A town is a business that sells quality of life and competes with other towns to attract real estate tax payers.  It spends its revenue on infrastructure that enhances quality of life and enables it to attract more workers and real estate tax payers.  Some towns are so attractive, relative to their rural competition, that they attract millions of newcomers without even trying, and these towns become megacities by growing vast economically rational but unplanned spontaneous communities called slums, where the housing demand has overrun the infrastructure capacity – and the problem of fixing slums’ overrun capacity is, I believe, the greatest demographic challenge of the 21st century, the century of cities.

Because towns compete, some lose.  This is less of a problem when a region or nation’s population is rising, because even losing market share (like Galveston did after the 1900 hurricane and Old New Orleans had been doing even before hurricane Katrina) can be absorbed in people terms through population growth.

A setback for the employment base?

When it cannot – when the town’s population falls and falls, despite all efforts – the town is economically ill.  That in turn makes it unattractive to its residents, and it keeps losing them.  Then its over-extended infrastructure becomes a millstone (pun) around its neck, dragging down the municipal budget and diluting its ability to serve any of its citizens well.

Some infrastructure is no longer functional

Such is the fate of Youngstown, Ohio, a town with too many houses, as revealed in this story from CNN Money:

The last holdout: Two minutes from Youngstown’s downtown sit empty lots and abandoned houses where families of mill workers once thrived.

Youngstown, Ohio, has long been on the decline and now is being hit by the foreclosure crisis. Its answer: Razing abandoned buildings and tearing up streets.

YOUNGSTOWN, Ohio (CNNMoney.com) — Youngstown, Ohio, has seen its population shrink by more than half over the past 40 years, leaving behind huge swaths of empty homes, streets and neighborhoods.

Like many cities in America’s Midwest – and Britain’s Midlands – Youngstown boomed on manufacturing, its proximity to the Great Lakes and Saint Lawrence Seaway representing an enormous competitive advantage:

“When I grew up in the 1950s, the city was at its peak,” said Father Ed Noga, who heads St. Patrick’s on Youngstown’s South Side. “There were kids everywhere and everyone converged on downtown. You went to eat, to shop and to go to the movies.”

Fast-forward fifty years, as jobs migrate.

Today, downtown is positively sleepy and even somewhat derelict.  Residents have to drive out of town to shop for clothes or housewares.

In cities that have made the shift from manufacturing to information, downtown exists to create a higher concentration of people within a few minutes’ walk (sideways or up-and-down) of face-to-face contact.  For information-oriented downtowns to flourish, they need people there twenty-four hours a day: which means both working (daylight), living (night-time), and socializing (evening). 

When Youngstown was hopping: the 1930’s

For that, in the modern world you need verticality – buildings that go up. 

Density, in other words, isn’t an urban problem, it’s an urban solution. 

Youngstown at night – that was then

Lack of density is the problem.

When you have homes isolated amidst rubble-strewn lots, service costs greatly outweigh tax benefits.  In fact, the costs rise – as New New Orleans is finding out – because your best defenders are the home’s owners.  Vacant houses must be defended by patrols, and you cannot patrol every street all the time.

Although dwindling demand hits the most marginal neighborhoods first (subprime risk!), no neighborhood is immune:

Even wealthy neighborhoods, like the North Side historic district, where mill owners and upper management once congregated, have eyesores.

On one corner, there sits a beautifully maintained seven-bedroom Tudor, yet down a side street, a wood-framed colonial is boarded up. Next door, an empty Victorian sits moldering, the wood of its window frames scorched. Lines of old hedges mark lot boundaries where once-proud homes stood.

In addition to reducing demand for infrastructure (saving the city money), returning land to greenery also creates a more pleasant environment, especially for kids. 

Recycling Youngstown: Empty houses, once magnets for drugs and prostitution, have been reclaimed as playgrounds.

As I discussed in the two posts regarding the Ultimate Future City – the Caves of Steel and the Naked Sun – we all want more elbow room, yet our cities succeed when we have a little less.  Call that the density paradox.

When the jobs go, the people follow.  When the people are gone, the houses must go.  Yet houses are built to endure.  They stay behind, and wither.

“Abandoned houses here are like rainfall in the spring,” said Mayor Jay Williams, “That has gone on for decades.”

In declining-population cities, recessions bring foreclosures like autumn chills bring falling leaves. 

And while foreclosures have long been a scourge in this city, they have recently skyrocketed along with the rest of the country, up 178% in February from a year ago.

The foreclosures, though, are merely the visible manifestation.  The cause was job flight:

Youngstown used to be the nation’s third-largest steel producer; its mill workers earned among the highest factory wages in America. Demand for their services was strong.

Coaling station, Youngstown Sheet and Tube

“You could graduate from high school one day and start work in the mills the next,” said Noga.

William Gropper, Strike and Youngstown Sheet and Tube, 1916

That changed on Sept. 19, 1977 - Black Monday - when Youngstown Sheet and Tube abruptly closed its doors.

“Five thousand people showed up for work one day and were turned away,” said Phil Kidd, Downtown Director of Events and Special Projects for the city.

“The city lost its heart and soul,” said Mayor Williams.

Within years, all the mills vanished. Noga recalls seeing idled workers watching as one of the oldest blast furnaces in the valley was dynamited. “I saw these hard men, shot-and-a-beer guys, standing there crying,” he said.

Grown men cried when the blast furnace was dynamited

The advantages to tearing down empty houses are numerous. 

Tearing down the Youngstown textile mill

Empty houses attract clandestine occupancy, and can become houses of crime.  The results are all too visible:

Some dead-end streets are already uninhabited and torn up, their outlets blocked with concrete barriers. Many roads are pitted and potholed; drivers have to slalom slowly through or face axle-busting jolts. Lonely water hydrants look woefully out of place sitting on the sides of rural-looking roads.

Since houses don’t unbuild themselves, they must be unbuilt. 

It’s better if you disappear

But finding the political commitment to reach that conclusion wasn’t easy –

It’s an odd way to pioneer. “The American narrative always includes growth,” said Hunter Morrison, Director of the Center for Urban and Regional Studies at Youngstown State University, which works closely with the city on plan 2010’s implementation. “No one wants to talk about shrinkage. That’s too threatening to politicians, civic boosters and Chambers of Commerce.”

“That’s a hard choice to make”

[Continued tomorrow in Part 2.]

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What with my work with Slum Dwellers International, I’ve been spending inordinate time thinking about SDI’s members, which are federations of local savings co-operatives, and hearing descriptions of what they will do with money (as we’re calling it in SDI lingo, a Spend) if they get it from SDI’s in-development International Urban Poor Development Fund.  
 

I’ve got to get out of the mode of thinking digitally

SDI’s cooperatives are assemblies of enterprise, in the pure etymological sense – their grasp-between two things, in this case between customer need (their members) and potential supplier (government or private sector capital sources).  While so far the SDI members have never used the term, they are also entrepreneurs, connecting capital to property, supply to demand, programs to money.  They are entrepreneurs on a mission.

Yet they don’t think of themselves in those terms.  They speak of their members, they talk of the results they intend to achieve, they focus on recovering their direct costs.  Their pro-formas never have even a reimbursement for overhead or staff time, much less development fee for themselves. 

That’s where the profit bit me

I’ve seen this orientation before, in US non-profit community development corporations (CDCs) that are likewise culturally allergic to profit.  If their transaction makes money, they call it ‘development fee.’  If by chance they generate cash, they plow it right back into operations, or the next committed venture. 

The more we harvest, the more we can grow

That’s perfectly fine, if done as a conscious choice by a financially and administratively healthy organization.  A non-profit is bipolar – it’s a business and a charity permanently joined at the hip – and the profits it may generate are consciously repurposed back into expansion of mission.  But the non-profit’s got to make money also:

Yet a non-profit is an enterprise too.  By the law of economic gravity, enterprises have to prosper.  This applies at two levels, both the property and the non-profit itself. 

Good non-profits expect to make money in their core business area, because profit is the price you pay for competence.  The same is true of non-profits — or, at any rate, of those that last a long time.   Everybody loses money now and then, so you had best make money some of the time, to cover the losses you make some other times.

Successful affordable housing achieves dual goals simultaneously: good social outcomes, good economic outcomes.

Which end of the bridge is more important?

Balance, harmony.  Profitability and contribution, fused together.

Successful non-profits have figured out that profits and purpose are not either-or, but both-and.  Each sustains and complements the others. 

Not all non-profits are for-profits glued to charities.  But all the successful ones are.

That’s what struck me about the SDI membership – for them to succeed in their mission, they have to be successful entrepreneurs.

I’ve previously written of the developer as a person with a cell phone and a vision, using Other People’s Money to finance his or her schemes.  Every SDI leader I’ve met is never without his or her cell phone, usually wheeling and dealing.

All it takes is a cell phone and your honeyed voice

Self-motivated and self-taught in the Yogi Berra school of management (”you can observe a lot just by watching“), they’re all entrepreneurs in the grand tradition. 

Unfortunately for them – and for cities around the world – bad nomenclature (NGO v CDC v HA) has obscured fundamental similarities, preventing information exchange.  Regardless of what they are called, all these entities are mission entrepreneurial enterprises:

• Mission.  They got into the field to make positive change.
• Entrepreneur.  They achieve their results via entrepreneurship, as actors in the space, not government, taking risks, persuading established institutions to do things (approve proposals, provide capital).
• Enterprise.  However little they pay their staff, they must cover their expenses and make cash profits, else they cannot continue pursuing their mission outcomes.

MEE’s always pursue a ‘double bottom line’ – profits and social outcomes. 

Profit and outcomes run in parallel

They often feel stressed in having to choose one or the other.  

In the UK, which has essentially no for-profit permanent professional rental sector, the non-profit Housing Associations (HAs) have grown up with the field to themselves.  With that head start, many of them have become large, diversified, and highly professional, to the point where the whole sector is seen as thoroughly market-competitive.  More than any other group, UK Housing Associations see themselves as MEEs. 

So professionalized they have their very own regulator

Faithful AHI blog readers know that because of my background – thirty-plus years working in affordable housing, but always on the private side, and always in an entrepreneurial environment – I’m predisposed to see their value everywhere.  Still, when I see change being made – in the UK, the US, or increasingly in the global south – the change is coming from the MEEs. 

They’re the ones doing transactions.

They’re the ones turning resources into properties and developments.

They’re the ones organizing slum dwellers into political and economic forces.

They’re the ones whose activity changes the political environment.

MEEs are the change agents. 

In housing-finance ecosystemic terms, they’re the critters.

Just as ecosystems don’t work without animals, whether acting as the plants’ reproductive system or converting DNA into more DNA (”A hen is only an egg’s device for making another egg” – Samuel Butler), without the critters, the ecosystem doesn’t work.

Further, just as parallel evolution gave us the dog and the dingo:

These two animals are not related

You’re kidding, right?  They’re not related?

MEEs north and south have plenty in common with each other. 

• Similarity of world-view.  MEE’s see themselves as acting to make change on behalf of a customer group (low-income households)
• Mutuality of interest.  MEE’s the world over have mutuality of interest – increasing government and donor funding.   They face the same growing pains, challenges of staff retention, difficulty of competing with or partnering with the private sector.

They just don’t realize it, because they haven’t been brought together. 

I need a new perspective, don’t I?

MEEs don’t recognize their cousins because their externally-imposed nomenclature keeps them apart.  In the academic literature, they’re referred to as NGOs – Non-Governmental Organizations – a terminology that I positively hate, because it’s wrong on all useful counts:

• Non.  Defines by what the thing is not rather than what it is.  Like saying a crow is a not-white bird.
• Governmental.  Defines the incumbent (literally!) and sets up the premise that change flows from government
• Organization.  Aside from being a term without meaning (one might as well call it a ‘bag’, organization isn’t what these groups are strong on!  They’re strong on enterprise, not organization.

“Marge, don’t call them NGOs!”

Indeed, to my astonishment, the role of MEEs in making change is largely overlooked in the research and theory of affordable housing and community development in the global south. 

AHI is setting out to change that.

You have to start seeing things differently