Economically Inclusive Revitalization in North Memphis

Starting Date: 2018-06-01

The core idea of the innovation applied to Klondike is to ensure that Klondike remains a Black neighborhood, while homes in Klondike rise in value. Our commitment to the residents of Klondike to inclusively revitalize the neighborhood aims to prove once and for all that it is possible to turn a very poor, virtually all Black North Memphis neighborhood into a vibrant, mixed-income Black neighborhood. To this end, Klondike’s revitalization pivots on three non-negotiables that will inform and shape all our decisions: Zero Displacement, Permanent Affordability, and Home Owner Wealth Through Rising Home Values. Klondike will be developed into a mixed income neighborhood of 1,500 households, 900 of which will be owning and renting at market rates. This will double Klondike’s home ownership rate while more than halving poverty levels, two building blocks for stability and eventually for economic vitality, making tax increment financing and home equity possible.

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What is the geographic reach of your work to date?

Local

Which metropolitan areas (if any) does your work focus on?

Memphis, Tennessee

What is the core idea of your innovation? How does it increase the value of homes in Black communities?

The core idea of the innovation applied to Klondike is not the technical value of a community land trust mechanism at times, nor use of flexible philanthropic dollars, however essential these tools are. This project’s innovativeness is an adaptation resulting in an intentional commitment to ensuring that Klondike remains a black neighborhood, while homes in Klondike rise in value.

Historically, there has never been a shortage of technical tools and innovative programs deployed on behalf of revitalization, from the New Market Tax Credit to Choice Communities. But, however sharply designed, technical tools deployed in the absence of intentionality to preserve both affordability and community character and especially a path for home equity wealth for black households, has not ever translated into durable gains for the black community as a whole. Neighborhood revitalization in America – by purely market forces or by the hand of government and nonprofits – has managed, at best, to help just a few black families able to become owners in majority non-black neighborhoods. This is expressly – by intent – not going to happen in Klondike.

Our commitment to the residents of Klondike to inclusively revitalize the neighborhood aims to prove once and for all that it is possible to turn a very poor, virtually all black North Memphis neighborhood into a vibrant, mixed-income black neighborhood.

To this end, Klondike’s revitalization pivots on three non-negotiables that will inform and shape all our decisions.

Zero Displacement. All 600 current households (150 owner and 450 renters) will be able to stay in Klondike if they want to.

Permanent Affordability. As current households choose to leave, or pass away, their “place” in the neighborhood will be affordably preserved. There will always be no less than 600 affordable housing units in Klondike, always comprised of 150 affordable homes for ownership, and always comprised of 450 affordable rental apartments.

Home Owner Wealth Through Rising Home Values. Klondike will be developed into a mixed income neighborhood of 1,500 households, 900 of which will be owning and renting at market rates. This will double Klondike’s home ownership rate while more than halving poverty levels, two building blocks for stability and eventually for economic vitality, making tax increment financing and home equity possible.

How is your idea new or different from current approaches?

No entirely new tools are envisioned. Instead, our Klondike effort borrows from a combination of empirical research on one hand and development experience on the other to create the following key elements of our approach.

Strengths. Whether from Kretzman and McKnight to Geoffrey Canada’s work in Harlem, leveraging what works always costs less, delivers results more quickly, and has the potential to create real value by retention instead of replacement. Our approach is to work where there are clusters of existing owners exhibiting pride of residency and that are also near addresses where social and financial investment and reinvestments are already occurring, and to knit these together.

Diversity. From William Julius Wilson to Raj Chetty, it’s long been well-documented that for a community to thrive, it must be economically diverse. Our approach in Klondike is to simultaneously strengthen the existing community while attracting new residents and businesses. Improvement is not going to be a result of subtraction (removal), which is how neighborhood change efforts usually tend to go. Our motto in Klondike is that we get better together.

Confidence. Need and demand, almost always conflated in the community development field, are not the same. Where need is a function of the ability to pay, demand is an expression of the willingness to pay. A neighborhood – or any product or service – unable to make a persuasive case to those in the market able to say “no thanks” and buy elsewhere, will suffer diminished demand and thus value depreciation.

The black community in Memphis, long deprived of the chance to obtain home owner wealth in a black community, is hungry for this opportunity. Marketing and product development will be geared to sending signals to working and middle class black households that Klondike is going to be developed with the black community and with wealth building and with inclusivity in mind. Our approach in Klondike is – by where we work, and by the products we develop, and by the manner of our engagement, and by our commitment to partnership – to send the following clear signals.

That Klondike will remain a black community
That Klondike will be economically diverse
That Klondike will be a place where buyers can achieve home equity

What are the primary circumstances that devalue homes in Black communities that you are addressing? What is the impact?

With one exception, only neighborhoods along the East-West spine of Poplar Avenue have enjoyed home price appreciation in Memphis greater than inflation during the period 2000-2020.

Among these, just a few have black populations of more than 50 percent.

And just two census tracts (in a city of almost 700,000 people) with a majority black population have experienced actual wealth creation (sufficiently ahead of inflation to compete with other investment opportunities such as the stock market during this period).

In Memphis, there are no majority white neighborhoods that are poor. And vitally, all Memphis neighborhoods where the median household income is $45,000 or less are overwhelmingly black.

It is very rare for a black household in Memphis to realize home price appreciation in a black neighborhood.

Memphis is a very poor city, and almost all the city’s poor are minority households. Only two census tracts in Memphis are at least 30% white and poor. With few exceptions, to be in a black neighborhood in Memphis is to de facto be in a poor neighborhood, which is to de facto be in a neighborhood not experiencing home value appreciation except as an result of flipping and near downtown or near University gentrification.

The evidence in Memphis is that when neighborhoods get less black, they become more attractive to the marketplace comprised of households with superior buying power, who, owing to structural inequity, are overwhelmingly white.

The revitalization effort in Klondike aims to disprove the notion that only white communities appreciate and black communities only depreciate. The revitalization of Klondike aims to disprove the notion that only those communities that are entirely middle income and higher appreciate, and working and moderate and low income neighborhoods only depreciate.

Such revitalization is going to be possible because of our intentionality to be inclusive and to preserve, using a commitment to market forces on one hand, and tempering the power of the unfettered market by using land controls on the other.

What were your “aha” moments (the key insights) that led you to see how your innovation could work?

Klondike is very poor. The typical renter household struggles with an annual income of less than $10,000. The typical home owner is an elderly household with less than $15,000 annual income.

There are more than 600 vacant lots in Klondike. Predatory flipping is common. Predation by hard money and other actors is prevalent. Serious crime is a real issue. More than 30% of the existing residential structures are candidates for immediate demolition.

In spite of these Klondike-specific challenges, the neighborhoods to the south – Snowden/Speedway – and the neighborhoods to the east – Vollintine/Evergreen, are bursting at the seams, with demand pushing prices up at rates <10% annually the last three years, most of it resulting in a combination of gains for investors and displacement risk for long time black residents.

In spite of these challenges, there are signs of incipient strength in Klondike. Minority developers and contractors are buying and fixing up and marketing and successfully selling rehabilitated homes to strong buyers. While many of these developers and contractors are betting – correctly – on a bright future for North Memphis, minority developers and contractors especially are challenged to secure favorable development and small business financing. If the face of these hurdles, their optimism and their entrepreneurial spirit has served to remind us of two things.

One, that neighborhood revitzliation can and whenever possible should also be stitched together with minority business development goals.

And two, that the same developers and contractors struggling to secure working capital are the ones on the ground who know the most about local market conditions. They are in touch with everything from what buyers and renters want to what materials cost.

What’s happening is a bet that, given time and an infusion of optimism and capital, Klondike’s low entry price and location promise a significant upside.

This opened our eyes to the need for us to see land scarcity as the key, and thus land control as the mechanism NPI would need to toggle so a combination of free market investment seeking a return, and below market price controls (through a land bank and other deed restrictions), would be needed to achieve diversity and inclusion and appreciation and affordability all in one neighborhood.

How does your innovation create structural change? What will be different in 5-10 years if you are successful?

For all intents and purposes, Klondike today is 100% poor and black and home owners are not enjoying home value appreciation. Today Klondike has 600 households, only 25% of whom are home owners.

Five years from now the goal is to have added 90 new households paying market rate prices and rents and to have a 34% home ownership rate.

During these five years, the goal is to have completed 140 upgrades to current home owners’ homes, added a mix of 160 new rental units ranging from heavily subsidized for very low income households to market rate, converted 50 existing rentals to home ownership, and constructed 50 new homes for buyers at strategic locations in the neighborhood. Meanwhile during these five years, a community land trust will have been established and achieved scale, and advanced planning on mixed-used development along the neighborhood’s commercial corridor will have begun in earnest in partnership with the city’s planning office. The combination of four interconnected components – deed-restrictions, shared equity agreements, the deployment of a land trust while new product has been coming on line targeted to the working income black household, and resident leadership development – will have redefined Klondike as an emerging, exciting opportunity for black households wanting to live in a vibrant North Memphis neighborhood.

This strategy will close appraisal gaps that historically undervalue black communities, showcase black culture as a positive marketing element, and make clear that a black neighborhood in North Memphis, and therefore anywhere, is both a good place to live and a good financial bet for investors, be they home owners, banks, or others. In these respects, we are creating structural change.

What is your innovation’s path to (i.e. strategy for) success? What momentum or impact have you achieved thus far?

NPI and The Works, Inc. have merged to create one large community-based entity capable of leading this change. With the Klondike Smokey City CDC as a partner, more than 150 land bank properties have come under community control. With a $30M investment from the Pyramid Peak Foundation, the neighborhood’s vacant high school and adjoining property are being redeveloped into a vibrant mixed-use industrial educational campus and arts center.

Leading national consultants have been retained to assist in strategy refinement in real time, working in partnership with The Works, Inc. to constantly evaluate conditions on the ground – real estate prices, inflation, and on-going municipal planning and capital improvement efforts.

There is now a critical mass of 343 parcels (29%) under our direct control, giving The Works and its partners the capacity to control the direction of the neighborhood. The volume and location and contiguousness of properties we control are now allowing for a number of strategically connected efforts:

Demolition
Infill
Affordable rental multifamily
Market rate rental
Market rate home ownership
Pocket parks
Mixed use development on commercial corridors
Rehabilitation
Upgrade and sale to market and below market rate buyers
Upgrade and retention as self-managed affordable rental units
Coordinated resident leadership development
Partnership with law enforcement, churches, and other institutions

What will take your innovation to the next level?

We anticipate that successful target market work will be a difference maker. The Works and its partners are extraordinarily blessed to have the extraordinarily rare volume of flexible financial support from the philanthropic community in Memphis needed to obtain a critical mass of positive market activity and a balance of below market subsidy at the same time. Seldom have community-based organizations ever had this level of support.

We not only have flexible capital to work with, but patient capital as well.

As necessary as enough flexible and patient money is, it is not sufficient to create opportunities for black buyers to live in a black community and enjoy the financial benefits of home ownership, while at the same time making sure there’s no displacement.

What’s needed to really achieve success will include our ability to create a housing product that black Memphis buyers truly want to buy and black Memphis renters really want to rent, and creating a neighborhood vibe that is genuinely attractive to the black community in general.

This means the right housing architecture. The right mix of businesses. The right price points. The right message.

Black buyers don’t just want home equity wealth. They want a high quality of life. Black buyers will seek trails and green space and pocket parks and farmer’s markets and bike paths and good schools, just like any housing consumer. But black housing consumers want to be in a black place, not a former white one.

For too many decades, black buyers have had to settle for hand-me-down houses in hand-me-down neighborhoods in the city, and then hand-me-down neighborhoods in the inner ring suburbs, and then hand-me-down neighborhoods on the urban edge.

In seeking to preserve the black character of Klondike, and express that creatively in our development form and in our marketing and in our pricing, we aim to make Klondike a place where black Memphis wants to be and can afford, and therefore where a combination of preserved and new culture is the basis for black home owner wealth.

How will you involve others to move your initiative forward?

Our aim is for Klondike over the next 30 years to grow from a neighborhood of 600 households with a 25% home ownership rate to a neighborhood of 1,500 households with a 50% home ownership rate.

We envision most (80%) of the owners (600/750) at full build out will have self financed their acquisitions and eventual ongoing improvements, and hundreds of arms length sales will have occurred without any involvement from NPI or the The Works. At the same time we envision a deep relationship with the original 150 owners and their heirs and properties and a growing rental property responsibility, as the neighborhood grows by 70% from 450 rentals to 750.

Right now almost 100% of Klondike’s existing rentals are owned by absentee entities doing minimal property management beyond rent collection and no asset management to speak of.

It will be crucial for The Works, Inc. and our partners to develop the in-house (or find partners with) capacity to expertly manage a large volume of scattered site rentals for very low income households, and slowly dispose of and replace derelict properties with upgraded if not new rental products. At the same time it will be crucial to attract property management partners to the market rate side of the rental equation.

What is the current composition of your team (types of roles, qualifications, full-time vs. part-time, board members, etc.). How do you plan to evolve the team’s composition as the innovation grows?

The Works, Inc. and Neighborhood Preservation, Inc. consolidated operations and operate as The Works, Inc. effective January 1, 2022. The resulting full time complement includes Roshun Austin, an urban anthropologist, as President and Steve Barlow, a lawyer and urban anthropologist, as Vice President and General Counsel.

There is a partnership agreement and development agreement in place with two other key organizations, Urban Renaissance Partners, whose President is Archie Willis III and the Klondike Smokey City Community Development Corporation, whose President is Quincey Morris.

Our work in the Klondike neighborhood is supported by the staff, boards, volunteers and supporters of all four of these organizations. The Works, Inc. has an additional 2 full time lawyers, 1 full time anthropologist, 1 communications expert, 5 full time city planners, 7 full time support staff and another 5 part time advisors and consultants with expertise in policy, planning, community organizing and law. As the innovation grows, we plan to increase vertical integration of project management so that fewer external resources will be needed and to fill needs as they arise to staff the land trust, property development, community organizing and property maintenance operations.

How does your team reflect communities directly impacted by the topic you are addressing? Why are you, your team, or organization dedicated to the issue?

The same institutional and structural inequities prevalent in distressed and disinvested communities are too often faced by black leaders. Smaller philanthropic support and lack of access to capital in general reinforce the very social ills that foundations and those in community development purport that they are trying to help overcome.

Though it may seem trite, people think they can become what they see. And more often than not leaders of major neighborhood revitalization efforts are male and white no matter the demographics of the population they are serving. Rather than continuing this flawed practice of race neutrality we at The Works, Inc. are intentionally race conscious. We understand that the only way to have a successful movement of black wealth creation, black ownership, black neighborhood revitalization, and black equity and access is by ensuring that it be led by, targeted to and shaped and influenced by black people.

The Works, Inc has a staff composition where sixty percent identify as black or African American. One hundred percent of the staff taking leadership roles in the Klondike Neighborhood Initiative are black. Two of the three key leaders have familial ties or spent part of their formative years in the Klondike area.

I (Roshun Austin, President/CEO) will serve as key principal of the sponsoring organization of the $70 plus million redevelopment of the former Northside High School. Quincy Jones, Director of Special Programs will serve as the lead project manager of the Northside High School redevelopment. And Corey Davis, Staff Attorney/Project Leader of the Klondike Neighborhood Initiative will coordinate all of the development efforts being undertaken in the community.)

My (Roshun Austin’s) personal values as it relates to community development are formed by a belief system that I should love my neighbor as myself. This system values community and the collective over individual advancements that are often transactional. “I am because we are” (Ghanaian Proverb) means a deeper connection and engagement seen through the lens of a similar lived experience and a basic understanding of the cultural nuances prevalent in the particular local community.

Is there anything else you think we should know about your innovation?

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