Living Cities Sparks Innovative Community Investment

Posted April 5, 2010
By the Annie E. Casey Foundation
Blog livingcitiessparksinnovation 2010

In spring 2009, as offi­cials from 16 cities rushed to meet dead­lines to draw fed­er­al stim­u­lus mon­ey for ener­gy-sav­ing pro­grams, they sought expert guid­ance at a Green Stim­u­lus Boot Camp” held in Cam­bridge, Massachusetts.

The boot camp, attend­ed by 140 senior city and state offi­cials, was host­ed by Har­vard University’s Kennedy School of Gov­ern­ment and Liv­ing Cities, a col­lab­o­ra­tive of 22 of the world’s largest foun­da­tions and finan­cial insti­tu­tions work­ing to improve the lives of low-income peo­ple in the neigh­bor­hoods of 23 cities.

Guid­ance came from some of the country’s smartest work­force fun­ders,” who hap­pen to be mem­bers of Liv­ing Cities, illus­trat­ing one of the group’s key pur­pos­es, says Ben Hecht, the group’s pres­i­dent. Rather than just serv­ing as fun­ders, senior lead­ers of Liv­ing Cities’ mem­ber organizations—including Doug Nelson—have helped craft and imple­ment its agenda.

Liv­ing Cities’ mem­bers serve as long-term and inno­v­a­tive investors in com­mu­ni­ty devel­op­ment efforts. Since its found­ing in 1991, the group has invest­ed over $600 mil­lion, which in turn, has lever­aged over $16 bil­lion to help build homes, stores, and schools, as well as child care, health care, and job-train­ing centers.

An ear­ly mem­ber of Liv­ing Cities, Casey joined in 1993 under the lead­er­ship of Nel­son, who was attract­ed by the group’s mis­sion and the unique col­lab­o­ra­tion between foun­da­tions and finan­cial ser­vices com­pa­nies. Nel­son is wide­ly cred­it­ed with reviv­ing the orga­ni­za­tion by help­ing orches­trate a major reor­ga­ni­za­tion when he served as board chair­man from 2005 to 2008.

He saw that there was an affin­i­ty between Casey’s com­mit­ment to com­mu­ni­ty revi­tal­iza­tion and what Liv­ing Cities was estab­lished to do,” says Roger Williams, a Casey Senior Fel­low and direc­tor of respon­si­ble rede­vel­op­ment. Nel­son pushed the group to pur­sue a new approach to com­mu­ni­ty devel­op­ment by com­bin­ing dif­fer­ent kinds of cap­i­tal— phil­an­thropic, pri­vate, and public—to spur invest­ment in poor neighborhoods.

Liv­ing Cities’ abil­i­ty to endure and chal­lenge itself con­tin­u­al­ly owes a large debt of grat­i­tude to Doug,” says Gary S. Hat­tem, the cur­rent board chair­man, who is pres­i­dent of Deutsche Bank Amer­i­c­as Foun­da­tion. It is incred­i­bly dif­fi­cult to hold togeth­er a col­lab­o­ra­tion of so many promi­nent insti­tu­tions and strong-willed indi­vid­u­als. He has always kept us on task, got­ten us back to core val­ues, and been a voice for tak­ing risks and not accept­ing the sta­tus quo.”

Lead­ers, includ­ing Hecht, were select­ed to help Liv­ing Cities broad­en its focus and become a more mem­ber-dri­ven part­ner­ship that could respond to press­ing issues and influ­ence nation­al debate about urban revitalization.

Mov­ing beyond its orig­i­nal approach of pro­vid­ing grants to two major inter­me­di­aries to help com­mu­ni­ty devel­op­ment cor­po­ra­tions expand afford­able urban hous­ing, Liv­ing Cities began mak­ing loans to lever­age oth­er types of cap­i­tal in order to boost invest­ment in poor neigh­bor­hoods so they can rebuild and strengthen.

In 2007, Liv­ing Cities launched the Cat­a­lyst Fund, a vehi­cle to pool and invest cap­i­tal through pro­gram relat­ed invest­ments (PRIs) that pro­vide below-mar­ket rate loans and guar­an­tees to non­prof­its aligned with Liv­ing Cities’ mis­sion, enabling the non­prof­its to lever­age oth­er sources of cap­i­tal. PRIs are a type of social invest­ment, a tool designed to pro­vide a soci­etal or mis­sion-relat­ed return as well as a finan­cial return.

Three years ago, there was no vehi­cle for foun­da­tions to bring oth­er cap­i­tal besides grants to the table,” says Hecht. With­in eight months, there was “$22 mil­lion in loan dol­lars that we were invest­ing along­side grant dollars—almost all of it from foun­da­tions who had nev­er done lend­ing before. That was all because of Doug.”

Nel­son was unapolo­getic that the Casey view was the rea­son he was at table,” says John Mon­a­han, a for­mer Casey Senior Fel­low who assist­ed Nel­son with Liv­ing Cities and is now Coun­selor to the Sec­re­tary and Inter­im Direc­tor of the Office of Glob­al Health Affairs for the Depart­ment of Health and Human Ser­vices. None of it—more afford­able hous­ing, bet­ter-designed neighborhoods—mattered unless it result­ed in improved out­comes for kids and families.”

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