Big ideas sparked by the housing crisis

Carl Vogel
Published: January 30, 2012

“We have to acknowledge that it takes more than housing,” said Chrystal Kornegay at the Chicago panel.

Gordon Walek

Pull together experts and stakeholders from around the country to discuss the connection between regional development and neighborhood housing markets, and something interesting happens. The conversation gets even broader.

The frame for the second “Connecting to Markets” series was a widescale exploration of how the current housing crisis impacts development, housing options, investment and opportunity in inner city, suburban and exurban neighborhoods.

The seminar featured a national panel discussion in Chicago, simulcast to five other cities—Boston, Houston, Minneapolis, Pittsburgh and San Francisco—and then followed by regional discussions in those locations.

“In general, neighborhoods, cities and regions decline or prosper together. Real estate values, incomes and outputs all tend to correlate,” explained Bob Weissbourd, president of RW Ventures, in his opening statement for the event, which was sponsored by the Federal Reserve Banks of Boston, Chicago, Houston, Los Angeles, Minneapolis and San Francisco as well as the Urban Institute, the Institute for Comprehensive Community Development and the Local Initiatives Support Corporation (LISC).

How then, can low-income communities both leverage and influence regional efforts? The participants put even that expansive consideration of housing into a wider, more comprehensive perspective.

“[Housing has] implications for how well students do in school, how residents are attached to the labor force, how they’re impacted by the criminal justice system,” said Raphael Bostic.

Gordon Walek

“A lot of factors we need to take into account”

“People choose a neighborhood not just by housing and not just because of what jobs are available. There are a lot of factors we need to take into account when enacting policies,” said Raphael Bostic, the assistant secretary for policy development and research for HUD.

Bostic noted how residents’ health can be impacted by where they live, for instance—and so can the options they have for health care when a family member is sick.

“[Housing has] implications for how well students do in school, how residents are attached to the labor force, how they’re impacted by the criminal justice system,” he said.

Both Bostic and Antonio Riley, HUD’s Midwest regional administrator, talked about how this wider understanding of housing’s role in a neighborhood is reflected in current federal initiatives, including the Neighborhood Revitalization Initiative, which brings together the departments of Education, HUD, Justice, Treasury, and Health and Human Services.

CDFI loan funds are also starting to expand their view of the role of neighborhood development. Calvin Holmes, the president of the Chicago Community Loan Fund, cited new support by CDFI loan funds for charter schools, retail development and health care centers during the Chicago discussion.

“It’s a pretty tectonic shift,” he said. “We’re thinking about it much more broadly, and that includes schools and that includes safety. It’s really changed the dynamics of community development.”

“We have to acknowledge that it takes more than housing,” said Chrystal Kornegay, the executive director of Boston’s Urban Edge community development corporation, when talking about community-based organizations.

A lack of housing options in a community has a significant negative ripple effect, said Cathy Capone Bennett.

The education agenda

“One of the major factors that influences where people move to a place has to do with schools,” Kornegay added. “As a CDC, we need to think about how we can have a voice in education decisions. That’s not always easy—they have their own language and their own world.”

Education became a topic in several of the cities. Pittsburgh’s regional panel touched on the importance of getting school districts involved in local planning, and in Houston, the discussion turned to the need to address poor education outcomes in Harris County K-12 schools. Participants talked about the need for career coaching and technical training for high school-aged youth, as well as the potential for Houston's incomplete city-wide wi-fi project to be a force which improves equity in education.

In Minneapolis, the regional conversation included not only how other community factors influence housing outcomes, but also how the health of local housing impacts those issues in return.

A lack of housing options in a community has a significant negative ripple effect, said Cathy Capone Bennett, the Project Coordinator for the Urban Land Initiative Minnesota/ Regional Council of Mayor’s Housing Initiative.

Tighter municipal budgets due to foreclosures and a drop in property values translate to fewer public services and deferred maintenance on facilities, for instance, and when families can’t afford to move or have to double up in rental units, it has a notable impact on local schools.

Clark Ziegler, executive director of the Massachusetts Housing Partnership, argued that the region's failure to create more housing will limit its economic growth in the future.

George Galster called for more collaboration between “community developers” and “smart growthers.”

Gordon Walek

The regional perspective

The same dynamic is at play in the suburbs, especially the newest and most remote developments, where public services are in danger of being severely curtailed as property taxes dry up.

“When you look at the pattern of foreclosures, it’s hard to believe some suburban districts will be able to maintain their level of services,” argued Chris Walker, research director for LISC. (For more on the implications of the suburban malaise for city neighborhoods, read John McCarron’s blog post, “A coalition you never thought you’d see.”)

Like Weissbourd, George Galster, a professor of urban affairs at Wayne State University, argued that the long-term fate of all parts of a region—from the inner city to the outer suburbs—are linked together.

With that perspective, Galster said in his presentation, it only makes sense that there can and should be more collaboration between “community developers” working in urban neighborhoods and “smart growthers” focused on fighting suburban sprawl.

The result can be more resources pushed back toward urban communities because of limits on regional expansion. “Growth boundaries can lead to better urban schools, resources for public safety,” Galster said. “It can make people reconsider cities.”

Chicago County Foreclosure Inventory

"Neighborhoods and Housing Markets Regional Discussion," Robin Newberger

However, the complexity of the urban/suburban connection was illustrated in the Chicago session in a presentation of regional housing data compiled by Robin Newberger, a senior business economist from the Federal Reserve Bank of Chicago. “Foreclosures are affecting the entire region,” she summarized when presenting a chart of the rise in foreclosure rates in the nine metropolitan counties that include and surround Chicago (right).

A few slides later, though, and Newberger showed that the drop in home values varied widely in the area, both within and outside the city. Chicago’s Little Village neighborhood saw a decline in home values from 1992 to 2010 of 60.7 percent, for example, while the Lincoln Park community only dropped 6.6 percent.

Meanwhile, in the suburbs, Cicero dropped 61.4 percent, Woodstock dropped 37.6 percent and Naperville dropped only 18.1 percent. (To download Newberger’s PowerPoint presentation, click here.)

In Boston, Barry Bluestone of Northeastern University also described how localized the impact of the foreclosure wave had been in Massachusetts, and a similar dynamic was noted at the San Francisco meeting.

“We hear that people in Palo Alto are tearing down one million dollar homes to build two million dollar homes,” said Stephanie Forbes, executive director of Bay Area LISC. [Meanwhile], families with lower incomes are doubling and tripling up in homes and apartments. The disparity appears to be increasing. Lower income areas are continuing to do worse as higher income areas are continuing to do better.”

The audience listens intently at the Chicago Federal Reserve Bank auditorium.

Gordon Walek

Rental units needed

Blessed with a region that has weathered the recession relatively well, Pittsburgh still faces another common issue: Rising rents. With many families being pushed out of their house due to foreclosure and into the market for an apartment, the increased demand is raising the cost of renting, even as more people are seeing their income decline.

“We don’t need to build our way out [of the recession],” said Liz Hersch, the executive director of the Housing Alliance of Pennsylvania in the Pittsburgh regional discussion. “But it’s hard to repair older rentals when the rent isn’t high enough to cover it.”

In metro Chicago, a third of the foreclosures are two- and three-flats, most of which include one or more rental units, according to Antonio Riley. Yet much of the foreclosure mitigation plans are aimed at single-family homes. “There’s a gap for rental properties,” he said.

“The problem in the Bay Area is that the drop in housing prices due to foreclosures has not solved the affordable housing problem,” said Evelyn Stivers, the field director for the Non-Profit Housing Association of Northern California. “There has also been huge migration into urban areas with lots of services like better public transit and high-paying entry level jobs. Recently, Santa Clara County rents have gone up 29 percent.”

Calvin Holmes suggests that new development in Chicago's North Lawndale community can "help people appreciate that entire corridor [on the West Side] as an area of choice and opportunity.”

Gordon Walek

Disagreement and Divergent Agendas

Several of the questions from the panel facilitators and the audience revolved around the idea of zero-sum solutions. If some of a region’s municipalities or communities improve their housing situation, does that take resources and momentum from others?

By and large, the experts agreed that this work is not a zero-sum game. Holmes gave an example of a new Dr. Martin Luther King Jr. district in Chicago’s North Lawndale neighborhood. “If it can be successful, it could help people appreciate that entire corridor [on the West Side] as an area of choice and opportunity,” he said.

That said, panelists did acknowledge that there can be difficulties and disagreements in moving forward. “Community development started as local control over local policies,” explained Kornegay. In that context, working within a regional plan may feel like giving up too much control.

Race is another hot-button topic that cannot be ignored when talking about housing. A question to the panel from Minneapolis asked how housing discussions can include the reality of racial steering from real estate agents in some communities and towns.

Participants spoke about the necessity of incorporating fair housing advocates and their agenda into any wider discussion of regional and place-based housing issues.

“We are going through a disruptive transformation in the economy at all levels,” said Bob Weissbourd.

Gordon Walek

Big Changes are Coming

Throughout the discussion, participants noted that whatever the solutions and changes that are on the horizon, it’s unlikely that the housing market, the economy or our communities will return to where they were before the recession began.

Neighborhoods and nonprofits that take that reality into account in their planning will be better off.

“We are going through a disruptive transformation in the economy at all levels,” said Weissbourd. “The ‘great recession’ is not a temporary blip, or a routine business cycle, after which everything will return to ‘normal.’ Rather, it reflects that the global economy is undergoing a major, disruptive transformation—as significant as the industrial revolution.”

That kind of transformation provides opportunities, as well as risks.

Some are big-picture: Weissbourd talked about how communities are the building blocks of regional economic growth, and how community development can rethink its role to help residents of urban neighborhoods by connecting to the regional dynamic.

Other opportunities are more specific. Bostic said that the current system for building affordable housing is largely reliant on Low-Income Housing Tax Credits. “But the tax credit program depends on housing profits,” he pointed out. “We need to think about a tool that allows us to produce in difficult times too.”

“I see our inner-city neighborhoods as both high-challenge and high-opportunity areas,” said Melvin Carter, a council member of the City of Saint Paul. “Following the notion that ‘high-risk yields high return,’ we have the potential to get a very high return-on-investment.”