Bridging the Development Divide

Joe Borgstrom is a principal with Place + Main Advisors, LLC. Place + Main specializes in economic development, downtown and real estate redevelopment, community marketing, and public relations.

“Nothing for us, without us.” – Jermain Ruffin, Host and Founder, “The Streets Are Planning” podcast

There seems to have always been winners and losers in community redevelopment, especially in larger cities. In these big cities, the winners were the “smart” developers, mostly white, who would swoop in and purchase a beautiful and historic, but unused and blighted property in an “up and coming” part of town. The losers were those community members, often black, whose neighborhoods were bought up by these smart developers and were relocated somewhere else. The developers were seen as the saviors by our industry because the community “had let” their neighborhood get to a dilapidated state. 

For many of us in this field, and let’s face it, it’s mostly a white field, this narrative rings true though it makes us cringe a little. It might’ve made us a little uncomfortable, but in the end, a wealthy developer did keep a building from crumbling and added something beautiful to the neighborhood. The fact that the inhabitants of the rehabbed building weren’t people already from that neighborhood, but young white 20-somethings often being called one of the most ignorant and racist names, “urban pioneers.” Pioneers, mind you, were white settlers who were (and still are) celebrated for taking over native American land, and either killing the local tribes or forcing them to relocate to vastly smaller chunks of land at the hand of the federal government. Applying this to the city meant saying essentially cities were unsettled places because only people of color lived there. 

Calling Bullshit on the Current System

I’m not here to vilify developers who seized an opportunity. But the opportunity was there because of a long and sorted history of racism that goes back hundreds of years in our country. Without rehashing all those hundreds of years, one only needs to look back at the last 100 years to see how whenever a neighborhood of color in a large city started to become successful it was either violently destroyed (Tulsa Race Massacre of 1921), plowed over (every interstate created in every large city in the 20th century), or systematically destroyed through practices like redlining. Redlining, if you’re not familiar with the term, refers to a practice banks, insurance companies, and even cities would literally mark on a map with a red marker areas that were primarily owned by people of color. The people and businesses within these areas would be denied loans to purchase homes or invest in businesses. On the public side, infrastructure investments would be minimized, and police presence treated these areas with particular suspicion. By denying the people in these neighborhoods the same resources their counterparts in mostly white neighborhoods could get, not only killed off their ability to build wealth, but in many cases limited those folks who did own a home from using the equity in their home to make improvements over time. Those who could afford to move from these spaces often did, but many could not. These policies over decades created large swaths of blighted property. Over time, these blighted properties have been scooped up by mostly white landlords, many putting little to no investment into these properties earning the title “slum lord,” further exacerbating the problem. The systematic denying of capital to these neighborhoods have manifested numerous other issues as well such as underfunded schools due to lack of revenue from property or local sales taxes, lack of overall educational attainment, and earning potential are just a few. There are numerous pieces of literature on the topic and I encourage everyone to read them. For a quick primer, I would start with this 2017 article form National Public Radio, “A ‘Forgotten History’ Of How The U.S. Government Segregated America.

Doing Better

It’s hard to fix hundreds of years of fucked up practices in a few simple steps and I won’t pretend to. But we can at least do better. There’s a handful of things we can do in the planning and economic development professions to begin to bridge the divide that has been created between the development haves and have nots. There are three main areas we should focus on related to economic development: Education, Finance, and Opportunity. While these efforts can and should be targeted to communities of color first, the beauty of these areas are they can be applied to any size community and values and prioritizes local residents over outside people. 

Education

There are numerous financial literacy programs that exist to help people how to manage their personal finances. But few communities have used resources like the Incremental Development Alliance, let alone marketed them to communities of color. Helping aspiring developers to understanding the development process, constructing financial pro formas, affordable development options, and creative financing are what programs like Incremental Development Alliance is about. Providing access to this education should be a community’s highest priority if they want to create local developers. Likewise, Small Business Development Centers also exist and offer small business planning for free but are often located on university campuses and gear themselves towards college students. These offices should be located in more accessible areas like downtowns or neighborhood storefronts. Burying them in potentially intimidating settings like administration buildings on college campuses limits who can easily access them. 

Finance

While redlining was outlawed over fifty years ago, many of those practices have continued. Furthermore, the effects of the redlining, like a lack of homeownership equity a person could use to leverage for financing a business or development project, still very much exist. Obviously, continuing to fight redlining policies to encourage home ownership is a critical first step to creating local wealth. In addition, access to capital remains one of the largest barriers for prospective business owners and developers in the black community. Larger cities can use their annual Community Development Block Grants (or CDBG) to create what are called section 108 loans, that can serve low income individuals and help them start businesses. They could even appropriate money from general funds to match various federal programs from the Small Business Administration and others to create specialized loan pools. But in my opinion, the greatest potential tool to enable local developers and create local wealth in the surrounding neighborhoods is for-profit crowdfunding, which was made legal by the JOBS Act of 2012, but has gone largely unused. Crowdfunding is not a new term. In its short history, crowdfunding has typically been used by non-profits to raise funds for a project. It’s largely been used as a donation model. However, with changes that occurred in 2012, small businesses and developers can solicit investment from their neighborhoods. There are several companies who do this type of work (MainVest,WeFunderRepublic, and MicroVentures are a few) but many potential small business owners and developers have no idea they exist. 

Opportunity

This is where our communities really need to put up or shut up. It’s one thing to provide education and financing tools. But if you don’t proactively provide opportunities, you really aren’t doing a whole lot to create systemic change. From a commercial perspective, local institutions (cities, hospitals, universities) could provide either local business set aside or local supplier preference (where bids within 10% of lowest cost are accepted if the business is local or minority owned.) These institutions spend millions of dollars a year and helping to level the playing field can go a long way in making small businesses successful. From a real estate perspective, the opportunity to buy, renovate, and rent or flip tax reverted properties is the other low hanging fruit. Typically, communities sell tax reverted properties in one of two ways. The first is through public tax auction. This is where slum lords come and buy up properties to add to their portfolio and is designed to quickly get properties back on the tax rolls regardless of intent of the buyers. The second is through land banks. Land banks are state legislatively created and take tax reverted properties and can hold on to them and are given wide latitude in redevelopment. A standard practice with land banks is to take a tax reverted property and either renovate it themselves and flip it or they will sometimes see if an adjoining property owner wants to buy a vacant lot it for a nominal fee and join the lots as one big yard. If we were to couple training like Incremental Development Alliance’s small developer boot camp, financing tools like crowdfunding, and provide these small developers with opportunities in their own neighborhoods then we are killing several birds with one stone. We could build wealth, remediate blight, and build stronger neighborhoods without displacing residents. 

There’s a lot more that could and needs to be said and changes that need to happen. But these are a few pragmatic steps that communities can take to start to bridge the gap and help to create more locally owned businesses and small-scale developers in communities of color. We must do better. 

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Bridging the Development Divide

“Nothing for us, without us.” – Jermain Ruffin, Host and Founder, “The Streets Are Planning” podcast There seems to have always been winners and losers