One of the best indicators of the health of a child in elementary school: whether they are reading at grade level. For adults, it’s having a steady job.
Such correlations suggest that in communities across the US, many more people, organizations and institutions than are generally considered are, in fact, producing good health. Governments, insurers and even private investors should be able to purchase such improved health outcomes.
“Why can I invest in a company that makes a pill that lowers blood pressure, but I can’t invest in a neighborhood that does measurably the same thing?” asks David Erickson of the Federal Reserve Bank of New York (crediting Maggie Super Church, who created the Healthy Neighborhoods Equity Fund in Boston to make such investments possible).
Erickson and his team at the New York Fed have helped bring together children’s hospitals, community foundations and nonprofits with corporations, banks and local governments in Cincinnati and Columbus, Ohio; Syracuse, NY; Fairfield County, Conn.; and the Adirondacks region to prototype more such cross-sector collaborations.
The project teams will meet at the New York Fed’s “Making Missing Markets” gathering this week to design financing mechanisms that connect the builders and buyers of health, wealth and vibrant communities.
Many low-income communities have overlapping vulnerabilities in health outcomes, educational achievement, economic opportunity and, increasingly, climate risk. The flip side, Erickson says, is that there are overlapping resources that could be more effectively coordinated to finance preventive measures and other investments that are “upstream” of such problems.
“If we could organize the buyers to say, ‘We have a common cause in going upstream in places that are experiencing overlapping issues,’ then we could rationalize the producers,” says Erickson, author of “The Fifth Freedom,” which explored such solutions. “And what we need are the connectors to bring them together.”
Market crafting
In Cincinnati and Columbus, for example, local children’s hospitals have helped convene school districts, city councils and chambers of commerce, as well as JPMorgan Chase, Procter & Gamble and the Port of Greater Cincinnati Development Authority around upstream health interventions such as access to fresh food and quality affordable housing.
The idea, modeled after special-purpose public agencies such as sports stadium authorities, is to issue bonds to back a series of pay-for-success contracts around proven interventions.
In Connecticut, the state’s green bank, one of the country’s oldest, is working on a strategy to create “Resiliency Improvement Districts” to finance improvements to shield homes and businesses as the state faces stronger storms, rising seas along its coasts and more extreme winds. Modeled after tax-increment financing tools that municipalities use for redevelopment projects, the districts would tap future increases in property tax revenue to attract private investment for community-scale climate resilience projects.
Making Missing Markets is an exercise in what author (and Facebook co-founder) Chris Hughes calls “market crafting.” Such skills are all the more important as public and other sources of funding are cut back.
In Syracuse, for example, this year’s federal tax and budget bill cut nearly $30 million that had been approved for a neighborhood revitalization project in the East Adams neighborhood. The once-thriving neighborhood has faced significant disinvestment since the construction of Interstate 81 in the 1960s caused the displacement of local residents, business owners and church leaders.
At this week’s event, Carol Naughton, CEO of Atlanta-based Purpose Built Communities, a network of dozens of local groupings, will share how the organization helped Syracuse resident design the East Adams Neighborhood Transformation Plan, a billion-dollar initiative to replace aging public housing with new mixed-income complexes built with commercial spaces. Naughton will share how communities can ready themselves to absorb such capital and learn to co-design solutions that meet their needs.
Erickson points to the example of affordable housing, now an established asset class that attracts institutional and other investors with its low risk and steady yields. That wasn’t the case in the early 1970s, when the federal government got out of the business of building housing. Religious orders, led by nuns, made early impact investments in what were considered risky affordable housing projects.
“They basically said, ‘I fight poverty all day. I want my pension dollars to fight poverty all night,’” Erickson recounted.
Eventually, tools like accelerated depreciation and the Low Income Housing Tax Credit helped institutionalize affordable housing investments.
“Now it’s an asset class,” he says. “And so there should be a Ready-to-Learn Kindergarten Bond, or a Flourishing Neighborhood Bond. Someday those markets will be as liquid and as predictable as affordable housing is. But today we need some nuns.”
