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The Community Economic
Development Movement
 . 

  

The Community Economic Development Movement
 THE COMMUNITY ECONOMIC
........

william h. simon
 .
.
.
.
.
.
.
. Law, Business, and the New Social Policy

DEVELOPMENT MOVEMENT

duke university press : durham and london 2001 . . . . . . . . . . . .

∫ 2001 Duke University Press All rights reserved
Printed in the United States of America on acid-free paper $
Designed by Rebecca Giménez Typeset in Minion with
Franklin Gothic display by Keystone Typesetting, Inc.
Library of Congress Cataloging-in-Publication Data
appear on the last printed page of this book.
Contents

Acknowledgments vii

1. Introduction 1

2. Background: The Turn to Community-Based

Organizations in Social Policy 7
General Planning: The Revival of Redevelopment and Community
Action, 7 / Housing, 19 / Banking and Credit, 26 / Job Training and
Placement, 34 / Welfare Reform, 37 / Community Health Care, 39

3. Three Logics of Community Action 41

Economic, 42 / Social, 49 / Political, 58

4. The Community as Beneficiary of Economic Development 69

The Local Perspective, 69 / The Community as Residual Claimant:
Development Rights, 76 / Local Trade: Self-Reliance and Import
Substitution, 95 / Local Knowledge as a Community Asset, 109

5. The Community as Agent of Economic Development 113

Tools, 114 / Institutions: The Community Development
Corporation, 119 / Institutions: Cooperatives, 130 / Hybrids:
Churches and Mutual Housing Associations, 137
6. Constrained Property: Rights as Anchors 143
Subsidized Housing, 145 / Enterprises: Cooperatives, 156 /
Community-Based Nongovernmental Organizations: The Nonprofit
Corporation, 160 / Churches: Mobile versus Immobile Membership, 162

7. Induced Mobilization 167

The Ex Ante Structural Approach, 169 / The Ex Post Competitive Approach, 178

8. Institutional Hybridization 195

An Illustration: Hyde Square Co-op, 195 / Social Control,
Opportunism, and Empowerment: Boundary Problems, 206

9. The Limits of CED 219

Distributive Consequences, 219 / The Instability of Low-Income
Communities, 222 / The Limited Appeal of the Communitarian Ideal, 223 /
The Weakness of the Inside Game, 225 / Conclusion, 227

Index 229
Acknowledgments

In 1995 Gary Bellow asked me to develop a course for the Harvard Law
School winter term to complement the clinical practice of the Commu-
nity Enterprise Unit at the school’s Hale and Dorr Legal Services Center
in Jamaica Plain. I’ve taught the course every January since 1986, and
this book is a product of that experience.
The argument incorporates and responds to many comments from
the remarkable group of students the course has attracted over the years.
I am especially grateful to that first group in January 1996, who re-
sponded to my groping e√orts with a combination of sympathy, world-
liness, and visionary hope that continues to inspire me.
The lawyers at the Hale and Dorr Center, including Jeanne Charn,
Brian Ford, Liz Solar, and Vin McCarthy have taught me a lot and
provided various forms of support. Arthur Johnson, a ced pioneer who
has dedicated himself with integrity and imagination to the Jamaica
Plain community for twenty-five years, has been my most important
informant. Our collaboration in the Law School’s ced course has been
invaluable to me.
I got my first taste of ced in 1991 at the Center for Law and Economic
Development in Berkeley (now Oakland), where Brad Caftel, James
Head, Dave Kirkpatrick, and Jan Stokeley—four more pioneers—shared
their knowledge. Since then, I have benefited from many conversations
viii : Acknowledgments

with Kevin Stein of the East Palo Alto Community Law Project and
Peter Pitego√ of the State University of New York at Bu√alo.
For helpful comments on the manuscript, I’m grateful to Greg Alex-
ander, Susan Bennett, Peter Pitego√, Mark Aaronson, Joel Handler,
Jerry Frug, Fred Block, and Chuck Sabel. I got valuable suggestions and
encouragement at a seminar at the Columbia Law School, where I pre-
sented drafts of two chapters.
The Copes—Greg, Comfort, Eliza, and Thomas—put me up in Ja-
maica Plain and o√ered support of many kinds during some of those
cold Januaries. I could not have done it without them.
Norma Tabares provided excellent research assistance. As always, Pat
Adan’s administrative support was invaluable.
 .
.
.
Chapter 1 . Introduction
.
.

Within a five-minute walk of the Stony Brook subway stop in the Ja-
maica Plain section of Boston, you can encounter the following:
—A renovated industrial site of about five acres and sixteen buildings
that serves as a business incubator for small firms that receive technical
assistance from the Jamaica Plain Neighborhood Development Corpo-
ration (jpndc), a nonprofit community development corporation,
which is also housed there. Known as the Brewery after its former
proprietor, a beermaker, the complex is owned by a nonprofit subsid-
iary of jpndc.
—A 44,000-square-foot Stop ’n Shop supermarket. The market
opened in 1991 after years in which the community had been without a
major grocery store. It lies next to a recently renovated community
health center and a large high-rise public housing project. The land on
which the market and health center sit was developed and is owned by a
limited partnership that includes, in addition to a commercial investor,
jpndc and the Tenant Management Corporation of the housing proj-
ect. Some of the income from the market’s and health center’s leases
goes into the Community Benefits Trust Fund, which supports job
training and business development activities.
—A cluster of small, attractive multi-unit residential buildings con-
taining a total of forty-one homes. These units were built with support
from the federal Low Income Housing Tax Credit, and most are oc-
2 : Community Economic Development Movement

cupied by low- and moderate-income families at rents limited to 30

percent of family income. The buildings are owned by a limited part-
nership in which the general partners are a subsidiary of jpndc and a
resident cooperative; the limited partners include five conventional
business corporations and a nonprofit corporation with a board com-
posed of prominent government and business figures that promotes
housing development throughout the state.
—Two recently renovated apartment buildings—one with eleven
units and one with forty-five units—designed with common areas and
facilities for medical support for elderly residents. The project benefits
from large federal grants. It is owned by jpndc; the units are leased to
the tenants at rents that may not exceed 30 percent of income.
—A wood-frame building containing three apartments recently ren-
ovated by jpndc with support from various public programs. JPNDC
then sold the building at a price well below market value to an individ-
ual, who, as a condition of ownership set out in the deed, must live in
one of the units and rent the others only to people who meet specified
income-eligibility conditions at specified rents.
These institutions are products of the Community Economic De-
velopment (ced) Movement. Although it is unusual to find so many
concentrated in such a small area—there are still more there that I have
not mentioned—such projects can be found in most cities; their num-
bers have increased substantially in recent years, and there will be many
more of them if current programs succeed. Such projects figure promi-
nently in the most optimistic and innovative approaches to urban pov-
erty on both the left and the right. They exemplify a kind of social
entrepreneurialism that is flourishing across the country.1 As support
for traditional welfare and public housing programs has waned, a corre-
sponding (though far from proportionate) increase in support for ced
has arisen. The movement has been fueled by trends toward decentraliz-
ing public administration, on the one hand, and channeling the de-
velopment of local markets along socially desirable paths, on the other.
It has also been encouraged by changes in the contours of urban politics,
especially new strategies by neighborhood activists.
1. See Harold McDougal, Black Baltimore: A New Theory of Community (1994); Harold
Washington and the Neighborhoods: Progressive Government in Chicago 1983–87, ed.
Pierre Clavel and Wim Wievel (1993); Peter Medo√ and Holly Sklar, Streets of Hope: The
Fall and Rise of an Urban Neighborhood (1994) (Dudley Street area of Boston).
 Introduction : 3

Though there are many variations, the core definition of ced em-
braces (1) e√orts to develop housing, jobs, or business opportunities for
low-income people, (2) in which a leading role is played by nonprofit,
nongovernmental organizations (3) that are accountable to residentially
defined communities.2 Chapter 2 surveys the increasing focus on such
e√orts in a broad range of public programs.
These e√orts are supported by a cluster of convergent policy ra-
tionales that, in the most influential perspective, represents at once a
theory of local economic development, a strategy of social policy imple-
mentation, and a vision of grassroots democracy. These ‘‘three logics of
community action’’ are explored in chapter 3.
The ced Movement has brought forth a profusion of legal and in-
stitutional innovation. CED institutions are based on traditional, albeit
peripheral, legal forms, especially the charitable corporation and the
cooperative, but the movement has elaborated and combined them in
innovative ways. The popular term ‘‘public–private partnership’’ glosses
over the myriad and complex forms that public and private take in these
projects.
The heart of the analysis focuses on the institutional contours of ced
practice. There are five core themes:
Chapter 4 discusses the theme of the community as beneficiary of
economic development. At the modest end of the spectrum, this notion
refers to the traditional role of local institutions in regulating to mitigate
the negative external e√ects of development and in taxing property and
economic activity to support the provision of public goods, such as
roads, police, and schools. At the more radical end, it connotes the idea

2. The average population of a community development corporation (cdc) commu-

nity was 69,000, and the median was 32,500 in a 1992 study of 130 cdcs: Avis Vidal,
Rebuilding Communities: A National Study of Community Development Corporations 38
(New School for Social Research, 1992). The range is broad. The Bronx Overall Eco-
nomic Development Corporation, which coordinates the federal Empowerment Zone
program in the South Bronx serves an area of about 100,000 people. The Jamaica Plain
Neighborhood Development Corporation, as well as the cdcs I discuss below in East
Palo Alto, California, and the Dudley Street area of Boston, have constituencies of
about 25,000. Optimal size, of course, depends in part on the types of projects the
organization does. Job training tends to be done over larger areas than housing, and
cdcs serving small areas may find large real estate projects beyond their means. But
generalization is di≈cult. Marin City, California, whose cdc recently completed a
major housing and commercial project, has only about 2,500 residents.
4 : Community Economic Development Movement

that the community—defined as the collectivity of residents within its

borders—is the residual claimant on the proceeds of local development.
The more radical interpretations challenge some traditional doctrines
of American local government, including constitutional doctrines that
limit residential communities’ ability to pursue their interests at the
expense of property owners and nonresident workers.
Next, there is the theme of the community as agent of economic
development, discussed in chapter 5. This notion implies an entrepre-
neurial role for local institutions that, as applied to nonbusiness institu-
tions, is somewhat novel. A central question for the movement has been
how this entrepreneurial role should be institutionalized. The most
prominent answer gives a central role to the community development
corporation (cdc). Although they are not primarily oriented toward
profit, cdcs are in many ways competitive enterprises, and their mecha-
nisms of accountability are a hybrid of those associated with business
and government.
Constrained property rights are the subject of chapter 6. CED in-
stitutions tend to create property rights that are quite di√erent from the
paradigm of private law. Such property tends to be subject to two kinds
of constraint—alienation constraints and accumulation constraints. Al-
ienation constraints limit the ability to sell or transfer the property.
Accumulation constraints limit the degree of inequality within some
group associated with the property. These constraints are most salient in
the limited-equity cooperative, a type of organization found in both
subsidized housing and business development. Though less visible, such
constraints play important roles in other types of organizations associ-
ated with ced, including the cdc.
Chapter 7 takes up the theme of induced mobilization. To widely
varying degrees, ced projects depend on local participation. In addition
to its entrepreneurial side, the cdc has an organizing and representative
side. This latter side is encouraged by a growing number of state, re-
gional, and national institutions that provide support for local devel-
opment that is conditioned on some degree of mobilization. These
supporting institutions typically require community applicants to dem-
onstrate at least openness to—and, sometimes, e√ective encouragement
of—resident participation. These programs represent a striking come-
back of an idea that has often been pronounced dead since the 1960s.
Induced mobilization was central to the ‘‘Community Action Program’’
 Introduction : 5

launched by the Economic Opportunity Act of 1964, but the idea was
disparaged on both right and left, and it faded. The new variation has
both continuities with and di√erences from the older one.
The last of the basic themes is institutional hybridization, taken up
in chapter 8. CED structures tend to defy conventional boundaries
that separate levels of government and types of private organization.
They recombine organizational attributes in unfamiliar ways in order
better to link such functions as political representation and economic
entrepreneurialism.
The focus here is on the institutional configuration of ced practice. I
suggest that the movement has developed a set of structures that re-
sponds usefully to the social forces emphasized in the three logics of
community action discussed in chapter 3. These innovations represent
an enduring achievement that promises a broad range of productive
applications. This is not, however, a full-scale appraisal of community-
based social policy. Such an e√ort would require a larger body of infor-
mation than we possess, and it would also have to consider the interac-
tions of the local values and forces emphasized in the ced perspective
with competing values and surrounding structures above the local level.
Chapter 9 identifies some of these considerations and considers briefly
how they bear on the appraisal of Community Economic Development.
This page intentionally left blank
 .
. Background: The Turn to Community-Based
.
Chapter 2 .
.
. Organizations in Social Policy

Its practitioners think of the ced Movement as a grassroots a√air. To

begin an account of ced by reviewing national-, regional-, and state-
support structures might strike them as looking through the wrong end
of the telescope. Yet no one denies that grassroots ced activities depend
on an elaborate network of larger-scale e√orts. Moreover, the increasing
salience of ced in political and policy discourse can be most readily seen
in the recent growth of national, regional, and state programs designed
to encourage and sustain it.

General Planning: The Revival of Redevelopment and Community Action

Looming over the current ced Movement are memories of two earlier
experiments in community development—urban renewal, or Redevel-
opment (a word I capitalize to indicate that it is a term of art referring to
a special legal process), and the Community Action Program. Both are
widely regarded as discredited, and to some extent the current move-
ment has been shaped in reaction to their failures. However, in some
respects, current e√orts might also seem a continuation and vindication
of the earlier movements.
8 : Community Economic Development Movement

redevelopment
The Redevelopment process was created by the states under the impetus
of the National Housing Act of 1949, which provided for grants and
other support for local e√orts to revitalize ‘‘blighted’’ areas. The federal
grant program came to be called ‘‘Urban Renewal.’’ The state process it
supported begins with the designation of an area as ‘‘blighted.’’ A mu-
nicipal agency then undertakes with private investors to formulate a
plan of public and private investments to improve the area. The agency
can draw on municipal powers of spending, eminent domain, land-use
regulation, and public finance—with streamlined procedures. The plan
often provides for public provision of structural improvements, as well
as the condemnation and delivery to private developers of large tracts of
land, perhaps at a substantial ‘‘write down’’ (below-cost price). The pri-
vate developers undertake various improvements on their own account
and perhaps build community facilities, such as parks, meeting places,
or low-income housing. The plans and ensuing contracts often limit or
designate special uses for state and local taxes on the improvements.1
The Redevelopment process responds to a problem of coordination
pervasive in real estate development that has been thought exceptionally
severe in poor or otherwise ‘‘blighted’’ areas. One aspect of the coordi-
nation problem arises from the fact that the basic local instruments of
economic development—providing tangible public goods such as roads
and parks; delivering services such as police and schools; regulating land
use; and o√ering fiscal subsidies, such as targeted tax breaks or favorable
credit terms—often involve separate political processes. Bringing them
to bear simultaneously on an ambitious development project could be
cumbersome. Redevelopment combines the tools in a single, stream-
lined process.
The other aspect concerns the coordination of investments. The suc-
cess of a real estate investment typically depends on other investments in
the surrounding area, both public investments in public goods and
services and private investments that make the neighborhood more
attractive or produce beneficial services. In a prosperous neighborhood,

1. For overviews with citations to the extensive literature, see Sonya Beko√ Molho and
Gideon Kanner, ‘‘Urban Renewal: Laissez-Faire for the Poor, Welfare for the Rich,’’ 8
Pacific Law Journal 627 (1977); Benjamin B. Quinones, ‘‘Redevelopment Redefined:
Revitalizing the Central City with Resident Control,’’ 27 University of Michigan Journal
of Law Reform 689 (1994).
 Social Policy : 9

informal coordination or simply shared optimism may be su≈cient to

induce separate but mutually beneficial investment. However, in a
blighted area, public and private investors may need more formal
commitments from each other.2 The Redevelopment process structures
negotiation and produces binding contracts intended to create such
commitments.
Redevelopment has been harshly criticized for decades. The critics
have shown that, over and over, the development facilitated by the
process has come at the expense of the initial residents of the commu-
nities being developed. In the worst-case scenario, which has been often
enacted, it takes the form of ‘‘Negro removal’’—displacing low-income,
minority people by destroying rental housing or commercial buildings
they use or occupy and replacing them with upper-income housing or
business facilities serving the a∆uent. The West End in Boston and the
Western Addition in San Francisco are two famous examples.3
The Redevelopment process encouraged such injustice by weakening
democratic constraints on governmental aid to development; by creat-
ing various fiscal incentives for localities to undertake it; and by sub-
sidizing the private participants through sweetheart land deals, cheap
finance, tax breaks, and publicly provided infrastructure tailored to
their investments. There is substantial evidence that the returns in eco-
nomic growth to public Redevelopment investments have been small or
negative and that the distributive e√ects of the program on balance have
been regressive.
In 1974, the federal government ended specific support for Redevel-
opment and folded these funds into the Community Development
Block Grant (cdbg) program.4 Under this program, resources are not
tied to specific projects or types of projects; instead, local governments
have discretion to decide how to spend them within broad parameters.

2. A similar premise applies to new or ‘‘green-belt’’ communities being built from

scratch and accounts for another category of specialized development procedures ap-
plicable to these communities. See, for example, Daniel Mandelker, Roger A. Cun-
ningham, and John M. Payne, Planning and Control of Land Development 631–51 (4th
ed., 1995).
3. Molho and Kanner, ‘‘Urban Renewal,’’ 643–62.
4. Housing and Community Development Act of 1974, Public Law No. 93–383, tit. I, sec.
101, 88 Stat. 633, 93d Cong., 2d Sess. The related Urban Development Action Grant
program came on line in 1977 but has since expired.
10 : Community Economic Development Movement

Nevertheless, Redevelopment did not die. It survived as a state law

process. In some states, its use expanded in the 1980s and 1990s under
the impetus of e√orts to limit property taxes, such as California’s Propo-
sition 13. By limiting revenues from the existing tax base, these measures
prompted local governments to seek new taxable development. The
consequence in California has been called ‘‘the fiscalization of land use’’:
Municipalities exercise their regulatory power over land use with a view
to enhancing their tax revenues. The Redevelopment process is espe-
cially attractive in this regard both because it streamlines large-scale
development and because the statutes typically allow local government
to keep a larger share of tax revenues attributable to Redevelopment
e√orts than they keep from revenues arising from conventional sources.
Counties, school districts, and other taxing entities claim larger shares
of the non-redevelopment tax base.5
Federal support remained substantial even after the expiration of the
urban renewal program. Although cdbg funds were not tied to Re-
development projects, local governments that wanted to could so use
them. Moreover, the federal tax code has continued to permit localities
to issue tax-exempt bonds to finance Redevelopment projects.6
The fiscal attractions of Redevelopment are great enough in some
areas to prompt local o≈cials to characterize relatively prosperous areas,
and even vacant land, as blighted, and in California a lot of Redevelop-
ment projects do not involve low-income neighborhoods. The process
continues to attract criticism as wasteful of public subsidy and arbitrary
in its e√ects on taxation. However, assessments of its potential for low-
income neighborhoods are far less negative than in the past, and some
prominent Redevelopment e√orts have been viewed as ced success
stories.
Statutory reform has strengthened the requirements of community
participation and provided safeguards and remedies for displacement.
California, for example, requires the formation of a ‘‘project area com-
mittee’’ with representation of residents, community organizations, and

5. See William Fulton, Guide to California Planning 208–13, 242–261 (1991).

6. 26 usc. 144c. Lynne Sagalyn estimated that the annual value of the tax subsidy for
Redevelopment finance in the 1980s considerably exceeded the annual amounts of
direct expenditures under the prior urban renewal program: ‘‘Explaining the Improb-
able: Local Redevelopment in the Wake of Federal Cutbacks,’’ 56 Journal of the American
Planning Association 429, 432 (1990).
 Social Policy : 11

businesses. If the project involves displacement or the use of eminent

domain, the committee must be chosen through an election publicized
throughout the area. The committee is entitled to information from the
Redevelopment agency and to consultation on major decisions. While it
cannot veto a project, it does have potentially significant voting rights. If
the committee votes against the project, then the project can proceed
only on a two-thirds vote by the Redevelopment authority, rather than
the usual majority.7 A thick body of judicial precedent also gives residents
who oppose projects the right to challenge them in court on a variety
of procedural grounds (for example, compliance with environmental-
impact-assessment requirements or consistency with the city or county
plan).8
Since the 1970s, federal law applicable to both federal projects and
federally supported state and local projects has given important rights to
displaced tenants, homeowners, and businesses. Some states, including
California, have enacted similar protections for projects with only state
support. For example, in addition to moving expenses, tenants are en-
titled to payments designed to compensate them for any increased rent
they must pay for the next five years in their new apartments. The
reimbursement formula potentially compensates the lowest-income
tenants by more than the costs of displacement and hence can leave
them better o√ for being displaced.9
Finally, if low- or moderate-income housing is eliminated by the
7. California Health and Safety Code 33385–88.
8. Goldfarb & Lipman, A Legal Guide to California Redevelopment 87–8 (2d ed. 1994).
9. 42 usc 5301 et seq.; 24 cfr 42.350 (standards applicable to projects supported by
cdbg and related programs); California Government Code 7260 et seq.
The federal standards require protection against rent increases for five years; the
California standards require protection for three and a half years. Both federal and
California law require that the compensation enable the tenant during the period of
protection to pay no more than 30 percent of her income for the new apartment.
Moreover, California requires that the compensation be based on the cost of a new
apartment that complies with the Sanitary Code. Because many low-income people pay
more than 30 percent of their income for housing and most live in sub-code apart-
ments, the formula can leave them better o√ when they are displaced. However, if the
residents are being displaced from the community entirely because no satisfactory
housing is available for them, then the payment might be viewed as compensation for
the loss not only of the current benefits of residence in the community, but of the
opportunity to enjoy the benefits of the new development. From that point of view, it
would be less likely to seem excessive.
12 : Community Economic Development Movement

project, federal and sometimes state law require that localities build
comparable replacement housing within a few years.10 California fur-
ther specifies that 20 percent of the incremental tax proceeds attribut-
able to the project be used to fund a√ordable housing development.11
Some of these provisions are unenforced, and others can be circum-
vented or neutralized by a determined Redevelopment agency. But they
do make abuse more di≈cult and increase the likelihood that develop-
ment will involve grassroots participation and benefit. Here, for exam-
ple, are two recent examples of Redevelopment activity that seem con-
sistent with ced aspirations:
The city of East Palo Alto, California, is a low-income minority area
with about 25,000 residents. It has been desperately short of public
revenues since its inception. The city can honestly be described as
blighted; it has poor public services, a substantial crime problem, and
despite rising land prices, had little private investment for decades. Yet it
sits in the middle of booming Silicon Valley and contains large tracts of
underdeveloped land. Aside from the fiscal incentives mentioned ear-
lier, the Redevelopment process o√ers an opportunity to induce greater
investment by coordinating public and private e√orts and to canalize
the development process in a way that allows benefits to be widely
shared.
Since the city is relatively small and participation in municipal gov-
ernment is extensive, citywide governmental processes have a commu-
nity character. The city council sits as the Redevelopment agency, and its
activities are closely and widely followed. In the planning for the first of
its projects to reach the active development phase—a large commercial
center along the highway that separates the city from the rest of Silicon
Valley—several community organizations pressed with some success for
various community benefits, for example, a ‘‘First Source Hiring Ordi-
nance’’ giving preference to local residents for jobs in the project area
and commitments for a√ordable housing to be built by nonprofit de-
velopers. The project area committee and a≈liated residents’ council
were active both in organizing its constituents and negotiating with the
Redevelopment agency. The project has displaced 150 families, but they,
too, have shared in its benefits. A few have received subsidized units in

10. 24 CFR. 42.375; California Health and Safety Code 33413a.

11. California Health and Safety Code 33334.
 Social Policy : 13

the city’s first a√ordable housing project; the rest have received reloca-
tion payments averaging about $70,000—arguably, large amounts for
vacating dilapidated apartments in which they were tenants-at-will.
The Dudley Street Neighborhood Initiative (dsni) in the Roxbury
area of Boston is another example of a Redevelopment project that
appears to involve genuine community control.12 DSNI is a nonprofit
corporation devoted to organizing residents around development plan-
ning. It operates in a low-income minority neighborhood with a popu-
lation about the same size as that of East Palo Alto. The neighborhood
has su√ered severely from poverty, crime, and disinvestment and, in the
early 1980s, had an appearance of unredeemed physical devastation.
DSNI has sponsored a variety of projects, including social-service pro-
grams, a new town common, and a few hundred units of subsidized
housing. It has been credited with improving the delivery of social ser-
vices and reversing the trend of disinvestment. Its processes are widely
considered a model of grassroots accountability and involvement.
In collaboration with the city of Boston, dsni has made a striking use
of the Redevelopment process. In accordance with a long dormant au-
thorization in Massachusetts Redevelopment law, the city has delegated
to dsni various Redevelopment powers, including eminent domain.13
DSNI’s physical revitalization plans required acquisition of hundreds of
small lots, mostly absentee-owned and many with untraceable owner-
ship. This is a classic case in which eminent domain seems necessary. In
Boston, however, where Redevelopment-driven eminent domain has
historical associations more with liquidation than with revitalization of
low-income neighborhoods, the city’s ability to engage in large-scale
condemnation without arousing community opposition is constrained.
By delegating the power to a community-based organization, the city
neutralized much fear and suspicion.14

12. See Medo√ and Sklar, Streets of Hope: The Fall and Rise of an Urban Neighborhood
(1994).
13. Massachusetts General Laws, c. 121A, secs. 3, 11.
14. State ‘‘brownfields’’ programs, which proliferated in the 1990s, should be mentioned
as a specialized but important type of Redevelopment process. The programs are
designed to facilitate remediation and development of environmentally contaminated
sites. They o√er prospective developers financial assistance, liability protection, and
relaxation of clean-up requirements. Some explicitly condition benefits on a showing
of community support. Although these programs are not targeted at low-income areas,
14 : Community Economic Development Movement

from community action agencies

to empowerment zones
Community action agencies emerged from the Economic Opportunity
Act of 1964, the controversial centerpiece of the Kennedy and Johnson
administrations’ War on Poverty. A central provision of this act contem-
plated the delivery of a range of social services through ‘‘community
action agencies.’’ The act provided for certification and support by the
federal government of a community action agency for any low-income
urban neighborhood. Public and private nonprofit agencies could ap-
ply, but both were obliged to demonstrate ‘‘maximum feasible par-
ticipation of the residents’’ of the geographic areas in which they were
focused.15 The agencies were expected to oversee a range of services—
most notably, educational enrichment and job training, but also ‘‘com-
munity economic development.’’
The Community Action Program was an attempt to force decentral-
ization of urban government. One premise was simply that munici-
palities were often too centralized and bureaucratic to design and de-
liver services e√ectively to poor neighborhoods. Another was that many
municipalities were dominated by white political coalitions insensitive
to racial minorities. The program responded to the first problem by
inducing the formation of neighborhood institutions and giving them
responsibilities for social service administration. It responded to the
second by setting up relations between these local agencies and the
federal government that were substantially independent of local power
structures.
The program disappointed the expectations of its designers in two
distinct ways. For the most part, the citizen-participation goals were
never realized. Turnout at elections tended to be tiny, and ongoing
involvement in the program was limited. The agencies tended to be
dominated by their sta√s or, in some cases, unaccountable boards. At
best, these organizations were competent service providers; at worst,

many toxic sites are located in such areas, and community-based organizations have
occasionally made e√ective use of the programs to support beneficial development. See
Lincoln Davies, ‘‘Working Toward a Common Goal? Three Case Studies of Brownfields
Development in Environmental Justice Communities,’’ 18 Stanford Environmental Law
Journal 285 (1999).
15. Public Law 88–452, Title II, Pt. A, sec. 202, 88th Cong., 2d Sess., 1964 U.S. Code
Congressional and Administrative News, 595–96.
 Social Policy : 15

they were ine≈cient and patronage-ridden. Some community action

agencies appear to have been more e√ective in mobilizing constituents,
but they were no more successful as organizations in the long run.
Agencies tended to engage in confrontation with established municipal
power structures to demand more resources and attention to their com-
munities. Although such confrontation was exactly what some of the
program’s designers hoped for, the protests from established local Dem-
ocratic figures came as a surprise to Lyndon Johnson, who had no taste
for inner-city mobilization that threatened the party’s core constituents.
The federal government failed to support activist community action
agencies and came to regard them as liabilities.16
Unlike Redevelopment, the Community Action Program did not sur-
vive in name (though many community action agencies continue as local
social service providers), and its activities withered in the 1970s. One
small fragment that did survive, however, played a significant role in the
ced Movement. In 1968, the Economic Opportunity Act was amended to
provide grants to ‘‘community development corporations,’’ which were
defined as locally initiated nonprofits focused on the problems of low-
income areas. More than half of the seats on the organization’s govern-
ing body were required to be held by residents of the relevant geograph-
ical area.17 After the O≈ce of Economic Opportunity was abolished,
this grant-making function went to the Community Services Admin-
istration, later renamed the O≈ce of Community Services within the
Department of Housing and Urban Development (hud). The hud
Community Services Program is a small operation, most interesting for
its links to the past, though it has continued to support notable projects.
Both the Brewery business incubator and the Stop ’n Shop supermarket
project in Jamaica Plain benefited from its grants. The Community
Services Program was one of several, including the Community Rein-
vestment Act and others to be discussed shortly, that encouraged com-
munity groups that had been founded as protest organizations or social-
service delivery agencies to reinvent themselves as economic developers.
Moreover, the federal urban grant programs that succeeded the
Community Action Program—most importantly, the cdbg program—
continue to mandate ‘‘public participation,’’ though more ambiguously
16. See Robert Fisher, Let the People Decide: Neighborhood Organizing in America 110–20
(1984).
17. 42 usc 9805, 9807.
16 : Community Economic Development Movement

and less ostentatiously than in the past. The cdbg program requires that
municipalities have a ‘‘public participation’’ plan that includes publicity
about plans and opportunities, public hearings, and technical assistance
to groups interested in applying for grants.18 Although this is a far
cry from the Community Action Program idea of facilitating the forma-
tion of a community-based organization in each poor neighborhood,
hud has encouraged municipalities to consider the option of forming
‘‘Neighborhood Strategy Areas,’’ in particular communities that seem to
be promising sites for focused assistance. The strategy area idea involves
the formation of a community-based development organization with
an elected board.19
Despite the lowered profile of federal support for community-based
organizations in the 1970s and 1980s, this period saw an explosion in
neighborhood activism that has been described as a ‘‘backyard revolu-
tion,’’ a ‘‘rebirth of urban democracy,’’ and a ‘‘rise of sublocal struc-
tures in urban governance.’’20 Community groups formed to demand
more and better services from city governments. They formed to in-
fluence land use and investment decisions, protesting proposed uses
with negative external features (dumping facilities, high-density public
housing projects, freeways) and pushing for uses likely to enhance the
community (parks, schools). Many of these groups were reacting to
decades of municipal policies that appeared to lavish investment on
downtown areas at the expense of outlying neighborhoods. Some were
fueled by political realignments induced by migration patterns that
increased the electoral clout of minority neighborhoods (for example,
‘‘white flight’’ to the suburbs followed by the arrival of immigrant
groups of color).
State and local policy encouraged such developments by creating
new structures designed to enhance community participation in munic-
ipal government—little city halls, neighborhood councils, community
boards—and new opportunities to participate in land-use and environ-

18. 24 cfr 91.105(a)(2).

19. ‘‘Neighborhood Strategy Areas: City of Nashville, Tennessee.’’ Available from:
http://www.hud.gov/80/ptw/docs/tn07.html (visited 30 July 1999).
20. Je√rey M. Berry, Kent E. Portney, and Ken Thomson, The Rebirth of Urban Democ-
racy 57–60, 108–14 (1993); Harry Boyte, The Backyard Revolution: Understanding the
New Citizen Movement (1980); Richard Bri√ault, ‘‘The Rise of Sublocal Structures in
Urban Governance,’’ 82 Minnesota Law Review 503 (1997).
 Social Policy : 17

mental decisions and to challenge them in the courts. Federal policy also
played a role. In a study of the ‘‘rebirth of urban democracy’’ in five
cities, researchers concluded that in four of the cities, community ac-
tivism had resulted from local government initiatives encouraged by
the federal Community Development Block Grant and related pro-
grams, and in the fifth, San Antonio, the grassroots movement that
emerged without municipal assistance had been prompted in part by
the goal of participating in cdbg allocations.21 Some states have enacted
their own programs of general financial support for ‘‘community de-
velopment corporations,’’ ‘‘community preservation companies,’’ or
‘‘neighborhood assistance organizations.’’22
With the advent of the Clinton administration, the federal govern-
ment re-embraced the combination of developmental and participatory
themes associated with the War on Poverty in the Empowerment Zone/
Enterprise Community program. Announced at the beginning of the
Clinton administration with great fanfare, the program o√ered an ex-
traordinary package of federal benefits over a ten-year period to a small
number of competitively selected Empowerment Zones and a smaller
package to a larger number of Enterprise Communities. After an initial
application period, hud designated nine Empowerment Zones in 1994.
Impressed by initial reports, Congress then authorized funding for

21. Berry et al., Rebirth, 57–60, 108–14. The cities in which the book describes extensive
and e√ective grassroots activism are Birmingham, Alabama; Dayton, Ohio; Portland,
Oregon; St. Paul, Minnesota; and San Antonio, Texas. See also Fisher, Let the People
Decide, 121–52.
Bri√ault, ‘‘Rise of Sublocal Structures,’’ describes the emergence of a di√erent cate-
gory of ‘‘sublocal structures’’—tax-increment finance districts, special zoning districts,
business-improvement districts, and enterprise zones. With some exceptions, espe-
cially the new federally supported Empowerment Zones, these entities are generally
oriented toward, and often controlled by, businesses and landowners rather than resi-
dents. To that extent, they are not ced in our sense, but they are part of a common
trend toward decentralizing municipal governance.
22. Massachusetts General Laws, c. 40F (authorizing Community Development Fi-
nance Agency to provide support for ‘‘community development corporations’’); New
York Consolidated Laws Private Housing Finance Law 901 et seq. (authorizing state
assistance to ‘‘Neighborhood Preservation Companies,’’ or ‘‘community-based not-for-
profit organization[s]’’); Virginia Code 58.1–333, 63.1–32 et seq. (tax credit for dona-
tions to ‘‘neighborhood assistance organizations,’’ or 501(c)(3)-qualified organizations
providing ‘‘neighborhood assistance to impoverished people’’).
18 : Community Economic Development Movement

twenty-two more in 1997. Ninety-three ‘‘Enterprise Communities’’ re-

ceive the smaller set of benefits.23
Empowerment Zone benefits include increased grants for social ser-
vices and economic development, regulatory waivers, use of tax-exempt
bonding authority, and tax benefits for employers, including a credit
for wage payments to employees who reside in the zone. Communities
with ‘‘pervasive poverty’’ compete for selection by producing ‘‘strategic
plans’’ of coordinated public and private e√orts at housing, business,
and job development. Congress mandated that the ‘‘a√ected commu-
nity’’ was to be a ‘‘full partner’’ in the development of the plans. An
important criterion in evaluating the plans is ‘‘the extent to which the
a√ected community’’ and its ‘‘community-based organizations . . . have
participated in [its] development . . . and their commitment to imple-
menting it.’’24 Regulations require that applicants identify the commu-
nity groups participating in the development of the plan; explain how
they were chosen to participate; describe their history; show that they
are, collectively, representative of the full range of the community; and
‘‘describe the role of the participants in the creation, development, and
future implementation of the plan.’’25
The Empowerment Zone idea combines themes from both Re-
development and Community Action while it attempts to respond to
the salient criticisms of both. Like Redevelopment, it seeks to encourage
coordination of large-scale public and private investment. It has, how-
ever, a considerably broader vision of investment that includes social
services as well as physical improvements. Most importantly, it defines
the goals of the program in terms of benefit to the community, which it
identifies with its current residents,26 and mandates broad community

23. ‘‘Empowerment Zone/Enterprise Community Initiative.’’ Available from: http://

www.hud.gov/cpd/ezec/ezecinit.html (visited 22 May 2000). The initial round of des-
ignates was to receive a total of $1.5 billion in grants and $2.5 billion in tax benefits over
a ten-year period.
24. 26 usc 1391(f ); 24 CFR 597.201(c).
25. 24 cfr 597.200(d). ‘‘What sets this initiative apart from previous urban revitaliza-
tion is that the community drives the decision-making,’’ hud’s Web site, cited in note
23, asserts. An assessment of early e√orts of the first round of designates finds mixed
results in terms of community participation: Marilyn Gittell, Kathe Newman, Janice
Bockmeyer, and Robert Lindsay, ‘‘Expanding Urban Opportunity: Urban Empower-
ment Zones,’’ 33 Urban A√airs Review 530 (1998).
26. For example, 24 cfr 597.201.
 Social Policy : 19

participation. The social service themes and emphasis on community

participation resonate with the Community Action Program. The pro-
grams, however, do not bypass local government to fund community
groups directly: Applications for Empowerment Zone status must come
from government entities.27 The program gives state and local govern-
ments material inducements to support and cooperate with community
groups by making such support and cooperation the central eligibility
criterion for benefits. Moreover, in contrast to the Community Action
Program, the Empowerment Zone program does not contemplate sup-
port for a single organization to mobilize and represent the entire com-
munity; it assumes that multiple community-based organizations will
be involved, with no one of them necessarily pre-eminent.
A further reassertion of community-action themes at the federal level
came with the 1998 revision to the Community Services Block Grant
program, which provides funds to local governments for a panoply of
social programs. The statute describes the purpose of the program this
way: ‘‘to provide assistance to states and local communities, working
through a network of local action agencies and other neighborhood-
based organizations’’ for poverty alleviation and community revitaliza-
tion. It prescribes that specific expenditures be coordinated under a
general plan formulated with ‘‘maximum participation of residents of
the low income communities and members of the groups served.’’28

Housing

The model of public housing institutionalized in the National Housing

Act of 1937 involved rental housing constructed, owned, and operated by
local public-housing authorities (phas). The Housing Act created a sys-
tem of federal financial assistance to local phas for building and main-
taining such housing under guidelines enforced by federal authorities,
currently the Department of Housing and Urban Development. The
guidelines restrict eligibility for housing to applicants who meet spec-
ified measures of low- or moderate-income status and restrict the rent
charged to residents to (currently) 30 percent of the household’s income.
In the 1970s, a di√erent model designed to enlarge both tenant choice

27. 24 cfr 597.200.

28. 42 usc 9901.
20 : Community Economic Development Movement

and private market incentives was introduced. Under the ‘‘tenant-based

Section 8’’ program, a local agency distributes certificates to eligible low-
income applicants. The certificate obligates the agency to pay a portion
of the applicant’s rent on a qualifying apartment leased from a private
landlord. The portion is currently the di√erence between an amount
intended to approximate the market value of the leasehold and 30 per-
cent of the certificate holder’s income. The holder then pays 30 percent
of her income to the landlord. The holder has to find a landlord with a
suitable apartment willing to accept the certificate and enter into a
triangular relation with the holder and the administering agency.29
The conventional model of pha-owned and operated housing has
fallen into steadily increasing disfavor since the 1960s. Some of the
complaints focus on a particular physical configuration that is now
discredited—the large high-rise located in a desolate area of concen-
trated poverty. Projects of this sort have long been considered breeding
grounds for crime and other social pathology. This view has led to a
reorientation of public housing design toward smaller, lower, more at-
tractive, and more dispersed projects. Some of the older high-rise proj-
ects have been demolished, and hud is funding the demolition or re-
habilitation and redesign of others. PHAs continue to be active in the
development of the newer style of projects, and they play important
roles in hud’s demolition and rehabilitation programs.
However, another set of criticisms questions the e≈cacy of phas
more generally. PHA-owned housing is substantially more costly to
build and maintain than comparable private housing, and notwith-
standing the greater costs, it is often poorly maintained, sometimes
horrendously so. The prevalent explanation points to the familiar lim-
itations of public bureaucracy—poor incentives and information. PHAs
have been monopolists largely immune to market pressures and highly
vulnerable to political pressures that compromise e≈ciency. They have
been organized in a centralized fashion that concentrates discretion at
the top among administrators with limited knowledge of conditions in
the projects they manage.
Even though the matter is controversial, many do believe that pro-
grams of tenant-based private housing assistance have not performed

29. U.S. Department of Housing and Urban Development, Opting In: Renewing Amer-
ica’s Commitment to A√ordable Housing (April 1999), 1–8.
 Social Policy : 21

better.30 This model does not directly produce new housing, and critics
assert that private supply of low-end housing is not strongly responsive
to the increased demand induced by the certificates. Moreover, the cer-
tificate model has incentive and information problems of its own. The
administering agency has to estimate the market value of the leasehold
to calculate the proper subsidies. It has no market incentive to get things
right, and it has limited information. Because of resource constraints,
the agencies set uniform levels across broad geographical areas. They are
thus certain to get the figures wrong for many apartments, and may well
do so for most. To the extent that the standards underestimate the
market value of minimally adequate apartments, the subsidy is not
enough to induce landlords to rent to certificate holders. Thus, a sub-
stantial number of those awarded certificates—between 20 and 40 per-
cent, various studies suggest31 —return their certificates unused because
they cannot find appropriate housing. To the extent that the standards
overestimate market rents, subsidies are excessive, and resources are
wasted. ‘‘Estimates of the amount hud pays above market run as high as
$1 billion per year.’’32 The tenant has no incentive to search or bargain
for a lower rent, because the di√erence between 30 percent of her in-
come and the standard is paid by the program.33
The first Bush administration, under hud Secretary Jack Kemp, and

30. Jenifer J. Curhan, ‘‘The hud Reinvention: A Critical Analysis,’’ 5 Boston University
Public Interest Law Journal 239, 243–45 (1996).
31. Ibid., 250–51, and sources cited in notes 92–97 therein.
32. HUD, Opting In, 22.
33. A third approach is ‘‘project-based’’ private housing assistance. Here the govern-
ment subsidizes the construction or rehabilitation of privately owned housing in return
for an agreement by the owner to rent only to eligible tenants at specified rents for a
specified period. Such programs are designed to directly increase supply, but they su√er
from information problems similar to and, in some respects, more severe than those in
the ‘‘tenant-based’’ approach. In ‘‘project-based’’ assistance, contracts typically run for
twenty years or more, rather than the two or three years characteristic of ‘‘tenant-
based’’ assistance. If the subsidy turns out to be too low and rents are insu≈cient to
cover costs, the owner, whose obligations are usually nonrecourse and undercol-
laterlized, can insist on a bailout or simply walk away. Thus, in the depressed market of
the 1970s, mass defaults and abandonments created a crisis. However, if the subsidy
turns out to be higher than necessary, the owner recovers excess profits during the term
of the contract, and if there is substantial appreciation, he can escape the use restric-
tions at the end of the term and capture the appreciation. Thus, in the boom market of
the 1990s, hud faced an ‘‘expiring use’’ crisis. See hud, Opting In, 9–17.
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