Moving Toward the Market

By Harold Simon

Most of us work in nonprofit organizations; many in community development corporations. In our nonprofit world, our “customers” are rarely the ones who pay our salaries. We rely instead on patrons – government and foundation donors – to underwrite much of what we do, with a percentage coming from fees or sales.

Some say this system is successful. Since we work in places where the market has failed, the people and organizations we serve rarely have the financial resources to pay for what we provide – shelter, job training, information – or to pay enough to allow us to provide it. Our patrons recognize this and support us.

But maybe the system isn’t so good. Poverty has gotten worse and providing affordable housing harder. Government subsidy is waning, and, increasingly, foundations are losing sight of the direct connection between an affordable place to live and the ability to save money, or spend on education or business creation instead of rent or mortgage. So what’s a nonprofit to do?

Embracing the Market
For a growing number, the solution seems to be embracing the way of the market. By carefully evaluating your organization’s “products and services,” you can identify those that can compete with for-profits and make money. And when done right, the effort should not interfere with your mission. In fact, contend Michael Shuman and Merrian Fuller, by casting off foundation and government shackles that inevitably accompany support, you should be able to focus more clearly on that mission. For CDCs, say the authors, this is not a new path but a return to their original purpose as entrepreneurial engines of economic revitalization.

More and more, CDCs are trying to follow this path. Homewise in Santa Fe, New Mexico, presents us with a model of a vertically integrated enterprise that provides cost-efficient services to its low- and moderate-income clients, while earning money to cross-subsidize the whole operation. Santa Fe is a very old city that has experienced gentrification for decades (see SF #86). The market has failed many of Santa Fe’s low-income residents while serving the bi-coastal affluent who relocate there. In his profile, Jason Stevenson examines the challenges and opportunities of pursuing a market strategy while simultaneously trying to undo market failures.

And in Albany, New York, a new real estate brokerage is taking a different approach to doing good while doing well. A collaboration of housing nonprofits identified a striking gap in their services. Though low- and moderate-income individuals could, for example, receive credit counseling or mortgages, none of the organizations in the collaborative were helping people find homes. Much like the established mortgage market, the real estate market avoids serving low-income clients or selling low-priced properties, citing high service costs and unprofitable returns. Along with a handful of other nonprofit real estate brokers around the country, Community Realty, profiled by Miriam Axel-Lute, is embarking on an uncharted road. Can they provide the intense level of services their market niche requires and still be profitable (or at least break even)? If they’re successful, they’ll not only fill a gap for their customers, but they might also introduce new residents to communities often neglected by other brokers.

Rejecting the Market
If the market is the solution for many CDCs, it is the problem for others. Randy Stoecker brings us up-to-date on a place that has been fighting gentrification for decades. Back in the 1960s, residents of the Cedar-Riverside neighborhood of Minneapolis, Minnesota, said that the value of their homes was in the nature of their use – as places to live and create community – not in the prices the homes could fetch. A CDC was formed and a limited-equity cooperative created to protect those values. But market forces are strong and people change. Today the CDC struggles to maintain these homes as permanently affordable while many in the community have lost sight of the values that first brought them together. In Stoecker’s view, when a home is seen as nothing more than a commodity to be traded for the highest price, the inevitable result is a weakening in the social fabric.

Most of us work somewhere between Shuman and Fuller’s call for confidence in the market and Stoecker’s call to resist the values that underlie capitalism. Finding the way to support our work while staying true to our missions still remains one of our biggest challenges.

Winds of Change
Our last issue was mailed one week before Hurricane Katrina hit New Orleans and the Gulf Coast. The cover story profiled a group in North Gulfport, Mississippi, fighting the gentrification of a historic black community. Today the community is in ruin. Trisha Miller updates us on the people and neighborhoods she wrote about in that issue.

NHI’s senior research fellow, Mary Gail Snyder, who joined our staff this year after teaching at the University of New Orleans, reminds us that the disaster was only partially a natural one. Our historic racial and economic divides led, inevitably, to this moment. The question now is, can we seize it to redress the underlying issues that go beyond levees and transportation options?

Since the hurricane struck, faith-based organizations, local nonprofits, organizing networks and national advocates and intermediaries have sprung into action. Their first response was relief, followed by planning and political action to fight the greed and indifference that precipitated this disaster. You’ll find links to many of their stories on our website. Over the coming months we’ll examine what their efforts mean, not only to the regions affected, but to how we conduct our work, build power and raise the voices of those we serve.

Back to September/October 2005 index.