When it comes to building better communities and urban spaces, businesses and developers often hone in on a single term: economic growth. But what happens when the people who serve these communities—doctors, nurses, teachers, paramedics, police officers, and so on—can no longer afford to live in them?
This very issue is currently plaguing cities like San Francisco, New York, Boston, and Washington, D.C., where an influx of talent, jobs, and businesses has given rise to gentrification, inequality, and a lack of affordable housing. As large, dense cities continue to grow and expand, their low- to moderate-income residents are slowly being priced out, creating deep-seated divides in our urban communities.
Solving these divides requires a shift in the narrative of urban development from one that views equity and growth as mutually exclusive to one that recognizes the central role of equity in economic progress. In our latest report for the NYUSPS Schack Institute of Real Estate Urban Lab, my colleague Richard Florida and I make the case for an inclusive prosperity strategy that goes beyond inclusionary zoning and affordable housing to include jobs, innovation, and design.
Recently, Florida sat down with Jodie McLean, the Chief Executive Officer at EDENS, and Lata Reddy, the Senior Vice President for Diversity, Inclusion and Impact at Prudential Financial and the Chair of the Prudential Foundation, for a discussion on how cities and real estate investors can partner to build more inclusive communities.
Inclusivity is Good Business
When Prudential was founded in Newark, New Jersey in 1875, it was the first U.S. company to make life insurance available to working families who could not afford to pay premiums. Today, it is one of the largest financial institutions in the world. As Chair of the Prudential Foundation, Reddy attributes much of her company’s economic success to its lasting commitment to inclusivity. As a company that “believes deeply in the role of business in driving progress,” Reddy says, Prudential’s “long-term value creation for stakeholders is dependent on our community interactions.”
The same is true for EDENS, a real estate firm that develops, owns, and operates community-oriented spaces with a focus on building key relationships with neighboring residents, universities, and retailers. While helping to construct Union Market in Washington, D.C., for instance, EDENS teamed up with the nearby Gallaudet University, a private university focused on providing barrier-free education of the Deaf and hard of hearing, to provide jobs for local students. “When we lead with social goals, we outperform our financial goals,” McLean says. “It is a good business model to be focused first and foremost on the community.”
It is also an effective strategy for companies to remain open about their financial motivations. According to Reddy, people tend to understand that there is an economic incentive to being socially responsible. Creating a brand that adds to a community rather than extracts from it, she says, is fundamentally “about relationships and trust.” But how exactly does inclusivity translate into economic growth?
Planning for the Long Term
The challenge for developers, McLean finds, is learning how to adapt a long-term social mission to a short-term investment cycle. Still, both she and Reddy agree that it can be done.
To start, anchor institutions—organizations like universities, hospitals, medical centers, real estate developers, and high-tech companies that quite literally anchor urban centers—can band together to form a long-term commitment to fostering inclusivity in their communities. In Newark, for instance, the city has partnered with a number of local institutions to reduce poverty and unemployment while strengthening the city’s economy by the beginning of the next decade. The initiative’s three-pronged approach—“hire, buy, and live” local—provides a simple way for anchors to share in a mission of inclusivity.
In addition to coordinating their efforts, there is plenty that anchor institutions can do to promote inclusivity on their own. In the case of Union Market, EDENS was determined to address what McLean calls a “billion-dollar retail leakage” in Washington, D.C. But the company also chose to employ only those retailers with a willingness to give back. Similarly, when the Prudential Foundation decided to renovate the Hahne’s building in downtown Newark, they selected nearby Rutgers University as their first tenant. Today, the building includes an arts incubator conceived by Rutgers faculty, staff, and students, and will soon feature a Barnes & Noble that doubles as a campus bookstore.
But, with their vast size and resources, anchor institutions have the capacity to do even more. During their discussion, McLean and Reddy cited many of the same pillars of inclusive prosperity outlined in our report: On the one hand, Reddy noted, anchor institutions must bring affordable housing to areas of economic opportunity and create a path to employment for local graduates. On the other, McLean added, developers must build workforce housing near major employment hubs, thereby reducing commute times and allowing people—particularly service workers—to live near their jobs.
What Comes Next?
At times, these initiatives will require anchors to trade their economic objectives for community assets—an exchange that not all developers and high-tech firms will be eager to make. But, setting aside an inherent desire to improve a neighborhood, there is a real financial incentive for large-scale anchor institutions to invest in inclusive prosperity.
When an anchor meets its goals for inclusivity, Florida argues, it helps to protect its brand in the long run. Investing in underserved neighborhoods also contributes to a city’s diversity, innovativeness, and creativity—characteristics that are essential to economic growth. As Jane Jacobs once said, “When a place gets boring, even the rich people leave.”
Of course, cities will face numerous challenges in their pursuit of both inclusivity and economic progress. Because of this, they must develop long-term partnerships that transcend investment and political cycles. As Florida puts it, “Inclusive prosperity is a long game. [But] if we can shift the conversation from growth versus affordability to growth requiring affordability, we can get there in the next ten years.”