Federal Reserve Governor Elizabeth A Duke told a Community Affairs Research Conference on Thursday that, while every community across the country has been affected by the financial crisis, the results look different in each. The impact of foreclosed, vacant and abandoned properties that threaten neighborhoods nationwide and the efforts needed to stabilize those neighborhoods are shaped by the circumstances that prevailed in those neighborhoods before the crisis hit.
"Neighborhood stabilization efforts are critical, now more than ever," she said, "as not all communities will be stabilized without intervention. This is because the market will not correct equally in all places."
The 12 Federal Reserve Banks and the Board of Governors are helping communities by combining research with local outreach and bringing together financial institutions, policymakers, and community leaders to facilitate local attempts to repair the damage done by the crisis. The Fed, she said, participates in local collaboration efforts, helps evaluate what is working and what is not, and highlights promising practices
Duke used three videos to illustrate how the financial crisis has hit different cities in different ways and how grassroots innovation and collaboration are leading to promising stabilization efforts in each. The three "Reports from the Field" highlight Phoenix Arizona, Cleveland Ohio, and Detroit Michigan; each hard hit by the economic downturn and rampant foreclosures.
The current crisis in Cleveland, Duke pointed out, follows five decades of population loss, outmigration of jobs, and urban sprawl. Despite this, public and private partners have developed an innovative stabilization strategy that uses targeted data to help community leaders focus their scare resources on those neighborhoods that have the best chance for success. Cleveland's success is built around both on-the-ground community outreach and data collection to identify trends on both the block and community level. Nonprofits, local foundations, and universities provide the tools to analyze that data and steer resources to the places where they can do the most good. "This 'tipping point' strategy," Duke said, "relies on the comprehensive investment of public and private resources for sustained stabilization."
Phoenix and the rest of the western states look quite different. The problem here is in both urban areas and the suburbs and resulted from overbuilding. The vacant homes tend to be newer than in other parts of the country but because of this the problems are concentrated in communities that have never dealt with these issues on a large scale before. Here the public-private partnerships have reached out to the real estate community to help connect eligible families with affordable homes. The issues too are different in Phoenix than in older industrial cities. Because the problems are largely shaped by overbuilding and resulting falling home prices, houses and sometimes entire subdivisions are being purchased by investors. The challenge to the community is to ensure that qualified homeowners and non-profits are able to compete with investors for these now affordable homes.
While a city like Phoenix can largely grow out of its problems, Detroit is faced with the opposite problem, decades of population loss. The city was build for a population of two million and now has half that. The foreclosure crisis has created a pivotal moment in which the city must reinvent itself and few easy solutions exist. Detroit is partnering with community leaders to bring together thousands of residents to help make the tough choices to shape the city's future.
The Detroit Works Project aims to reimagine the city's geographic footprint and service range, based on the current smaller population. "Detroit's story reminds us that when ideas are controversial and hard choices must be made, community input and buy-in is critical for success," Duke said.
In her role as a Federal Reserve Governor, she said she has traveled to all 12 Reserve Bank Districts and saw first-hand what is happening across the country. The Federal Reserve is learning more each day about the complex task of stabilizing community and research and analysis of what is working is critical. "From these video 'Reports from the Field,' we've learned that collaborations and partnerships help achieve success; strategic targeting of limited resources may be necessary; data can help focus a strategy; community input and buy-in are critical for long-term planning; and different approaches will work for diverse challenges and places."
