How Community Ownership Can Stabilize America’s Neighborhoods

The story of neighborhood change in Washington D.C.’s Columbia Heights resembles that of many other communities in hot market cities — up to a point. In the wake of the Great Recession, home values there began to rise quickly, and buildings were switching hands as owners and developers aimed to profit from the rebounding economy in an area now coveted by newer, wealthier residents. Such swift transition threatened to displace long-time, lower-income community members — and the historic diversity of the neighborhood along with them.

As these changes were unfolding, residents of a modest 13-unit apartment building on Spring Road NW were feeling the pressure firsthand: in 2012, they learned that their landlord was planning to sell, putting them at risk for large rent increases once a new owner was found. Instead of awaiting an unknown fate, the tenants, many of whom had lived in the neighborhood for more than a decade, took action. With the support of a local ordinance, the tenants purchased the building collectively, becoming homeowners in this highly desirable neighborhood in one of the most affluent regions of our country.

The local ordinance — the Tenant Opportunity to Purchase Act (TOPA) — stipulates that when the owner of a rental property in D.C. wants to sell, they must first give tenants the opportunity to match the third-party offer. This legislation, paired with a bridge loan from DC LISC, provided residents with the capital necessary to make the purchase. Since TOPA was introduced in 1980, DC LISC has helped to preserve 21 buildings, and helped more than 1,000 residents stay in their homes. Today, the neighborhood of Columbia Heights remains a diverse community that is home to people of various income levels and to diverse local businesses and cultural life.

What happened on Spring Road NW, and across Columbia Heights, are prime examples of “community ownership” as a stabilizing force for neighborhoods. Community ownership has always been a critical issue for community development corporations (CDCs) and other stakeholders in neighborhood revitalization. But as gentrification threatens more and more places across the country, resident control of real estate, local business and other assets has become an increasingly important bulwark against displacement.

The emerging community ownership movement builds on the deep work of community development over the decades. CDCs were formed to fight urban renewal and redlining, and to this day actively promote local control, fight community wealth-stripping, and combat neighborhood displacement. For other CDCs, especially those formed to build rental housing, promoting community ownership is a newer response to combat neighborhood change and inequality. Now, in addition to CDCs, other entities are advancing ownership strategies in order to mitigate the displacement of people and businesses from their communities.

In the affordable housing arena, two strategies rooted in principles of community ownership are gaining traction. One is an innovative approach to pooling the resources of CDCs in order to maintain affordability and community control of properties. A leading model for this is the Joint Ownership Entity, or JOE NYC. Launched in 2017 with support from LISC NYC and others, JOE NYC is a partnership of a dozen non-profit CDCs in New York City to jointly own and manage the assets of their property portfolios. By pooling their assets, the CDCs are achieving a scale that brings operating efficiencies to their collective portfolio, reducing expenses and enabling the bulk purchasing of utilities. As JOE NYC grows, its size and financial strength will also increase its members’ development capacity by providing them a balance sheet that can issue guarantees when they pursue new affordable housing development opportunities. JOE NYC improves the groups’ finances, better positioning them to access additional financing and maintain ownership of their properties for the long-run. The organizations are all rooted in the communities where they own and are committed to keeping their units affordable.

The second and more established strategy is that of Community Land Trusts (CLTs). While CLTs and other land-owning entities and programs that govern the terms for owners and tenants are not new, they are gaining attention as an important housing strategy to facilitate community ownership and ward off displacement. For example, CLTs often set ground rules around the resale of units, as a way of guaranteeing long-term affordability in hot markets. This helps ensure that low-income residents continue to have homeownership opportunities in neighborhoods that they would not otherwise be able to afford. Because CLTs also include mechanisms to ensure community-informed decision-making about land use, they can encourage greater control over local resources. A new LISC report explores the dynamic role CLTs can play in promoting community resilience.

Displacing residents from housing is just one side effect of neighborhood change. Businesses, particularly small businesses, also define the character of a place and can become vulnerable when commercial real estate prices rise. Strategies to retain resident-owned businesses can mitigate this vulnerability. A particularly promising one out of Chicago has created a co-op-like structure for small businesses to own a building that will house their companies. This effort is similar to the JOE NYC, but the assets are owned by the collective of businesses. Moreover, the businesses leverage their expertise to support each other (in such areas as accounting, design and marketing).

Known as E.G. Woode, the collective purchased a vacant property on the South Side, with support from LISC Chicago and others, to convert into permanent space for their enterprises. Their ownership stake will allow the businesses to withstand the impact of other investments in the neighborhood and preserve their ability to operate in the face of rising property values. As more businesses join the collective, more properties will be purchased and included as assets.

Supporting locally-based entrepreneurs to establish and grow their businesses also can help stabilize a neighborhood undergoing change. The crowdfunding site KIVA gives small businesses much needed capital to get their ideas off the ground. Take Candice Schibli, owner and operator of the Southeastern Roastery, a wholesale coffee business in the Washington D.C. area, who struggled to access financing from traditional sources for her business.

Through KIVA, Schibli succeeded in raising a $10,000 loan within 12 days of posting her goal on the platform. She has used the money to buy new equipment which has allowed her to take on larger orders and additional clients, further cementing her place in the community. A well-developed entrepreneurial ecosystem that includes long-time residents and business owners who have a stake in the community can help maintain the character of a neighborhood amid an influx of new residents and investment.

Finally, policy is a crucial piece of this puzzle. Community development practitioners and financial institutions like LISC can invest in innovations that promote community ownership and help stabilize neighborhoods. But ultimately, local, state, and federal government must develop complementary policies to scale these strategies and increase their impact. Policies like TOPA in D.C. create immediate potential for tenants across the city to become owners, rather than being subject to the whims of property owners. In many of our communities, new resources and investments are long overdue and bring welcome economic and social dynamism. But with that change comes the obligation to create opportunities for existing residents and business owners to stay if they choose, and to share in this new prosperity.

Morgan Harper is vice president of Knowledge Management & Strategy at LISC (Local Initiatives Support Corporation), a national community development and social enterprise nonprofit. Sara Feierstein is a LISC program officer with a background in using data to drive decision-making for nonprofits.

Tags: affordable housingwashington, d.c.chicagoland trusts