PPA786: Urban Policy Class 20: Financial Capital

Transcript:PPA786: Urban Policy Class 20: Financial Capital:
PPA786: Urban Policy Class 20: Financial Capital Programs to Promote Community Development PPA786, Class 20: Financial Capital Programs Class Outline Background (CDCs and Small Business) Types of Community Development Institutions Description Analysis of Impacts PPA786, Class 20: Financial Capital Programs Background Institutional arrangements for community development—and financing—are very complex. Many financing programs are affiliated with a Community Development Corporation. The focus on financing activity is almost always on small business. PPA786, Class 20: Financial Capital Programs Community Development Corporations (CDCs) CDCs are non-profit, community-based organizations that build housing, finance local businesses, and occasionally run businesses themselves. They first appeared in the 1960s and have expanded rapidly in size and numbers since. The got a big boost with the National Community Development Initiative of the 1990s, which raised hundreds of millions of dollars for CDCs from the federal government, foundations, and businesses. PPA786, Class 20: Financial Capital Programs Current Status of CDCs There are about 4,600 CDCs, created with state, local, federal, and foundation grants. They create 86,000 units of housing per year. Advocates claim that they create 75,000 jobs per year, but there is no evidence on displacement. Only about 20% of CDCs try business development, but this number is growing. PPA786, Class 20: Financial Capital Programs The Misleading Emphasis on Small Firms In our dynamic economy (outside a recession), many new small firms appear every year. Many fail, but some succeed and grow. Early research, now discredited, said small firms produced most new jobs. Even if small firms did produce most new jobs, there is no reason to believe that jobs could be created by subsidizing small firms in areas with few resources and little business experience. PPA786, Class 20: Financial Capital Programs The Inevitable Focus on Small Firms Nevertheless, community development efforts will undoubtedly continue to focus on small firms. Community organizations do not have the resources to attract large firms. Community development is a place-based strategy and rarely looks into placing residents in existing large firms outside the neighborhood. This implies that training and technical assistance are almost inevitably part of any financing program for community development. PPA786, Class 20: Financial Capital Programs Place-Based vs. Person-Based Policies We do not attempt a comprehensive comparison of place-based versus person-based strategies. But as discussed earlier, most human-capital strategies are person-based. We do not have enough evidence to understand which strategy deserves more money or which strategy works best under