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Economic Development

Confronting Suburban Poverty in America

The following is an excerpt from chapter five of the book, "Fighting Today’s Poverty with Yesterday’s Policies."

 

Confronting Suburban Poverty in America

Elizabeth Kneebone & Alan Berube

169 pages, Brookings Institution Press, 2013

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In Confronting Suburban Poverty in America, Elizabeth Kneebone and Alan Berube of the Brookings Institution’s Metropolitan Policy Program take on the new reality of metropolitan poverty and opportunity in America. During the 2000s, the poor population in suburbs grew by 64 percent, versus 29 percent in cities, so that suburbia is now home to a majority of poor residents in the nation’s major metropolitan areas. Yet the antipoverty infrastructure built over the past several decades does not fit this rapidly changing geography. In this chapter, the authors describe this infrastructure and the barriers it poses to approaches that more effectively confront growing suburban poverty.

Chicago, America’s “second city,” has been getting a second look recently, with the election in 2011 of its first new mayor in more than two decades, the emergence of more of its corporations on the global stage, and the 2012 reelection of one of its own as president of the United States.

For all of Chicago’s urban muscle, though, it remains a heavily suburban region. More than two-thirds (68 percent) of the Chicago metropolitan area’s residents live in the suburbs. And over two-thirds (67 percent) of the region’s jobs are located more than ten miles from the downtown Loop. Indeed, many of the country’s most iconic suburbs are found in Chicagoland— from the Frank Lloyd Wright bungalows of Oak Park, to the Northwestern University campus in Evanston, to the Highland Park settings of Ferris Bueller’s Day Off and Sixteen Candles. All together, more than 280 suburban municipalities surround the city of Chicago.1

But Chicago’s suburbs are a much more diverse lot than those examples suggest. To the south of Chicago, stretching into suburban Cook and Will Counties, lies a series of suburban municipalities collectively referred to as the Chicago Southland, including the likes of Blue Island, Dolton, Harvey, Lansing, Park Forest, and South Holland. The Southland thrived when heavy industry and steel mill jobs concentrated in the area to take advantage of the proximity to rail, shipping, and major interstate expressways. As manufacturing and steel jobs began to disappear in the 1970s, many of these communities experienced income declines and poverty increases more typical of the city’s South Side than of its suburbs.

The recent housing crisis highlighted the fundamental misalignment between the Chicago region’s new geography of poverty and the outdated systems responsible for confronting it. By the end of the 2000s, the Southland area was home to fifty-one foreclosure filings per 1,000 mortgageable properties— the highest rate in the metropolitan area, outpacing other suburbs in the region and exceeding rates within the city of Chicago.2 But the relatively small size of many of these municipalities, years of economic restructuring, and sluggish population growth (or loss) meant that many of these suburbs did not have the capacity or resources to deal with the rapid spread of foreclosed and vacant properties threatening to destabilize their communities.

Recognizing these capacity constraints, the Southland suburbs had worked together since the late 1970s on issues that evaded the narrow geographic confines of each small jurisdiction. Under the auspices of the South Suburban Mayors and Managers Association and the Chicago Southland Economic Development Corporation, the suburbs joined forces around issues such as municipal management and planning, bond issuance and purchasing, brownfield remediation, public safety, infrastructure, and transportation. As the foreclosure crisis began to strike, they turned again to this model to access the first wave of federal Neighborhood Stabilization Program (NSP) funding— emergency assistance for state and local governments aimed at stabilizing home values in neighborhoods hardest hit by the foreclosure crisis. Communities in Cook County had two opportunities to apply for NSP funds— through an application to the state and to the county. Rather than compete with one another twice for critical resources, nineteen municipalities in the south suburbs banded together to submit a joint NSP application for more than $70 million in aid, based on a comprehensive strategy to link housing to public transit and broader economic development priorities.

Ultimately, though the state did not fund the collaborative at the time, the first-round NSP application attracted more than $9 million in funding from the county. However, instead of funding the collaborative, Cook County funded eleven municipalities directly, citing concerns raised by U.S. Department of Housing and Urban Development (HUD) technical advisers about whether the collaborative could assume the liability of a municipality and whether it could efficiently spend time-sensitive resources. But by funding each municipality separately and failing to engage directly with the collaborative, the capacity and efficiencies created by sharing resources and centralizing the application and reporting functions were lost.3

Although President Barack Obama’s administration had repeatedly signaled support for collaborative, integrated, and regional solutions, the structural barriers inherent in a system built to fund states or localities (and not in-between entities such as the Chicago Southland Housing and Community Development Collaborative, as it came to be called) nearly scuttled the strategic efforts of Southland leaders.4 One Southland elected official reflected on the difficulties he and his counterparts encountered as they pursued joint funding, stating, “We need new rules, because the current rules almost destroyed the collaborative.”5

The idea of a cooperative approach to addressing poverty and opportunity is hardly new. When President Lyndon Johnson declared the War on Poverty in 1964, he not only pointed to the tools needed to increase opportunity and alleviate poverty, including “better schools, and better health, and better homes, and better training, and better job opportunities.” He also called for a policy approach based on collaboration:

Poverty is a national problem, requiring improved national organization and support. But this attack, to be effective, must also be organized at the State and the local level and must be supported and directed by State and local efforts. . . . The program I shall propose will emphasize this cooperative approach to help that one-fifth of all American families with incomes too small to even meet their basic needs.6

The fundamentals of fighting poverty have not changed since that seminal speech. Finding collaborative approaches that improve access to opportunities is as imperative today as it was almost fifty years ago.

But the shifting geography of poverty, combined with a legacy system for confronting it, has arguably made the goals of the War on Poverty even harder to reach. As the Southland example illustrates, agencies, programs, and approaches designed years, if not decades, ago to help cities combat poverty are fundamentally out of step with today’s realities. Where poverty affects people and places in multidimensional ways, the system is siloed and fragmented. Where rapid economic changes and strained public budgets demand flexible solutions to poverty, the system is rigid and hinders collaboration. And where poverty is increasingly suburban, the system was built largely to address the needs of inner-city or rural communities. This chapter describes the current place-based antipoverty system in more detail, exploring the barriers it poses to approaches that more effectively confront growing poverty in suburbia.

Existing Place-Based Policies

The “system” to which we refer encompasses a range of federal policies that over the past several decades have evolved to alleviate poverty and increase access to opportunity in metropolitan areas. Though some may be commonly characterized as “place-based” and others as “people-based” policies, each has a spatial dimension that underscores the importance of place.

Building on a typology developed by Bruce Katz of the Brookings Institution, we group these policies and programs into three categories: improving neighborhoods, delivering services, and expanding opportunity.7 Many are supported by funding or regulation at the federal level that is ultimately deployed at the local level, and several require additional matching funds from state, local, or private sources. As a result, the federal government provides much of the overarching structure of the current system, motivating nonprofit activity and leveraging state, local, and private funding around poverty alleviation efforts.8

Improving Neighborhoods

While there have been different iterations over the last few decades, policies to improve neighborhoods typically have worked to address the place-based market failures that contribute to poverty by upgrading the physical and economic environments in poor neighborhoods. In part, the neighborhood improvement approach emerged as a response to urban renewal policies that appeared in the 1930s and continued through the 1970s, which redeveloped distressed inner-city neighborhoods in a top-down effort to eradicate urban blight. These programs included the 1949 Housing Act, which ushered in urban redevelopment (later known as renewal) policies and enabled the development of inner-city public housing towers in racial ghettos, and the 1956 U.S. Interstate Highway program, which is thought to have torn down more low-income neighborhoods than either urban renewal or inner-city public housing developments.9

In contrast, neighborhood improvement policies have adopted more of a bottom-up approach to addressing the ill effects of concentrated disadvantage, seeking to work within distressed neighborhoods to improve the lives of the poor “in place.”10 These strategies focus primarily on bringing better housing and job opportunities into poor neighborhoods, or working toward a wholesale transformation of distressed places into stable mixed-income and mixed-use communities. Bruce Katz observed:

American-style neighborhood improvement represents an interesting blend of theories of community empowerment, corporate social responsibility, and market engagement. It applies a public-private partnership model at the neighborhood level. Nonprofit community organizations become adept at performing functions (e.g., building affordable housing, making home loans) that are normally carried out by for-profit institutions. They are financed in these endeavors, not only by government grants, but by private equity raised through syndications of tax credits, large-scale philanthropic investment in organizational capacity, and private-sector mortgage finance.11

Perhaps no one policy area illustrates this complexity and blend of policy vehicles for neighborhood improvement— from regulation to tax credits to competitive and formula grants— more than affordable housing. A panoply of federal policy tools seeks to increase the availability of affordable housing in local communities.12

—Enacted in 1977 to address redlining in low-income neighborhoods, the Community Reinvestment Act (CRA) requires federally insured depository institutions to meet the credit needs of the communities (including low- and moderate-income neighborhoods) in which they do business and stimulates private-sector investment in many of the other leading tools for affordable housing development.

—The Low Income Housing Tax Credit (LIHTC), started in 1986, provides an annual allotment of federal income tax credits to states, which then disburse them to private developers who agree to set aside a certain number of units for low- to moderate-income renters.

—Since 1992, the HOME Investment Partnership program has provided funds for the acquisition, construction, and rehabilitation of affordable housing through a formula grant to state and local governments. In addition, it requires recipients to set aside 15 percent of the program funds for community housing development organizations.

—HOPE VI, which also began in 1992, functioned as a competitive grant available to public housing authorities in areas with severely distressed units in their housing stock. The program leveraged public and private dollars to redevelop the worst concentrations of distressed public housing and replace them with lower-density, better-designed, and economically integrated housing options.

These are only a few of the dozens of federal policies and programs designed to increase the supply of affordable housing, but they demonstrate the range of approaches to this issue that aim to help low-income people and places.

Neighborhood improvement strategies also encompass policies designed to encourage community and economic development and to achieve better education and health outcomes for residents of disadvantaged neighborhoods. The Community Development Block Grant (CDBG) program, created in 1974, provides flexible resources to state and local governments for a range of activities that promote community and economic development. In addition, programs like Empowerment Zones, enacted in 1993, and New Market Tax Credits, started in 2000, focus on attracting and stimulating business investment in distressed and disinvested communities.

More recently, policies such as the Obama administration’s Choice Neighborhoods program have adopted an arguably more holistic approach to revitalizing distressed areas. Building on HOPE VI, the Choice Neighborhoods program seeks to turn distressed communities and federally subsidized housing projects into stable mixed-income communities by linking housing improvements with access to services, schools, transportation, and employment opportunities, and emphasizing local community planning.

Altogether, the federal government dedicated about $14 billion in spending programs and tax incentives in 2012 to efforts aimed explicitly at neighborhood improvement. The LIHTC alone accounted for more than one-third of that spending, at $5.6 billion. Of course, this total does not account for the impact of important laws and regulations such as the CRA on the allocation of private capital to low-income communities. In addition, many of these funding streams, such as the LIHTC and CDBG loan guarantees, generate significant private and philanthropic financial leverage not captured in federal outlays.13


Read a related article, "Poverty's New Home," here.

Notes

1 Susan Longworth, “Suburban Housing Collaboratives: A Case for Interjurisdictional Collaboration,” Profitwise News and Views (Chicago: Community Development and Policy Studies Division of the Federal Reserve Bank of Chicago, 2011).
2 Woodstock Institute, “Chicago City and Regional Foreclosure Activity” (Chicago, 2010).
3 As described in chapter 6, HUD and new Cook County leadership eventually put their support behind the collaborative approaches developed in Chicago’s suburbs.
4 For examples of the Obama administration’s efforts to promote more integrated and comprehensive planning, see the Sustainable Communities Regional Planning Grant program, which “supports metropolitan and multijurisdictional planning efforts that integrate housing, land use, economic and workforce development, transportation, and infrastructure investments” and “places a priority on investing in partnerships, including nontraditional partnerships” (http://www.grants.gov/search/search.do?mode=VIEW&oppId=109013).
5 Dominic Tocci, “Multi-Town Collaboration Is Now an Imperative,” Metropolitan Planning Council, November 22, 2011 (http://www.metroplanning.org/newsevents/article/6279), p. 2.
6 President Lyndon B. Johnson, “Annual Message to the Congress on the State of the Union,” January 8, 1964 (http://www.lbjlib.utexas.edu/johnson/archives.hom/speeches.hom/640108.asp).
7 Bruce Katz, “Neighborhoods of Choice and Connection: The Evolution of American Neighborhood Policy and What It Means for the United Kingdom,” Metropolitan Policy Program Report (Washington: Brookings Institution, 2004).
8 See, for example, Sarah Reckhow and Margaret Weir, “Building a Stronger Regional Safety Net: Philanthropy’s Role,” Metropolitan Opportunity Series 17 (Washington: Brookings Institution, 2011); Pascale Joassart-Marcelli and Jennifer R. Wolch, “The Intrametropolitan Geography of Poverty and the Nonprofit Sector in Southern California,” Nonprofit and Voluntary Sector Quarterly 32, no. 1 (2003): 70–96.
9 Alexander von Hoffman, “The Past, Present, and Future of Community Development in the United States,” in Investing in What Works for America’s Communities: Essays on People, Place, and Purpose, edited by Nancy Andrews and David Erickson (San Francisco: Federal Reserve Bank of San Francisco and Low Income Investment Fund, 2012), pp. 12–15.
10 Katz, “Neighborhoods of Choice and Connection.”
11 Ibid., p. 10.
12 The programs in this category provide resources to governments and nonprofit organizations to promote the economic revitalization of lower-income neighborhoods; all programs explicitly target substate geographies for those resources.
They exclude programs characterized by individual or family enrollment and those that do not have an explicit revitalization purpose (for example, public housing and project-based rental assistance).
13 For analysis of the effects of the CRA on home mortgage lending to low- and moderate-income communities, see Robert E. Litan, Nicolas Retsinas, Eric Belsky, and Susan White Haag, “The Community Reinvestment Act after Financial Modernization: A Final Report” (Washington: U.S. Department of the Treasury, 2001).

 
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