Giving Compass' Take:

• Ross Baird, Bruce Katz, Jihae Lee, and Daniel Palmer discuss how building community wealth can improve equity. 

• How can these lessons be applied to communities in your area? What specific support could you provide in the formation and implementation of community wealth building efforts? 

• Learn about wealth building policies. 

The United States is witnessing a radical shift—a quiet revolution—in its approach to the revitalization of distressed urban communities. For almost sixty years, the U.S. has dutifully delivered a top-down “Community Development” system, narrowly focusing on producing low-income rental housing with a mix of federal tax incentives, federally encouraged bank debt and direct federal subsidies. Over the past decade, a new system has begun to emerge, focused on developing people rather than buildings, with a blend of public, private, civic and community leadership and capital. This system, which we label “Community Wealth,” is being raised bottom up, and is fundamentally committed to upgrading skills, growing entrepreneurs, increasing incomes and building assets. If codified and routinized, this system has the potential to bring hundreds of billions of market and civic capital off the sidelines into productive use and drive transformative outcomes for disadvantaged communities across the country.

The revolution is precipitated by a complex mix of market and civic dynamics, the evolving practice of the community development movement, and the inspiring work of a new class of investors and intermediaries. Income inequality today is the largest it has been since the government began measuring it in 1967. Most urban neighborhoods, even those blocks away from reviving downtowns and robust waterfronts and university areas, are characterized by high poverty, low social mobility, weak market demand and growing income, health, education, and wealth disparities. Urban communities are also past and present victims of institutional racism. They sit on the “wrong side of the color line;” access to quality capital and mentoring to help residents purchase homes and build businesses remains scarce while parasitic capital for dollar stores, payday lenders and check cashers is plentiful.

That’s the bad news. The good news is that across America we are seeing local, entrepreneurial, and often small efforts that are showing evidence of promise. Key players in the existing community development system are broadening their scope to go beyond housing and innovate on business demand as well as financial practices and instruments. At the same time, a new class of investors is entering the community space, focused on growing entrepreneurs and building strong local economies. Both the evolution of the old system and invention of the new have been accelerated by the latest federal tool, Opportunity Zones.

This paper represents our initial effort to capture the transformation underway. We define Community Wealth as “a broad-based effort to build equity for low-income residents of disadvantaged communities.” Going deeper, Community Wealth aims to build equity by:

  • Growing the individual incomes and assets of neighborhood residents by equipping them with marketable skills and enabling full or partial ownership of homes, commercial properties, and businesses;
  • Growing the collective assets of neighborhood residents by endowing locally-run organizations with the ability to create, capture, and deploy value for local priorities and purposes;
  • Improving access to private capital that has high standards, fair terms, a long-term commitment to the neighborhood, and reasonable expectations around returns and impact; and
  • Enhancing inclusion by bringing fairness and transparency to neighborhood revitalization so that community voices are heard and respected and trust is restored, and local residents have the opportunity to participate in wealth that is created.