Revisiting Inclusive Prosperity
Though traditional developers and policymakers have long viewed inequality as a byproduct of economic development, the tide is now changing. While today’s local governments are placing inclusion at the top of their agendas, private anchor institutions are also focused on community engagement in the form of new public parks, highway underpasses, and affordable housing initiatives. As a follow-up to our September 2017 paper, “The Case for Inclusive Prosperity,” the NYUSPS Urban Lab at the Schack Institute of Real Estate identified some of the latest, and most prominent, examples of an inclusive prosperity strategy. Full paper available here.
Require Affordable Housing
When it comes to affordable housing, few cities measure up to New York. In June, the city instituted new guidelines for simplifying its housing lottery process and reducing the effects of debt and credit history on an applicant’s standing. Initiatives like these have set the stage for cities across the country. In recent years, small cities like Alexandria and New Rochelle, and even larger metropolitan areas like Philadelphia, have begun to pioneer their own large-scale affordable housing initiatives.
Alexandria’s restaurant tax
To account for its declining share of affordable housing units, the City of Alexandria opted to raise the local tax on restaurant meals by one percent, with the proceeds dedicated to affordable housing and offering direct financial assistance to renters and homeowners. By increasing the tax to 11 percent, Alexandria has adjusted the overall cost by a small margin (a $30 meal that once cost $33 with tax will now cost $33.30). This increase is expected to raise an additional $4.75 million each year for affordable housing, bringing Alexandria closer to its goal of building and preserving 2,000 affordable units by 2025.
Philadelphia’s construction tax
In June, the Philadelphia City Council proposed a one percent tax on new construction and renovation, including most residential, commercial, and industrial projects. Like Alexandria’s restaurant owners, Philadelphia Mayor Jim Kenney worries that a higher tax will dissuade businesses like Amazon from locating in the area. But the bill’s supporters argue that it incentivizes developers to invest in inclusive prosperity. Lawmakers estimate that the policy could yield at least $20 million annually for down payments and closing costs for qualified homebuyers. While this is still not enough to address issues of affordability among Philadelphia’s lowest earners, it demonstrates how cities can work with developers to make their housing stock more inclusive.
New Rochelle’s public-private partnership
In 2015, the City of New Rochelle teamed up with RXR Realty to carry out its $4 billion downtown revitalization plan. Less than a year later, RXR began building the first of its projects, a $120 million mixed-use building at the site of the city’s historic Loew’s Theater. Upon completion, the project — known as 587 Main Street — will include 280 rental apartments, a tenth of which will be affordably priced. The city is also developing a downtown arts and culture district that will include affordable spaces for artists to live and work. Overall, the city’s new Downtown Overlay Zoning District allows for the construction of 6,370 residential units and 3 million square feet of commercial space. Developers who wish to build outside of these regulations must agree to fund community benefits like affordable housing, municipal parking, or historic preservation.
Make Good, Family-Supporting Service Jobs a Centerpiece of Development
Not all cities agree as to the best strategy for upgrading low-wage service jobs into sustainable careers. Nevertheless, a growing share of urban leaders, think tanks, workers’ groups, and even major banks recognize the need to reduce unemployment, improve wages, and provide a more supportive working environment for employees of all levels.
D.C.’s ballot for tipped workers
Washington, D.C.’s newly approved ballot measure, Initiative 77, requires hotels, restaurants, and other businesses to pay their workers a full minimum wage. While the city’s current minimum wage — $12.50 an hour — is scheduled to rise to $15 an hour by 2020, wages for tipped workers will increase by $1.50 each year until 2025. Though many restaurant owners fear the measure will increase labor costs, workers’ rights groups argue that requiring a minimum wage for tipped employees is key to reducing inequality. According to research from the Center for Poverty and Inequality, poverty rates are twice as high among tipped workers, the majority of whom are women. This could not be more antithetical to a “good jobs strategy,” which demonstrates that investing in lower-skill workers and offering them higher wages results in better customer service, reduced turnover, and higher rates of productivity and profit.
Starbucks’ university partnership
In 2014, Starbucks partnered with Arizona State University (ASU) to launch The Starbucks College Achievement Plan, a program that allows local Starbucks employees to earn full tuition coverage for their bachelor’s degree. Though it has faced some criticism, the collaboration has run smoothly over the past four years. In February 2017, the two anchor institutions unveiled a new Pathway to Admission program, which caters to the 20 percent of Starbucks applicants who lack the grades or educational background to apply to ASU. After completing their educational requirements and being accepted to ASU, Starbucks employees can then transition to the College Achievement Plan and convert their classes to academic credit.
Bank of America’s talent pipeline
In February, Bank of America announced its plan to open more than 500 branches in the next four years, creating the need for thousands of new employees. Rather than fill these slots with high-pedigree candidates, the bank rolled out a targeted effort to hire around 10,000 employees from low- and moderate-income neighborhoods. The plan is part of a larger program called Pathways, which aims to create talent pipelines for disadvantaged residents in the form of career coaching and professional skills training. To strengthen these efforts, the bank has partnered with a number of nonprofit organizations, which assist with recruiting candidates.
Focus on Inclusive Strategies for Innovation, Entrepreneurship, and Creativity
The most successful efforts to spur local innovation, entrepreneurship, and creativity hinge on collaboration. As cities and anchor institutions endeavor to provide low-income and disadvantaged residents with technical skills, job training, and entrepreneurial know-how, they have leaned on one another in the form of public-private partnerships or grant programs.
Citigroup’s venture philanthropy initiative
In 2016, The Citi Foundation unveiled Community Progress Makers, a a $20 million initiative that offers grants to visionary nonprofits in New York, Miami, Los Angeles, San Francisco, Chicago, and Washington, D.C. The strategy is part of what the foundation’s president, Brandee MacHale, calls “venture philanthropy,” or investing in the vision of local organizations. According to the foundation, their 2016–2017 funds helped construct more than 10,500 affordable housing units, strengthen more than 1,100 small businesses, connect 1,800 young people to local jobs, and secure financial assets for more than 14,700 low-income urban residents. With its second round of grants announced in April, the foundation hopes to further this success.
Blackstone’s local partners
In 2017, the multinational private equity firm Blackstone unveiled BX Challenge, a grant program for disadvantaged populations — including communities of color, women, veterans, and immigrants — in Chicago. The program provides up to $3 million in funding for organizations that recruit and engage underserved entrepreneurs. In addition to receiving support from Mayor Rahm Emanuel, the initiative is backed by World Business Chicago (WBC). After analyzing the efficacy of the program, WBC and JPMorgan Chase will soon publish a report that includes best practices for other institutions to follow. Already, the first $1 million cohort includes 12 companies and more than 800 participants.
Ascend 2020's research-based approach
Since its launch in 2016, the Ascend 2020 initiative has provided 140 small businesses with access to $8 million in investment. To achieve this goal, the initiative combines grant funding from JPMorgan Chase with data from the University of Washington Foster School of Business. While conducting its research, the university found that the revenue of white-owned small businesses in the U.S. is significantly larger than that of Latino- or African-American owned firms. As a result, Ascend 2020 focuses exclusively on inner city and minority-owned small businesses. Following the initiative’s success, JPMorgan Chase offered $2.5 million of additional capital for business education and consulting services, as well as strengthening partnerships with local anchors.
Design and Build Inclusive Public Spaces
While most public spaces are designed with their community in mind, not all have been successful at catering to residents who need them the most. Thankfully, many developers, design firms, and city governments have come to learn from projects like The High Line in New York City, whose initial design became a magnet for exclusive, high-end development. Today, a growing number of public spaces are built specifically for low-income or disadvantaged residents, or as celebrations of a neighborhood’s history and diversity.
Design Trust’s el-space reclamation
In 2013, The Design Trust for Public Space partnered with the New York City Department of Transportation to document and analyze New York City’s el-space, or space beneath an elevated transportation structure, including highways, rail lines, and bridges. Their vision became a reality in May, when they launched a pilot program to reclaim the unused land beneath the Gowanus Expressway in Brooklyn. The project features an alternative walkway, improved lighting and parking space, and new systems for green infrastructure, including low light plants, which capture stormwater and improve air quality. According to Design Trust’s executive director, Susan Chin, the initiative presages a series of five more pop-up el-spaces in New York City, which is currently home to around 700 miles of elevated infrastructure.
Domino Park’s historic preservation
In the late 19th century, the Domino Sugar Refinery was the largest sugar refinery in the world, producing more than half the sugar in the U.S. After decades of turmoil, including a fire, an explosion, and one of the longest labor strikes in New York City history, the plant eventually closed in 2004. Today, a massive redevelopment project is breathing new life into the 11-acre site, thanks to an innovative collaboration between the architecture firm James Corner Field Operations and the development firm Two Trees Management. The project, which will cost an estimated $3 billion, consists of a public waterfront park featuring restaurants, green space, and an elevated walkway. Perhaps the most notable element is the construction of 2,800 rental apartments, more than 700 of which will be priced at affordable rates.
Atlanta’s inclusive public space
Not all revitalization efforts begin with a major developer on board. In the case of the Sara J. González Memorial Park in Atlanta, the process began with Isabel González Whitaker, a former magazine editor who petitioned to have a local park named after her mother. By 2014, her actions caught the attention of a local developer, who made a sizable donation to the project. With new funding under her belt, González Whitaker established four pillars of diversity and inclusivity: making the park fully compliant with the Americans with Disabilities Act (ADA), installing accessible playground equipment such as “Zero G” swings and wheelchair ramps, mandating a new soccer field, and developing a legacy plaza that honors Atlanta’s diverse population.
As cities and anchor institutions begin to understand the value of diversity and access for all residents, they must develop a clear strategy for their investments. For inclusive prosperity to be successful, it must combine the knowledge and resources of local government, anchor institutions, and community members. Together, these institutions must adopt a place-based strategy that caters to the individual strengths and needs of a community.
STEVEN PEDIGO is the Director of the NYUSPS Schack Institute of Real Estate Urban Lab and a Clinical Assistant Professor for Economic Development at the NYU School of Professional Studies. He is also the Director of the Research and Advising for the Creative Class Group, an Associate Partner at Resonance Consultancy (Vancouver/ NYC), and a Senior Advisor for Leland Consulting(Portland). Follow him on twitter @iamstevenpedigo.
ARIA BENDIX is a writer for the NYUSPS Schack Institute of Real Estate Urban Lab. Her work has appeared in The Atlantic, CityLab, Bustle, and The Harvard Crimson, among other publications. Follow her on twitter @ariabendix.