresponsible investors failed and brought many vacants right back into the pool the city manages.

But if public dollars are strategically placed as part of a clear masterplan and game-plan which is transparent and predictable the outcomes can produce a heavy lift. Transparency and predictability are two things both the investors and the public really like to see. If Baltimore would overlay a concise growth strategy with clear ethical values and equity goals it could live up to its promise of becoming a first rate city again. Vigilance is needed. People with lots of money won't always voluntarily do the right thing. By harnessing greed with an economic development strategy that combines equity with ROI Baltimore will finally be able to address its vast needs.

Klaus Philipsen, FAIA

Related on this blog or from this author:
Disparities in Capital Funding
The secrets of comeback neighborhoods (Smart Cities Dive)
On the Edge, America's Middle Neighborhoods

Study finds deep racial disparities in way Baltimore allocates public construction dollars