Closing Urban Divides: Behind a Funding Collaborative's Pivot to Race
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When a group of foundation CEOs came together in 1991 to form the National Community Development Initiative (NCDI), equity issues were far less central to the philanthropic conversation than they are today. Racial equity in particular was just one concern among many, relegated to conference breakout sessions and given little consideration as a window into philanthropy’s biases and blind spots. But NCDI’s community development mission did reflect a key urban equity concern of the day—how to resurrect impoverished, largely black “inner cities” after decades of white flight and disinvestment.
Fast-forward to the present, and the urban landscape has changed quite a bit. While many neighborhoods remain trapped in cycles of poverty, other locales have seen rapid gentrification as the affluent snap up prime real estate. Rebranded as Living Cities, the organization has witnessed and worked through that three-decade “revitalization.” Its longevity alone is a remarkable feat for a philanthropic collaboration. For that, it can thank a roster of funders (members, as it calls them) that includes major liberal foundations and some of the largest financial firms in the country.
Living Cities’ strategy has evolved radically since the early 1990s. Following a pivot away from community development, today, it’s putting racial equity front and center in a striking way. “Our North Star is that we want to focus on racial disparities,” said President and CEO Ben Hecht. “We’re asking ourselves: How do we become a leading racial economic justice organization? There’s been great excitement around that future among our 18 member institutions.”
A Longtime Mission—and an “Extraordinary Pivot”
For the majority of Living Cities’ 28 years, race wasn’t a key element of its operational strategy. But it always lay in the background. The initial funders’ decision to create a joint vehicle for affordable housing finance stemmed from what was obvious at the time: America’s cities were faltering, and the problems of low-income, minority-dominated urban neighborhoods merited some kind of coordinated response. The 1992 Los Angeles riots were a bleak testament to that need, hitting the city shortly after NCDI got off the ground.
The core strategy back then was to build neighborhoods out of blight. That meant comprehensive support to community development corporations (CDCs) working on the ground to construct affordable housing. Inaugural funders included the Rockefeller Foundation, Lilly, MacArthur, Hewlett, Knight, Surdna, and one for-profit company, Prudential. Among them, Living Cities still counts Rockefeller, MacArthur, Surdna, and Prudential as supporters.
Beginning with its initial $62.5 million, NCDI invested in affordable housing development across the country. It directed the vast majority of its funds through just two entities: Enterprise Community Partners and the Local Initiatives Support Corporation (LISC). By the mid-2000s, Living Cities had moved over a half-billion dollars to CDCs in 23 cities, money that went into 140,000 units of affordable housing. Support from Living Cities’ members helped catapult Enterprise and LISC to the top of the national community development arena, a position they largely retain today.
As for Living Cities itself, it was hard to argue with what looked like a successful model. Amid a nationwide urban revival and declining violent crime rates, neighborhood revitalization seemed like a fruitful strategy—at least in some places. Plenty of new funders came aboard. On top of that, affordable housing is a comfortably quantifiable measure of philanthropic impact, and that no doubt helped sustain the collaborative during its early years.
But Living Cities—or more precisely, the foundation and corporate execs that make up Living Cities’ board—didn’t want to stay there forever. In 2007, the organization undertook what it calls an “extraordinary pivot,” hiring a new leadership team with Hecht at its head. Hecht’s task was to take Living Cities from a simple conduit for community development funding to something more holistic and intersectional. That meant moving away from a paradigm in which Enterprise Community Partners and LISC got the lion’s share of the money. “We pivoted from the built environment to people. How do we address the individual and focus on the systems that are keeping people from opportunity?” Hecht said.
By that point, Living Cities’ funders included many of the institutions that support it to this day: philanthropies and corporations whose leaders have come to view cities in a more nuanced way—not just as troubled places with problems to be solved, but as testing grounds for innovative policy and technology, often in partnership with local government. Urban innovation strategies were coming into vogue, as was the modern incarnation of place-based philanthropy. Living Cities was involved in plenty of interesting work as Hecht and team settled in. But it still craved greater focus and an overarching purpose.
How Living Cities Works Today
Over the past three years, Living Cities has found that focus. A 2016 decision to center its work explicitly around racial equity gives its projects a unity of purpose beyond the nebulous concept of urban innovation. Hecht said, “We’ve kept the platform current by regularly being responsive to the externalities around us. What we were doing in 1991 is very different than what we’re doing today, and our strength has been an ability to be responsive to that.”
Living Cities’ racial equity strategy flows from its early community development work, in spirit if not in substance. According to Hecht, the decision to focus on race began with an acknowledgment that discrimination and segregation set the stage for today’s crisis of urban inequality. “When we spent time looking at the root causes of urban disparities, we saw that racism has been in the groundwater of America since our founding. Intentional strategies have got us here, and we believe intentional strategies can get us out,” Hecht said.
So what are those strategies, exactly? Well, Hecht spoke of three levers that Living Cities is uniquely suited to pull. They already formed the backbone of the collaborative’s work during the early years of Hecht’s tenure. The move toward racial equity mostly involves adapting them toward that end.
The first is investment in cross-sector leaders who can collaborate and learn from each other. That’s the idea behind the Integration Initiative, one of Living Cities’ signature projects. The strategy there is to back mayors and institutional leaders as they implement economic inclusion projects on their home turf. Living Cities and its members provide those projects with grants and debt, and in many instances, projects have attracted cross-sector support from local and regional partners. Together, the cities participate in knowledge exchanges and online collaboration.
Also on the collaborative leadership front, Living Cities has supported the education-focused collective impact network Strive Together. It also backs the Working Cities Challenge, an effort by the Federal Reserve Bank of Boston to pursue economic inclusion and systems change in Massachusetts and Rhode Island via collaborative partnerships.
Living Cities’ second lever is impact investing. Through its Catalyst Fund, the organization has deployed $35 million in concessionary loans since 2008. Destinations for this support vary widely, from community development and housing projects to efforts around transit-oriented development, energy retrofitting, and food access. Investments also go toward pay-for-success initiatives. While that model has its critics, it may still be a good way forward in highly measurable contexts like juvenile recidivism—one area that Living Cities invests in.
The third lever is direct collaboration with local governments. The idea here is that Living Cities can convene leaders and fund work in city governments to help them improve their own operations. For instance, through its Project on Municipal Innovation, Living Cities works with the Harvard Kennedy School to support municipal policy directors and chiefs of staff as they implement “nimble, collaborative and data-driven” changes in their respective city halls.
Centering Racial Equity
The challenge for Living Cities right now is to figure out how to apply those strategies toward its stated racial equity goals—and that’s not always straightforward. While it’s easy to talk about equity, actually dismantling institutionalized racism in a meaningful way requires time, concerted effort and organizational introspection.
One silver lining to today’s racialized politics is that more funders and public officials are motivated to walk that path. For many philanthropies on Living Cities’ member roster, the 2016 election was a wake-up call that white supremacy and xenophobia are deeply rooted in American society. Their responses have varied, from rapid-response funding for immigrants to civic engagement and advocacy strategies. A “Trump bump” in post-2016 social justice funding has, in many cases, matured into longer-term commitments to fight racism and inequity.
“What we’ve learned from our racial inclusion journey is that we need to invest in a deep understanding of history and the roles of individuals within systems,” said Nadia Owusu, who leads Living Cities’ racial equity and inclusion portfolio. “We needed to develop a different way of approaching our decision-making strategies, and we realized that some of the deepest relationships we have are with people in the public sector.”
Hecht agreed, characterizing the resilience of Living Cities’ work in terms of relationships with public officials in dozens of cities. “Because we can have the patience for long-term funding, we build mechanisms that allow for relationships to be built,” he said.
Those relationships were a factor in one of Living Cities’ first ostensibly racial justice-focused initiatives, Racial Equity Here. The program got started in the wake of Freddie Gray’s death, when Living Cities began to think about how to address systemic and structural racism in places like Baltimore. It wants to promote introspection about planning policy—racist redlining and residential covenants set the stage for today’s segregated cities—as well as changes in areas like procurement and representation. Racial Equity Here operates in Albuquerque, Austin, Grand Rapids, Louisville and Philadelphia, working with public officials as they assess how to instill equity through core government operations.
Over the next 10 years, Living Cities wants to build on that work with a larger initiative it calls the Closing the Gaps Network. Set to roll out in the spring of 2020, Closing the Gaps will track 10 cities’ progress on racial equity. A total of around 30 cities applied, signaling significant interest among public officials who’ve become more aware of how race intersects with local economic opportunity.
Living Cities also wants to continue applying a racial equity lens to its existing work. That includes the Integration Initiative’s city-specific projects, as well as Living Cities’ own impact investing. Going forward, the collaborative will limit its loan funds to investments focused on closing racial gaps, an effort Hecht calls “capital for the new majority.”
Signs of the Times
Despite the rise of Trump, racial disparities have less to do with white nationalists waving Tiki torches and more to do with the perpetuation of de facto residential and educational segregation, predatory lending, unequal access to capital, discriminatory law enforcement, lack of access to fresh foods—the list goes on. While taking on structural racism can sound like a vague and overwhelming project, it becomes more tangible and sustainable through local initiatives that focus on specific inequities.
Big gains from such work rarely happen overnight. Operating with the assurance of multi-decade support from many of its members, Living Cities feels comfortable working with cities over the very long term. Hecht argues that a patient, integrated approach can be more effective than splashy-but-isolated big bets.
It is worth keeping in mind that Living Cities is an intermediary as well as a collaborative. Just like any grantee, it must make a case for the continued support of its funders. The fact that it has prioritized racial equity to such a degree says something about the funders involved—not only some of the nation’s foremost philanthropies, but also many of its biggest banks. While several of Living Cities’ members—like the Ford, Kellogg and Surdna foundations—have long put race near the center of their work, most of the others have not.
The implications are hopeful, but questions remain as Living Cities pursues its new course. However things unfold, it’s hard to deny that the organization’s turn toward racial equity is a sign of the times in philanthropy.
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