The need for investment capital in many communities across the US is significant and pressing. Most cities and regions include neighborhoods characterized by concentrated poverty and a lack of basic amenities and services; this creates wide disparities in access to economic opportunity and mobility (Gourevitch, Greene, and Pendall 2018; Turner et al. 2018). Concentrated poverty has increased dramatically since the Great Recession (Kneebone and Holmes 2016), and people of color—especially Black households—are more likely to live in poor neighborhoods than white households with similar levels of wealth or income (Aliprantis, Carroll, and Young 2019). The lack of access to capital in these neighborhoods is the result of market forces and private-sector actors, past public policies such as redlining and Jim Crow laws, and ongoing discrimination and structural barriers (Greene, Turner and Rush 2020; Kijakazi et al. 2016).1 The effects of past public policies that starved communities of capital are still felt today: recent evidence suggests that neighborhoods that were redlined by the federal government in the early 20th century continue to be economically disadvantaged and face heightened public health and climate risks (Aaronson, Hartley and Mazumder 2020; Hoffman, Shandas, and Pendleton 2020; Richardson et al. 2020).
Despite the need for investment capital, new real estate development projects and businesses can raise prices and rents in underinvested communities, which can lead to the displacement of long-term residents and businesses. New investments may also create amenities that don’t respond to the needs of existing residents and businesses, create jobs that are not accessible to local residents, or exacerbate environmental or climate risks. In response to these concerns, federal, state, and local governments can provide incentives to projects that meet local needs and improve social, economic, and environmental conditions rather than exacerbating existing inequities. Mission-driven investors can also support positive social impact by investing in projects that meet local needs. Community-based organizations and advocates can negotiate for increased benefits for existing residents before the project begins. However, all these stakeholders need reliable and transparent information about proposed projects and a way to assess their potential social impact in a systematic way.
To help fill this gap, the Urban Institute launched the Opportunity Zone Community Impact Assessment Tool in January 2020 to help stakeholders who wanted to use evidence-based indicators to assess the potential social impact of a planned development project in a designated Opportunity Zone. Although the tool was designed in response to the Opportunity Zone tax incentive in the Tax Cuts and Job Acts of 2017, it could be used by stakeholders interested in the social impact of any new development project or operating business, regardless of whether the investment was in an Opportunity Zone. And the tool could be used across a much broader array of public financing and incentive programs, such as local tax credits and density bonuses, the federal Community Development Block Grant program, or New Markets Tax Credits.
Now, with data and information from over 600 unique tool entries between January 2020 and June 2021, we are relaunching a new version of the tool, called the Capital for Communities Scorecard to achieve three main objectives: (1) to improve the ability of the tool to support more racially equitable outcomes, (2) to make the tool more user friendly, and (3) to improve its utility across a broader range of projects and places, including those outside of Opportunity Zones.
As with the beta version, we hope project sponsors, investors, public officials, and community organizations use the tool to support projects that strengthen communities, boost racial equity, and deliver benefits to residents. Project sponsors can use the tool to assess how well their proposed project aligns with community priorities and identify ways to improve their projects. Investors can use the tool to evaluate the potential social impact of their investments and prioritize investments in projects that are likely to deliver positive impacts on the surrounding community. Public-sector and community leaders can use the tool to identify projects that risk harming communities and negotiate with project sponsors to make improvements. This user guide provides information about the tool, our principles for delivering social impact, guidance for using a project’s scorecard, and the research and methods used to develop our indicators.
1 Brett Theodos, Eric Hangen, and Brady Meixell, “‘The Black Butterfly’” Racial Segregation and Investment Patterns in Baltimore,” Urban Institute, February 2019, https://apps.urban.org/features/baltimore-investment-flows/.
Aaronson, Daniel, Daniel Hartley, and Bhash Mazumder. 2020. The Effects of the 1930s HOLC “Redlining” Maps. Chicago: Federal Reserve Bank of Chicago.
Aliprantis, Dionissi, Daniel Carroll, and Eric R. Young. 2019. “What Explains Neighborhood Sorting by Income and Race?” Working Paper 18-08R. Cleveland: Federal Reserve Bank of Cleveland.
Gourevitch, Ruth, Solomon Greene, and Rolf Pendall. 2018. “Place and Opportunity: Using Federal Fair Housing Data to Examine Opportunity across US Regions and Populations.” Washington, DC: Urban Institute.
Greene, Solomon, Margery Austin Turner, and Chantel Rush. 2020. Creating Places of Opportunity for All. Washington, DC: Urban Institute.
Hoffman, Jeremy S., Vivek Shandas, and Nicholas Pendleton. 2020. The Effects of Historical Housing Policies on Resident Exposure to Intra-Urban Heat: A Study of 108 US Urban Areas. Richmond, VA: VirginiaCommonwealth University.
Kijakazi, Kilolo, Rachel Marie Brooks Atkins, Mark Paul, Anne E. Price, Darrick Hamilton, and William A. Darity Jr. 2016. The Color of Wealth in the Nation’s Capital. Washington, DC: Urban Institute.
Kneebone, Elizabeth, and Natalie Holmes. 2016. U.S. Concentrated Poverty in the Wake of the Great Recession. Washington, DC: The Brookings Institution.
Richardson, Jason, Bruce C. Mitchell, Helen C.S. Meier, Emily Lynch, and Jad Edlebi. 2020. Redlining and Neighborhood Health. Washington, DC: National Community Reinvestment Coalition.
Turner, Margery Austin, Solomon Greene, Anthony B. Iton, and Ruth Gourevitch. 2018. Opportunity Neighborhoods: Building the Foundation for Economic Mobility in America’s Metros. Washington, DC: US Partnership on Mobility from Poverty.