Issue #149, Spring 2007

Leading Neighborhood Change

By Alan Mallach

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During the past decade, researchers and practitioners have begun to look at urban neighborhoods from a new perspective, based on the premise that market change drives neighborhood change. That, in turn, has led to the development of market-oriented neighborhood topologies or taxonomies, which have been used not only as a way of distinguishing between different neighborhood types and conditions, but as a framework for developing strategies to effect change.

The insights that have grown out of market-based analysis form the basis for a growing number of urban initiatives, including Philadelphia's Neighborhood Transformation Initiative, and Grand Rapids, Mich.'s Healthy Neighborhoods Initiative. Part and parcel of these initiatives have been the efforts to identify and use indicators of neighborhood change to track the transformation of the neighborhood and determine the success of the strategies adopted by CDCs and local governments.

The focus on market change as the driving force of neighborhood change has led to the use of a wide range of new tools for revitalization. CDCs and municipal officials have begun to focus on strategies designed to increase the market potential and competitive position of neighborhoods, including mixed-income housing, neighborhood amenity and stabilization strategies carried out with market factors in mind and changing the way urban neighborhoods are perceived by the marketplace. When carefully designed and implemented, these strategies work. Capitalizing on the growing market demand for urban living, they have transformed urban neighborhoods around the country, from Patterson Park in Baltimore to Fall Creek Place in Indianapolis.

At the same time, a lot of what goes on is still uncertain and haphazard. The relationship between where a neighborhood fits on a market continuum, and what tools are most effective to build market strength, is still often hit and miss. Tracking neighborhood change is often erratic and uncertain, hindered not only by lack of information and resources, but by complicated data and measurement problems.

More important, as distressed neighborhoods are transformed, it is all too easy to lose sight of the effects of market-driven change on the people who already live there. While a few residents-particularly long-time homeowners ready to cash out-may benefit, others may be harmed, particularly if change leads to higher taxes, higher rents, condo conversions, and ultimately, displacement. Far too often, these questions are never seriously addressed, or if addressed, tackled long after the process of change has begun, and it is too late to affect the outcome more than modestly, if at all.

A major new research initiative from the National Housing Institute, Leading Neighborhood Change (funded by the Surdna Foundation), is designed to pull these many strands together, building a strategic model through which CDCs, city officials and other practitioners and policymakers can work more effectively to bring about neighborhood revitalization that is both sustainable and equitable. Sustainable and equitable change is grounded in solid market demand and the prospect of a good quality of life, coupled with a commitment to minimizing displacement and ensuring that lower-income households will benefit from the changes that have taken place.

Our study will build on the work that has been done over the past decade or so, including both analysis and practical experience in the field, to frame three central questions:
o How can practitioners and policymakers most effectively track neighborhood change to understand where their neighborhood fits on a market continuum and where it is heading?
o What tools are available for fostering market change at the neighborhood scale, how do they work, and at what points in the continuum of change are they most likely to be effective?
o What tools are available for minimizing displacement, preserving affordability and maximizing benefits to lower-income residents from neighborhood change, and at what points in the continuum of change are they most likely to be effective?

Our focus is on change of place, making neighborhoods stronger, healthier and more competitive. While neighborhoods can change along many different dimensions, we believe that change in the housing market is the central dimension of change. While quality-of-life improvements may be necessary to stimulate market demand, only where market demand has reached a level where people actively want to move into an area-or stay there-are those improvements likely to be sustainable. Similarly, from a place-oriented perspective, improvements in residents' economic conditions do not enhance the neighborhood if the outcome of those improvements is that people move out, rather than remaining and fixing up their home or trading up to a bigger house in the same neighborhood.

Within that framework, CDCs and other key neighborhood stakeholders have a wide variety of tools at their disposal to stimulate market demand, depending on the particular assets and constraints in the neighborhood:

Increase the desirability of the neighborhood's housing stock through construction, rehabilitation, incentives for potential homebuyers or rehabbers, equity protection insurance or providing better information to prospective buyers.

Increase neighborhood stability by fighting crime, reducing the number of abandoned properties, preventing foreclosures and property disinvestment by owners, reducing concentrated poverty and building strong neighborhood organizations and institutions.

Increase neighborhood amenity value by capitalizing on assets such as riverfronts and railroad or subway stations, upgrading the area's curb appeal, restoring parks and recreation areas, improving public transportation, upgrading neighborhood shopping and improving schools.

With resources always limited, choosing the most effective strategy, or combination of strategies, is critical. Which to use depends not only on the physical and locational characteristics of the neighborhood, but on its market dynamics. Timing is everything. Vacant old houses for which no use may exist today can be stabilized, rather than demolished, and packaged with incentives a few years later for middle-class families to rehabilitate and live in, after market conditions have improved enough to create the potential demand. A park can be restored in conjunction with a development of new townhouses on its perimeter, simultaneously enhancing the value of the new houses while creating a constituency to use and maintain the park.

If building market demand is difficult, fostering equitable outcomes in the midst of rising demand is even more so. As a neighborhood becomes more attractive to the marketplace, prices will rise. As they do, they will inevitably put pressure on the neighborhood's lower-income residents. Taxes may go up, making it harder for homeowners to stay, while rents may rise as multifamily properties are upgraded, converted to condominiums or demolished for higher density or more profitable uses.

Minimizing displacement and creating neighborhoods that will remain economically integrated over the long term require an intentional effort to manage the market forces that have been unleashed. Management mechanisms include land-banking for affordable-housing construction and legal protections for siting tenants. Timing is also a critical factor. The longer one waits-and the stronger the market becomes-the less room may be available for strategies to preserve affordable housing or create new affordable housing to replace that which is being lost. At the same time, if one acts too aggressively or prematurely, one risks shutting off the market opportunities that are needed to fuel the area's revitalization.

While many practitioners understand these issues intuitively, based on years of working in changing communities, the National Housing Institute feels strongly that organizing this information in a clear and conceptually sound framework that can be used in the field is necessary and timely. Our project is designed to help practitioners and policymakers navigate these complex and treacherous waters.

By offering not only a catalog of strategies and programs, but a body of tools and information to assist users to relate them to measurable changes in their communities, we believe that we can significantly increase the effectiveness of their efforts and their impact on their neighborhoods.

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