The growing field was driven by a clear theory of change: If you could transform the built environment, neighborhood by neighborhood, you would dramatically improve the well-being of a significant portion of the nation’s low-income people.
The years that followed saw the passage of a number of tools and policies (e.g., the Community Reinvestment Act [CRA] in 1977 and the low-income housing tax credit [LIHTC] in 1986), the growth of sophisticated organizations (e.g., the Local Initiatives Support Corporation [LISC], Enterprise, the Low Income Investment Fund [LIIF], and the Reinvestment Fund [TRF]), and the emergence of a supporting cast of local, regional, and national actors, both public and private.
We’ve seen staggering returns and many successes from these efforts. Using cornerstones of American capitalism — real estate development and finance — hundreds of billions of dollars in private equity, debt from traditional financial institutions and government, and philanthropic grants and loans were channeled to produce more than 3 million units of affordable rental housing across the country.1 Two organizations at the center of this movement, LISC and Enterprise,2 together raised more than $20 billion (leveraged many times over), helped build or rehab more than 500,000 units of housing, and developed millions of square feet of retail, community, and educational space nationwide.
But widen the aperture today, and the results are more sobering. Inequality has widened, not narrowed — most dramatically along racial lines. The statistics are well-known. The vast majority of income now goes to the top one-tenth of one percent of the population. Higher-income students are graduating from college at six times the rate of lower-income students. Black Americans now earn 59 cents and Latinos earn 72 cents for every dollar earned by a white household, and the racial wealth gap is even starker.3 Today, a minimum-wage worker can’t afford a two-bedroom apartment anywhere in the U.S.4
In short, the scope of the collective work to date has not met the scale and complexity of the challenges that we face as a nation. Poverty is no longer limited to specific disadvantaged subsections of cities. Issues once thought unique to isolated geographies, such as underperforming schools and underemployment, are now nearly ubiquitous. In most cities today, for example, we do not need to fix the elementary school in only one neighborhood; we need to fix most of the elementary, middle, and high schools in a school system.
In some ways, today’s urgent challenges are the ongoing manifestations of a contagion that has been in our groundwater since our nation’s founding. Racism is at the root of so many of the problems that we are working to address. We have yet to unravel the pernicious legacy of slavery and racist policies and practices that carved up cities and determined who could access critical wealth-building opportunities such as homeownership. In addition, we are confronted with myriad ways that structural racism is maintained and reproduced within the policies and systems that shape our life outcomes.
For almost all indicators of well-being across the country, racial disparities are profound. Despite decades of well-intentioned work, the social change sector has not made the needed progress toward closing these gaps. Creating lasting change will require us to work with eyes wide open to the ways that our efforts directly combat — or else tacitly allow — widening racial disparities.
The systems that impact overall life outcomes — affordable housing, geographic mobility, education, workforce development, and more — are deeply interrelated and mutually reinforcing. No one individual, organization, institution, or even sector can singlehandedly implement the kind of change needed to fundamentally solve today’s complex problems. Achieving better results demands that we recognize and harness the prevailing forces of opportunity, geography, connectivity, and systems innovation. We must move beyond the transactional approach used by many funders — one-off programs or siloed interventions — and invest in transformational systems change with the principles of racial equity and cross-sector collaboration coded into their DNA.
New Research, Same Lessons
The need to move from programs to systems was also the conclusion reached by recent U.S. Partnership on Mobility from Poverty. The two-year project, funded by the Bill & Melinda Gates Foundation, brought together two dozen of the country’s leading minds from academia, practice, philanthropy, the faith community, and the private sector to grapple with the question, “What would it take to dramatically increase mobility from poverty?” In order to learn from both research and practice, the group traveled the country, conducting site visits and gathering diverse local perspectives that, importantly, always included the viewpoints of people who have experienced poverty.
In January, the group released its findings: a suite of proposed strategies for tackling the interlocking challenges that restrict individuals’ mobility from poverty.5 Underpinning all of the strategies is the recognition that “individual actors should not work in isolation. No one organization, government, or philanthropy alone can deliver on all of these strategies.”6 Whether focused on creating more quality jobs or improving health outcomes in a community, these individual strategies are valuable, but none is sufficient on its own. Because these systems are mutually reinforcing, when strategies are enacted together, the impact is exponentially greater. In light of this, the Partnership prescribed “a concerted and coordinated cross-sector effort.”
This research reaffirms what we have observed and learned in two decades of working alongside local leaders as they do the hard work of moving beyond programmatic interventions and toward systems change. At Living Cities, the organization I lead, collective impact has been a valuable framework for structuring and guiding these cross-sector efforts. It provides a common language and shared norms for long-term engagements centered on bold challenges. But regardless of what you call it, systemic change requires the partnership of traditionally disconnected stakeholders who rally around shared results and commit to using data to track progress and, critically, to change their own behavior if the desired results aren’t being achieved.
Local Government as Today’s Social Innovator
Who is at the table matters when it comes to effecting lasting change. Too often, local government — one of the most influential actors in residents’ day-to-day lives — is left out of the conversation. When it comes to being at the forefront of social innovation, government has, at best, been considered largely irrelevant. At worst, it’s been viewed as an obstacle to change.
But this blind spot means that we are underutilizing a key stakeholder that is uniquely positioned to drive systemic change toward greater economic security, better social outcomes, and increased racial equity. Consider that the City of New York spends more in 12 weeks than the nation’s 50 largest foundations combined give away in a year, and you begin to have a sense of the scale that’s possible if government assets were leveraged effectively.7
Government also doesn’t face some of the same limitations as nonprofits and other social sector organizations. When innovations developed within government prove successful, they go straight into effect. No annual fundraising or advocacy is necessary. Importantly, governments draw on the most stable funding source in America: tax dollars. Local government, especially at the executive level, also often has the political capital and credibility to bring diverse partners to the table.
The Central Corridor Funders Collaborative in Minneapolis and St. Paul, MN is an extraordinary example. At the encouragement then-mayors R.T. Rybak and Chris Coleman of Minneapolis and Saint Paul, respectively, public, private, philanthropic and nonprofit leaders created the organization to ensure that a multibillion dollar rail line, the Green Line, would deliver social benefits — living-wage jobs, affordable housing, limited disruptions to businesses — beyond the rail. History is rife with instances of government at all levels undertaking major infrastructure investments that, intentionally or not, created or reinforced patterns of racial segregation and stripped wealth from communities of color. The Green Line could have easily become another example of such injustice.
However, the meaningful partnerships developed between local government, nonprofits, business leaders, and others helped hold all partners accountable to the communities’ needs, ensuring that residents along the Central Corridor were equitably served by the project and that the hundreds of small businesses — many owned by immigrants of color — were not unduly burdened in the process. The 10-year collaborative saw not only the completion of the connector rail but also an array of other benefits that no one partner could have achieved on its own — thousands of new affordable housing units, the survival of hundreds of businesses owned by local people of color, and the creation of many new, good-paying jobs.8
Fortunately, many public sector leaders are equipping themselves to meet the challenge, and they are finding increasing levels of support from philanthropic partners who recognize the role that government has to play in transforming broken systems and fostering an environment where all residents have opportunities to thrive.
The questions that keep mayors and other public sector officials up at night are often the same questions that drive our philanthropic work: How do we grow a local economy equitably? How do we deliver state-of-the-art health care, the highest-quality education, and housing that meets the needs of all? There’s no question that efforts to advance racial equity, which are a paramount concern for philanthropic organizations and others in the industry, must take root within the halls of city government to drive the type of systemic and lasting change desperately needed.
Building the Competencies to Close Racial Gaps
In addition to working together in new ways, to create systemic change, all partners must be equipped with the competencies to develop, execute and assess the impact of strategies through a lens of racial equity. These competencies encompass an ability to understand the impact of historical factors on current systems and outcomes, identify potentially disparate impact on different racial groups, interrogate personal biases, and combat damaging power structures. Because racism is in our country’s groundwater and drives so many of the inequities we see today, problem-solving with a racial equity lens is critical for moving beyond Band-Aid fixes and attacking inequality at its roots.
Local government has the potential and the imperative to lead this charge. From America’s earliest days, governments at all levels have played a role in creating and maintaining racial inequities through laws and policies that enshrined racial segregation in housing and more. But we have seen the power unleashed when government makes an explicit commitment to unravel them, as with Race Forward’s Government Alliance on Race and Equity (GARE), which has demonstrated the transformative results that can result when local government invests in its own workforce. Through Living Cities’ Racial Equity Here program and in partnership with GARE, Living Cities offered flexible grants to an initial cohort of five cities to fund racial equity audits of core government operations. That meant looking at all municipal operations to analyze the effects of policies, programs, and daily practices on residents of color. Now, with those audits complete, city employees are taking back the work of executing on the findings and using government funds to make advancing equity the new normal. For example, in Louisville, over half of the city’s 6,000-person staff has undergone racial equity training. Philadelphia is partnering with local trade unions to diversify their membership through its $50 million Rebuild project to renovate city-owned properties.9
Even more promising is the creation of a network of leaders across sectors who are focusing on the importance of racial equity. In Ohio, the nonprofit Cleveland Neighborhood Progress has been offering regular racial equity workshops to community leaders. To date, it has trained almost 1,500 people representing almost 400 organizations, including local businesses, nonprofits, philanthropy, academia, and more. New Orleans nonprofit Propeller has had similar success. By organizing institutional heads around the urgency of equity, it is unlocking the systems change possible when the leaders of hospitals, school systems, and government agencies grapple with root causes.
Making Change Happen
In an era in which the federal government is not positioned to provide primary support, the good news is that we don’t have to wait for policy to change in order to bring these solutions to life. In fact, some of the most promising instances of cross-sector collaboration with transformational results have occurred without any changes in policy. In fact, some of today’s most successful recipes for change are being developed in communities through the efforts of courageous leaders. The creation and spread of early college high schools is just one example. Through partnership with local colleges and universities, this model allows high school students to take college courses for credit without added cost, and in most cases, students have the opportunity to graduate high school with the addition of an associate’s degree. The model has taken hold in places like Pharr-San Juan-Alamo Independent School District, where almost 90 percent of students are considered economically disadvantaged. Change was driven by determined local leaders, including the district’s superintendent, Daniel King, and the founding president of South Texas College, Shirley Reed. Both recognized that they had the power to change the way they worked, redirect traditional funding streams, and partner and experiment together in an unprecedented way.
We all have the power to make change. My recent book, Reclaiming the American Dream: Proven Solutions for Creating Economic Opportunity for All, documents stories from across the country of leaders who are doing just that — improving educational opportunities, strengthening civic engagement, and providing a ladder to economic security. Like the early college high school model, in each of these cases, I’ve seen that harnessing that power to effect change requires us to ask ourselves different questions: Can I get people to work together differently? Could I use the assets of my own organization differently? And, critically, how can I build my own capacity to approach work with an eye on root causes and through a lens of racial equity, as well as push partners to do the same?
The work done by the Federal Reserve Bank of Philadelphia and its 11 counterpart Reserve Banks around the nation is critical to expanding the conversations about economic inequality and mobility. The community development function within each Bank seeks to bring many voices and interests to the table to discuss challenges and seek solutions. Complementing the Fed’s convening role is its deep well of unbiased research on issues affecting poverty, gentrification, and workforce development. This research allows us to know what works — and, importantly, why those elements work.
This combination of convening power and stellar research will be on display at the Reinventing Our Communities (ROC) conference scheduled for October 1–3, 2018 in Baltimore, cosponsored by the Federal Reserve Banks of Philadelphia and Richmond in partnership with Johns Hopkins 21st Century Cities Initiative. Using the theme of “Investing in Opportunity,” ROC will explore successful approaches that move beyond the transactional and toward the transformational systems change that enables economic mobility and prosperity to build across all socioeconomic, racial, and geographic lines.
Leaders of the 1960s had an admirable goal: commit as a nation to eradicating poverty once and for all. But they were working with poor tools, their eyes were shut — some willingly, some perhaps unwittingly — to the many ways that race shapes outcomes in this country and the need for problem-solving that reflected this reality, and their scope was too narrow. We must rekindle that original commitment but do so in a way that is aimed at transformative, long-term change.
The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.
Office of Policy Development and Research, U.S. Department of Housing and Urban Development. (2018). Low-income housing tax credits. www.huduser.gov/portal/datasets/lihtc.html.
Elise Gould and Jessica Schieder, “Black and Hispanic women are paid substantially less than white men,” Economic Policy Institute, March 7, 2017. https://www.epi.org/publication/black-and-hispanic-women-are-hit-particularly-hard-by-the-gender-wage-gap/.
Tracy Jan, “A minimum-wage worker can’t afford a 2-bedroom apartment anywhere in the U.S.,” the Washington Post, June 13, 2018. https://www.washingtonpost.com/news/wonk/wp/2018/06/13/a-minimum-wage-worker-cant-afford-a-2-bedroom-apartment-anywhere-in-the-u-s.
Learn more about the US Partnership on Mobility from Poverty at https://www.mobilitypartnership.org/restoring-american-dream.
David T. Ellwood and Nisha G. Patel, “Restoring the American Dream: What Would It Take to Dramatically Increase Mobility from Poverty?” US Partnership on Mobility from Poverty, January 2018, https://www.hks.harvard.edu/publications/restoring-american-dream-what-would-it-take-dramatically-increase-mobility-poverty, page 9.
Learn more about the Central Corridor Funders Collaborative and its impact at http://www.funderscollaborative.org/.
For more on Philadelphia’s Rebuild project, see https://beta.phila.gov/2018-05-22-mayor-announces-next-rebuild-project/.