Almost a year ago, Living Cities--a philanthropic collaborative of 21 of the world's largest foundations and financial institutions--set out to find local approaches that could limit the potentially devastating impact of the sub-prime mortgage crisis on urban neighborhoods. As so often happens, while looking for technical solutions, we found that the long-term answer to this crisis lies not with the experts and the economists, but in the indomitable spirit of the American people and our commitment to innovation, imagination and community.
The foreclosure crisis has spurred an extraordinary amount of innovation in both the public and nonprofit sectors. Living Cities provided grants to support foreclosure mitigation strategies in 10 cities; the common bond among them was innovation. Chicago, for example, broke with tradition and outsourced the acquisition, rehabilitation and re-sale or rental of foreclosed properties to Mercy Housing, a high-capacity national nonprofit organization. Armed with the necessary authority and federal Neighborhood Stabilization Program dollars, Mercy Housing is creating a new entity to serve residents throughout the city of Chicago.
In turn, national nonprofit affordable housing organizations, sometimes criticized for failing to achieve the needed scale, created an unprecedented joint venture, the National Community Stabilization Trust, to do just that. Together, through the trust, Enterprise Community Partners, the Housing Partnership Network, LISC (the Local Initiatives Support Corporation), the National Urban League and NeighborWorks, have established a working relationship with the financial institutions holding REO (real-estate-owned) properties that represent more than 60 percent of the country's foreclosed homes. The trust has agreements with more than 60 cities to help broker the units and bring them back to local use.
While devastating in the immediate term, the sub-prime crisis has spurred some cities to imagine a very different future for themselves. No place has done this better than Cleveland. With population and jobs declining well before sub-prime mortgages became front page news, Cleveland is planning for and addressing both its long- and short-term issues head on. The "Re-imagine a More Sustainable Cleveland" initiative was formed to accelerate the transformation of Cleveland from an aging, shrinking industrial city to one that is not only "right sized," but on the forefront of the green economy. City, state and philanthropic investment is helping to move the city into green buildings, clean tech businesses, even increased access to downtown and cultural institutions for those residents in neighborhoods hit the hardest by foreclosures.
Despite Facebook, MySpace and other online communities, people still place a high value on physical places, distinctive neighborhoods. The American sense of "community" and our pride in the uniqueness and the character of the neighborhoods in which we live has, perhaps, never been more evident than now. In New York City, for example, the crisis brought to the forefront the very real risk that, in addition to losing homeowners, neighborhoods could also lose their distinctive character.
An important part of New York City's response to foreclosures was the creation of the Center for New York City Neighborhoods and its nonprofit, mission-driven real estate brokerage service. The brokers employed by the center will work to quickly get foreclosed homes into the hands of interested homebuyers, before absentee investors can purchase the homes. In places, like Jamaica Queens, this type of quick market intervention will be critical to keeping the neighborhood's unique character as a working-class neighborhood of homeowners.
It is difficult to find a silver lining in the sub-prime crisis. Millions have lost their homes and incredible progress that many long-underinvested neighborhoods made in the 1990s has been reversed. However, this crisis has also reminded me of the sometimes hidden power of the American spirit. Right after Barack Obama was elected president, The Economist wrote that the election had "shown once again [America's] unrivalled capacity to renew itself, and to surprise." They got it just right.