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What is a community wealth strategy?
A wealth strategy aims at improving the ability of communities and
individuals to increase asset ownership, anchor jobs locally, expand
the provision of public services, and ensure local economic stability.
How do community wealth strategies benefit communities?
Community wealth strategies are designed to draw more dollars into
the community — by raising the financial assets of individuals,
by increasing the level of “common” assets within a community
that are locally owned, and by leveraging the use of funds from institutions
that are based in the community (such as city governments and universities)
for community-benefiting purposes.
What are the types of community wealth building strategies?
There are a growing number of distinct community wealth strategies.
On this site we provide information about a dozen of the most important
institutional examples. These include nonprofit and profit-making
models such as community development corporations (CDCs), community
development financial institutions (CDFIs), employee stock ownership
plans (ESOPs), community land trusts (CLTs), cooperatives, and social
enterprise. Local and state government also has an important role
to play, as do the nation’s 4,000 colleges and universities.
In recent years a new individually-focused wealth strategy (individual
development accounts, or IDAs) has experienced rapid growth. There
are also a number of innovative wealth building models occurring outside
the U.S. Information about all
of these models can be found on our C-W Access Panel »
Can different community wealth strategies be combined?
Yes. There are numerous ways to combine different strategies. IDAs
are often funded by government agencies and are commonly administered
by CDCs, which use the programs as part of their strategy to assist
low and moderate-income families to be able to afford home ownership.
CDFIs frequently finance projects that are developed by CDCs. Community
land trusts often set up their housing as limited equity cooperatives.
CDCs may set up social enterprises as part of their effort to provide
job training and increase neighborhood employment opportunities. In
the state of Ohio, the state government provides funding for an employee
ownership support center to encourage ESOP formation as a way to reduce
plant closures and thus reduce government social service costs. Indeed,
the best community revitalization efforts are likely to contain individual-focused
elements, community elements, and government support.
What do these community wealth strategies have in common?
All emphasize building assets or wealth as a way to contribute to
the solution of social and economic problems. These efforts provide
income, savings, direct services, jobs, and by building the local
tax base, they provide support for needed public services. While there
is no “one size fits all” approach, the various strategies
do share some common values and operating principles. They focus on
building and anchoring assets and capital in local communities, often
broadly distributing ownership among community members. They increase
the local economic “multiplier effect” by recycling dollars
within the community in which they are based. And they tend to orient
themselves not just to the financial “bottom-line” but
to producing public benefits of various kinds.
Is the use of community wealth strategies on the increase?
Yes, community wealth strategies are growing around the country. IDAs,
for example, didn’t exist 15 years ago; today, there are more
than 500 programs in the United States. State pension funds didn’t
target any funds to local investment three decades ago; today, they
invest over $12 billion in venture capital (much of which is invested
locally) and tens of billions more in other forms of economically
targeted investment. Community approaches, such as social enterprises,
CDCs, CDFIs, and ESOPs, have also grown. For instance, the number
of CDCs has risen from a handful 40 years ago to over 4,000 today,
while, at the same time, the number of employee owners in ESOPs has
increased from 200,000 to over 8 million.
What is driving the expansion of community wealth strategies?
These developments are not occurring in a vacuum. They are being spurred
by two converging trends with historic importance: (1) the steadily
increasing insecurities of the global economic era–which, in
turn, are generating a demand for new approaches to local economic
instability; and (2) the dramatic and rapidly expanding fiscal crisis
at all levels of government–which is systematically forcing
consideration of new alternatives that promise new ways to achieve
service-supporting revenues.
Does the federal government support community wealth strategies?
Many federal programs support community wealth strategies, although
the dollars involved are a small part of the total $1.8 trillion budget.
(It should also be noted that President Bush’s FY 2006 budget
proposes both restructuring and cutting funding for many of these
programs.)
In housing, key programs include the Low Income Housing Tax Credit
which provides about $4 billion a year and the HOME Investment Partnerships
Act which contributes about $2 billion. Both support affordable
housing development, a significant percentage of which is done by
CDCs. Community land trusts also receive some funding under these
programs. The CDFI Fund, established in 1994, provides slightly
over $50 million a year in capital grants and other grant support
to local CDFIs. Tax credits can also be used to support wealth strategies:
since 1974, about $2 billion in tax credits have been given to support
the expansion of ESOPs.
There are also a number of community development efforts funded
under other programs, such as the Community Development Block Grant
($4.7 billion in FY 2005) and the New Markets Tax Credit program,
which is designed to provide $15 billion in tax credit financing
for retail and commercial development over a period of seven years.
In what ways can state and local governments support community wealth
strategies?
State and local governments can and do provide support in a number
of ways. In housing, a key instrument has been the housing trust fund.
As of 2001, 34 states had housing trust funds that disbursed $437
million. City and county trust funds disbursed over $300 million that
same year. In Ohio, the state provides a few hundred thousand dollars
for the Ohio Employee Ownership Center, which provides technical assistance
for groups wishing to convert their companies to ESOP ownership. Another
increasingly common policy at the local level is inclusionary zoning,
in which developers gain the right to build with higher than normal
densities in exchange for setting aside a percentage of the units
built for people with low or moderate incomes. Additionally, city
and state governments often have flexibility to disburse federal dollars
in ways that can promote asset strategies. For instance, some states
and cities use Community Development Block Grant dollars to support
asset strategies while others do not.
Are there new policy proposals that promote community wealth strategies?
There are many ways that government could support the expansion of
asset and wealth strategies. In 2001, Rep. Dana Rohrabacher’s
(R. - Calif.) proposed to create a sub-category of ESOPs that would
get additional tax benefits in exchange for giving workers more rights.
A current initiative in the area of housing development is the 2005
proposal to create a National Low Income Housing Trust Fund: the National
Low Income Housing Coalition is backing a proposal to develop a trust
fund to finance the construction of 1.5 million homes over 10 years.
Also in 2005, a congressional caucus of asset strategy supporters
was formed, which has focused on expanding individual-oriented programs
such as individual development accounts. In addition to these initiatives,
there are a number of ways that government could further support asset
strategies – from expanding current support programs to duplicating
leading examples at the state level (such as the Ohio Employee Ownership
Center).
The role citizens can play in advocating new policies that support
community wealth building is key. Voicing your support to elected
and appointed government officials, both at the national level and
locally, is a critical step in helping these asset strategies acquire
the support they need to continue to grow and flourish. Learn
more about the range of innovative community wealth and asset development
policies (PDF 154KB) »
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