The Community Economic Development Movement: Law, Business, and the New Social Policy
240
The Community Economic Development Movement: Law, Business, and the New Social Policy
240eBook
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Overview
In this book William H. Simon provides the first comprehensive examination of the evolution of Community Economic Development, complete with an analysis of its operating premises and strategies. He describes the profusion of new institutional forms that have arisen from the movement, amalgamations that cut across conventional distinctions—such as those between private and public—and that encompass the efforts of nonprofits, cooperatives, churches, business corporations, and public agencies. Combining local political mobilization with entrepreneurial initiative and electoral accountability with market competition, this phenomenon has catalyzed new forms of property rights designed to motivate investment and civic participation while curbing the dangers of speculation and middle-class flight.
With its examination of many localities and its appraisal of the strengths and weaknesses of the prevailing approach to Community Economic Development, this book will be a valuable resource for local housing, job, and business development officials; community activists; and students of law, business, and social policy.
Product Details
| ISBN-13: | 9780822380825 |
|---|---|
| Publisher: | Duke University Press |
| Publication date: | 01/10/2002 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 240 |
| File size: | 561 KB |
About the Author
William H. Simon is Saunders Professor of Law at Stanford University. He is the author of The Practice of Justice: A Theory of Lawyers’ Ethics.
Read an Excerpt
THE COMMUNITY ECONOMIC DEVELOPMENT MOVEMENT
Law, Business, and the New Social PolicyBy WILLIAM H. SIMON
DUKE UNIVERSITY PRESS
Copyright © 2001 Duke University PressAll right reserved.
ISBN: 978-0-8223-2804-9
Chapter One
Introduction
Within a five-minute walk of the Stony Brook subway stop in the Jamaica Plain section of Boston, you can encounter the following:
-A renovated industrial site of about five acres and sixteen buildings that serves as a business incubator for small firms that receive technical assistance from the Jamaica Plain Neighborhood Development Corporation (JPNDC), a nonprofit community development corporation, which is also housed there. Known as the Brewery after its former proprietor, a beermaker, the complex is owned by a nonprofit subsidiary of JPNDC.
-A 44,000-square-foot Stop 'n Shop supermarket. The market opened in 1991 after years in which the community had been without a major grocery store. It lies next to a recently renovated community health center and a large high-rise public housing project. The land on which the market and health center sit was developed and is owned by a limited partnership that includes, in addition to a commercial investor, JPNDC and the Tenant Management Corporation of the housing project. Some of the income from the market's and health center's leases goes into the Community Benefits Trust Fund, which supports jobtraining and business development activities.
-A cluster of small, attractive multi-unit residential buildings containing a total of forty-one homes. These units were built with support from the federal Low Income Housing Tax Credit, and most are occupied by low- and moderate-income families at rents limited to 30 percent of family income. The buildings are owned by a limited partnership in which the general partners are a subsidiary of JPNDC and a resident cooperative; the limited partners include five conventional business corporations and a nonprofit corporation with a board composed of prominent government and business figures that promotes housing development throughout the state.
-Two recently renovated apartment buildings-one with eleven units and one with forty-five units-designed with common areas and facilities for medical support for elderly residents. The project benefits from large federal grants. It is owned by JPNDC; the units are leased to the tenants at rents that may not exceed 30 percent of income.
-A wood-frame building containing three apartments recently renovated by JPNDC with support from various public programs. JPNDC then sold the building at a price well below market value to an individual, who, as a condition of ownership set out in the deed, must live in one of the units and rent the others only to people who meet specified income-eligibility conditions at specified rents.
These institutions are products of the Community Economic Development (CED) Movement. Although it is unusual to find so many concentrated in such a small area-there are still more there that I have not mentioned-such projects can be found in most cities; their numbers have increased substantially in recent years, and there will be many more of them if current programs succeed. Such projects figure prominently in the most optimistic and innovative approaches to urban poverty on both the left and the right. They exemplify a kind of social entrepreneurialism that is flourishing across the country. As support for traditional welfare and public housing programs has waned, a corresponding (though far from proportionate) increase in support for CED has arisen. The movement has been fueled by trends toward decentralizing public administration, on the one hand, and channeling the development of local markets along socially desirable paths, on the other. It has also been encouraged by changes in the contours of urban politics, especially new strategies by neighborhood activists.
Though there are many variations, the core definition of CED embraces (1) efforts to develop housing, jobs, or business opportunities for low-income people, (2) in which a leading role is played by nonprofit, nongovernmental organizations (3) that are accountable to residentially defined communities. Chapter 2 surveys the increasing focus on such efforts in a broad range of public programs.
These efforts are supported by a cluster of convergent policy rationales that, in the most influential perspective, represents at once a theory of local economic development, a strategy of social policy implementation, and a vision of grassroots democracy. These "three logics of community action" are explored in chapter 3.
The CED Movement has brought forth a profusion of legal and institutional innovation. CED institutions are based on traditional, albeit peripheral, legal forms, especially the charitable corporation and the cooperative, but the movement has elaborated and combined them in innovative ways. The popular term "public-private partnership" glosses over the myriad and complex forms that public and private take in these projects.
The heart of the analysis focuses on the institutional contours of CED practice. There are five core themes:
Chapter 4 discusses the theme of the community as beneficiary of economic development. At the modest end of the spectrum, this notion refers to the traditional role of local institutions in regulating to mitigate the negative external effects of development and in taxing property and economic activity to support the provision of public goods, such as roads, police, and schools. At the more radical end, it connotes the idea that the community-defined as the collectivity of residents within its borders-is the residual claimant on the proceeds of local development. The more radical interpretations challenge some traditional doctrines of American local government, including constitutional doctrines that limit residential communities' ability to pursue their interests at the expense of property owners and nonresident workers.
Next, there is the theme of the community as agent of economic development, discussed in chapter 5. This notion implies an entrepreneurial role for local institutions that, as applied to nonbusiness institutions, is somewhat novel. A central question for the movement has been how this entrepreneurial role should be institutionalized. The most prominent answer gives a central role to the community development corporation (CDC). Although they are not primarily oriented toward profit, CDCs are in many ways competitive enterprises, and their mechanisms of accountability are a hybrid of those associated with business and government.
Constrained property rights are the subject of chapter 6. CED institutions tend to create property rights that are quite different from the paradigm of private law. Such property tends to be subject to two kinds of constraint-alienation constraints and accumulation constraints. Alienation constraints limit the ability to sell or transfer the property. Accumulation constraints limit the degree of inequality within some group associated with the property. These constraints are most salient in the limited-equity cooperative, a type of organization found in both subsidized housing and business development. Though less visible, such constraints play important roles in other types of organizations associated with CED, including the CDC.
Chapter 7 takes up the theme of induced mobilization. To widely varying degrees, CED projects depend on local participation. In addition to its entrepreneurial side, the CDC has an organizing and representative side. This latter side is encouraged by a growing number of state, regional, and national institutions that provide support for local development that is conditioned on some degree of mobilization. These supporting institutions typically require community applicants to demonstrate at least openness to-and, sometimes, effective encouragement of-resident participation. These programs represent a striking comeback of an idea that has often been pronounced dead since the 1960s. Induced mobilization was central to the "Community Action Program" launched by the Economic Opportunity Act of 1964, but the idea was disparaged on both right and left, and it faded. The new variation has both continuities with and differences from the older one. The last of the basic themes is institutional hybridization, taken up in chapter 8. CED structures tend to defy conventional boundaries that separate levels of government and types of private organization. They recombine organizational attributes in unfamiliar ways in order better to link such functions as political representation and economic entrepreneurialism.
The focus here is on the institutional configuration of CED practice. I suggest that the movement has developed a set of structures that responds usefully to the social forces emphasized in the three logics of community action discussed in chapter 3. These innovations represent an enduring achievement that promises a broad range of productive applications. This is not, however, a full-scale appraisal of community-based social policy. Such an effort would require a larger body of information than we possess, and it would also have to consider the interactions of the local values and forces emphasized in the CED perspective with competing values and surrounding structures above the local level. Chapter 9 identifies some of these considerations and considers briefly how they bear on the appraisal of Community Economic Development.
Chapter Two
Background: The Turn to Community-BasedOrganizations in Social Policy
Its practitioners think of the CED Movement as a grassroots affair. To begin an account of CED by reviewing national-, regional-, and state-support structures might strike them as looking through the wrong end of the telescope. Yet no one denies that grassroots CED activities depend on an elaborate network of larger-scale efforts. Moreover, the increasing salience of CED in political and policy discourse can be most readily seen in the recent growth of national, regional, and state programs designed to encourage and sustain it.
General Planning: The Revival of Redevelopment and Community Action
Looming over the current CED Movement are memories of two earlier experiments in community development-urban renewal, or Redevelopment (a word I capitalize to indicate that it is a term of art referring to a special legal process), and the Community Action Program. Both are widely regarded as discredited, and to some extent the current movement has been shaped in reaction to their failures. However, in some respects, current efforts might also seem a continuation and vindication of the earlier movements.
REDEVELOPMENT
The Redevelopment process was created by the states under the impetus of the National Housing Act of 1949, which provided for grants and other support for local efforts to revitalize "blighted" areas. The federal grant program came to be called "Urban Renewal." The state process it supported begins with the designation of an area as "blighted." A municipal agency then undertakes with private investors to formulate a plan of public and private investments to improve the area. The agency can draw on municipal powers of spending, eminent domain, land-use regulation, and public finance-with streamlined procedures. The plan often provides for public provision of structural improvements, as well as the condemnation and delivery to private developers of large tracts of land, perhaps at a substantial "write down" (below-cost price). The private developers undertake various improvements on their own account and perhaps build community facilities, such as parks, meeting places, or low-income housing. The plans and ensuing contracts often limit or designate special uses for state and local taxes on the improvements.
The Redevelopment process responds to a problem of coordination pervasive in real estate development that has been thought exceptionally severe in poor or otherwise "blighted" areas. One aspect of the coordination problem arises from the fact that the basic local instruments of economic development-providing tangible public goods such as roads and parks; delivering services such as police and schools; regulating land use; and offering fiscal subsidies, such as targeted tax breaks or favorable credit terms-often involve separate political processes. Bringing them to bear simultaneously on an ambitious development project could be cumbersome. Redevelopment combines the tools in a single, streamlined process.
The other aspect concerns the coordination of investments. The success of a real estate investment typically depends on other investments in the surrounding area, both public investments in public goods and services and private investments that make the neighborhood more attractive or produce beneficial services. In a prosperous neighborhood, informal coordination or simply shared optimism may be sufficient to induce separate but mutually beneficial investment. However, in a blighted area, public and private investors may need more formal commitments from each other. The Redevelopment process structures negotiation and produces binding contracts intended to create such commitments.
Redevelopment has been harshly criticized for decades. The critics have shown that, over and over, the development facilitated by the process has come at the expense of the initial residents of the communities being developed. In the worst-case scenario, which has been often enacted, it takes the form of "Negro removal"-displacing low-income, minority people by destroying rental housing or commercial buildings they use or occupy and replacing them with upper-income housing or business facilities serving the affluent. The West End in Boston and the Western Addition in San Francisco are two famous examples.
The Redevelopment process encouraged such injustice by weakening democratic constraints on governmental aid to development; by creating various fiscal incentives for localities to undertake it; and by subsidizing the private participants through sweetheart land deals, cheap finance, tax breaks, and publicly provided infrastructure tailored to their investments. There is substantial evidence that the returns in economic growth to public Redevelopment investments have been small or negative and that the distributive effects of the program on balance have been regressive.
In 1974, the federal government ended specific support for Redevelopment and folded these funds into the Community Development Block Grant (CDBG) program. Under this program, resources are not tied to specific projects or types of projects; instead, local governments have discretion to decide how to spend them within broad parameters.
Nevertheless, Redevelopment did not die. It survived as a state law process. In some states, its use expanded in the 1980s and 1990s under the impetus of efforts to limit property taxes, such as California's Proposition 13. By limiting revenues from the existing tax base, these measures prompted local governments to seek new taxable development. The consequence in California has been called "the fiscalization of land use": Municipalities exercise their regulatory power over land use with a view to enhancing their tax revenues. The Redevelopment process is especially attractive in this regard both because it streamlines large-scale development and because the statutes typically allow local government to keep a larger share of tax revenues attributable to Redevelopment efforts than they keep from revenues arising from conventional sources. Counties, school districts, and other taxing entities claim larger shares of the non-redevelopment tax base.
Federal support remained substantial even after the expiration of the urban renewal program. Although CDBG funds were not tied to Redevelopment projects, local governments that wanted to could so use them. Moreover, the federal tax code has continued to permit localities to issue tax-exempt bonds to finance Redevelopment projects.
The fiscal attractions of Redevelopment are great enough in some areas to prompt local officials to characterize relatively prosperous areas, and even vacant land, as blighted, and in California a lot of Redevelopment projects do not involve low-income neighborhoods. The process continues to attract criticism as wasteful of public subsidy and arbitrary in its effects on taxation. However, assessments of its potential for low-income neighborhoods are far less negative than in the past, and some prominent Redevelopment efforts have been viewed as CED success stories.
(Continues...)
Excerpted from THE COMMUNITY ECONOMIC DEVELOPMENT MOVEMENT by WILLIAM H. SIMON Copyright © 2001 by Duke University Press. Excerpted by permission.
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Table of Contents
Acknowledgments1. Introduction
2. Background: The Turn to Community-Based Organizations in Social Policy
3. Three Logics of Community Action
4. The Community as Beneficiary of Economic Development
5. The Community as Agent of Economic Development
6. Constrained Property: Rights as Anchors
7. Induced Mobilization
8. Institutional Hybridization
9. The Limits of CED
Index
What People are Saying About This
An original, informative, and important contribution to the fields of urban studies and social policy.
Community-based organizations are flourishing despite the atrophy of key parts of America's traditional civil society and turmoil in the provision of public services. Simon gives a compelling, coherent account of their success as an institutionally innovative revival of the republican idea of liberty. Whether you agree or not with the thesis, Simon's deeply informed and carefully argued book is an indispensable point of reference in the intensifying debate about the political vitality of the local in the age of the global.
A good overview of the intellectual roots and current policy context for the growing movement to rebuild this country's communities.
— Martin Eakes, C.E.O., Self Help Credit Union
An outstanding book on a very important subject. Simon has pulled together the many complex strands and woven them into a very readable, comprehensive story.
— Joel F. Handler, author of Down from Bureaucracy: The Ambiguity of Privatization and Empowerment