IN 1983 the makers of The Day After, a made-for-television movie about the aftermath of a nuclear holocaust, filmed part of their drama in an inner-city neighborhood in Kansas City whose forlorn, rubble-strewn landscape seemed the perfect image of a fictional ground zero. Today that same site is a development that includes 300 units of low- and moderate-income housing, three shopping centers, and a library. No new government program brought about this remarkable transformation; rather, a private local nonprofit organization, the Community Development Corporation of Kansas City, took the initiative.
The revival of this once-forsaken piece of Kansas City real estate is part of a little-celebrated but widespread campaign by community and nonprofit organizations to build low-income housing and revitalize inner-city neighborhoods across the United States. Unlike conventional government housing programs, the new housing movement is based in the communities it seeks to help, relies as much on private as on public funding, and produces homes that could be mistaken for upscale condos. It aims to engage the poor in improving their own lives. In an era of hostility to government the community-based approach to housing has wide political appeal. Along with Senator Carol Moseley-Braun, of Illinois, and other liberal Democrats, such staunch Republicans as Senator Kit Bond, of Missouri; Congressman Rick Lazio, of New York; and even Governor Kirk Fordice, of Mississippi, a rock-ribbed Reagan conservative, have publicly endorsed the community-based housing movement. Yet, strangely, it has eluded public awareness. It is making a visible impact on low-income neighborhoods all over the country, but the question remains whether it can survive, much less conquer the monumental problems of the inner city.
The movement originated in the 1960s but first took root in the 1970s, when job and population flight, disinvestment, arson, drugs, crime, and disease were ravaging many urban neighborhoods. As these destructive forces spread to large urban public-housing projects, Charles Murray and other conservatives concluded that government social programs had actually caused the chaos. In the early 1980s the federal government, under President Ronald Reagan, began slashing the funds available for subsidized housing.
Today the federal government has all but ceased to build low-income housing, and just last year President Bill Clinton signed a bill that stopped granting rent subsidies to new applicants. Meanwhile, rising housing costs take ever larger bites of the limited wages of the working poor: by 1993 one fifth of the nation's unsubsidized renters paid half or more of their income for shelter. In this grim context new initiatives in the housing field have become crucial.
In response to the federal retreat from housing, groups of private citizens set out to create islands of safety and comfort in some of the toughest slums in the country. There are now about 4,000 local housing organizations in the United States. Since 1988 they have developed more than 20,000 homes a year for low-income Americans. In 1994 community-based groups built approximately 40,000 units -- equivalent to the rates of production achieved by the government during the heyday of public housing.
The organizations that produce and manage low-income housing differ markedly from the rigid centralized bureaucracies that run most government housing programs. Community-development corporations, which are chartered nonprofit associations, figure prominently among the producers of low-income housing. CDCs were first created in the 1960s, to encourage business activity in inner-city ghettos, but the vast majority concentrate on housing.
Unlike public housing, community-based housing exists in the private market; its developers must at least break even in order to survive and carry out their ambitious agendas. Thus they seek both public and private sources of funding. In collaborative meetings -- or, occasionally, in dramatic confrontations -- local housing groups wheedle loans, grants, and free land and utilities from city, state, and federal officials.
Special kinds of nonprofit organizations, known as intermediaries, raise private funds and funnel them to hundreds of local housing and community developers across the United States. By acting as a combination of broker, credit-rating service, and rich uncle, two large intermediaries have emerged as powerhouses in the movement. The Local Initiatives Support Corporation, or LISC, was started by the Ford Foundation as a permanent institution for helping distressed neighborhoods. James Rouse's Enterprise Foundation, one of the foremost national housing organizations, founded by the head of the Rouse Company, an innovative development company, was designed to give the housing movement economy of scale. Each organization maintains a national headquarters and multiple branch offices and raises millions of dollars each year from foundations and corporate donors. (Also, the Neighborhood Reinvestment Corporation, created by Congress as a public nonprofit corporation, maintains an extensive network of local housing organizations.)
Both LISC and Enterprise create pools of housing-project deals that they offer to philanthropists and investors; the intermediaries then monitor the community groups responsible for the projects to ensure that they perform as promised. One reason that LISC and Enterprise can persuade businesses to provide capital to small community organizations is that low-income housing is, generally, profitable. With the help of tax benefits, especially the Federal Low Income Housing Tax Credit (which housing developers earn and then sell to investors), investments yield an average annual return of about 16 percent over fifteen years. Attracted by such earnings, hard-nosed business investors, including Warren Buffett, the celebrated financier, have plunged into housing for the poor.
Some critics dislike all the high finance and charge that community-based housing is simply a money racket. Old-style champions of public housing and direct housing subsidies object to the syndication of tax credits and other development deals, because the transaction costs benefit lawyers and accountants. Yet in a climate of government reductions and budget cutbacks a housing system under the direct control of public or semi-public agencies is simply not a viable alternative. The days of well-funded centralized programs are not about to return anytime soon.