With the downturn in housing affecting communities in a variety of ways, there is no one-size-fits-all strategy to fix deteriorating neighborhoods, said Federal Reserve Governor Elizabeth A Duke at the NeighborWorks Symposium on Community Stabilization held December 9 in Maryland.
“Because of these variations, a stabilization strategy that is effective in an industrial city facing high unemployment is unlikely to suit a suburban community where employment has remained relatively stable,” said Governor Duke.
Her observations were made first hand, as she toured the country to see how the economic crisis was impacting communities, how NeighborWorks was responding, and how the Reserve Banks were assisting communities under stress and the organizations that serve them. Governor Duke is a member of the NeighborWorks America Board of Directors and represents the Federal Reserve in a partnership with NeighborWorks America to reduce the impact of foreclosures in low- and moderate-income communities.
Governor Duke shared many lessons learned along the way; the first among them being that the effects of foreclosure on a community largely depends on the strength of the area’s underlying economy.
In some economically weaker communities, like Detroit, Cleveland and Indianapolis, the increased rates of foreclosures and the related economic downturn have hastened a cycle of vacancy and decreasing property values, said Governor Duke.
Communities with strong underlying economies have not been immune to the destabilizing effects of high foreclosure rates either. In the more vibrant communities of California, Florida, Arizona and Nevada, for example, there were very high rates of new home construction and speculative investments that resulted in unsustainable price escalation, Governor Duke said.
With so many influences exacerbating the foreclosure crisis across the country, Governor Duke said a holistic approach to community stabilization is key.
“After visiting with community organizations and seeing their work first-hand, it is clear to me that the most effective community stabilization approaches look beyond homes and mortgages,” said Governor Duke. “Successful community stabilization requires a broader vision of community, one that factors in the many elements that make a neighborhood a desirable place to live.”
She cited several examples of what this more holistic approach looks like across the country. Though tailored to meet the needs of the particular community, there is one thing all successful approaches have in common: organizational capacity.
The Governor highlighted efforts by NHS of Chicago, a NeighborWorks America member, as one of the “finest examples” organizational capacity. In the mid-1990s, NHS of Chicago identified predatory lending as a threat to the neighborhoods it served. In collaboration with the City of Chicago, the Federal Reserve Bank of Chicago, and many others, NHS formed the first Home Ownership Preservation Initiative (HOPI). This initiative became the model for foreclosure prevention and has been replicated across the country. Because of this experience, NHS was well-prepared to assist Chicagoans in the recent housing market downturn.
Governor Duke cautioned that many communities are facing the issues of vacancy, abandonment, and decay for the first time, and these communities need help to grow the human and financial capital required to address neighborhood decline. Organizational capacity needs time to be developed she said.
“As your attendance at this Training Institute demonstrates, there is a strong appetite among community organizations for information, training, and leadership development. And I am encouraged by your dedication,” said Governor Duke.