The voices of Urban Institute's researchers and staff
December 11, 2017

Supporting local businesses can help revitalize neighborhoods

December 11, 2017

The Saturday after Thanksgiving, Small Business Saturday, draws attention to the importance of supporting local businesses.

Most discussions and research on displacement and neighborhood revitalization focus on low- and moderate-income residents. But investments and displacement affect more than housing. They set in motion a series of effects that ripple through interconnected sectors. Change in one sector affects others in ways that can help build or erode a community.

Reducing risk of displacement for local businesses

Local businesses are at risk of displacement in changing neighborhoods. Research shows that displacement risk can be high among businesses that rent rather than own their properties, among businesses located where more commercially zoned properties are owned by developers than business owners, and among businesses in jurisdictions that use economic development tools for maximizing economic growth rather than for business sustainability and development.

Reducing the risk of displacement for neighborhood-based businesses matters because of the range of purposes those businesses serve. In addition to their instrumental roles of meeting consumer needs and supplying jobs, neighborhood-based businesses can play important social and cultural roles through civic engagement activities and creating spaces of belonging and opportunity for a diversity of neighborhood residents.

Efforts to assist long-standing neighborhood businesses and revitalize communities are emerging in many US cities. San Francisco established a grants program to reduce the risk of displacement for local “legacy” businesses that have been open at least 30 years and that are part of a neighborhood’s history. The small program makes direct grants to select businesses and their landlords.

In New York City, the city government passed legislation to impose penalties on landlords who harass commercial tenants with threats of steep rent increases or actions that affect a business’s ability to function. And in Detroit, the Southwest Detroit Business Association has provided technical assistance and façade improvement support to existing and new businesses in its service area.

Exploring the best approaches for neighborhood development

We don’t know enough about how businesses might best take advantage of neighborhood change or about the effectiveness of innovative local laws and programs that support business sustainability.

Researchers and practitioners have posited that taking a community economic development or revitalization approach rather than solely a market-driven economic development approach can make a positive difference. A community-engaged approach more readily involves local business owners and residents in developing goals and action plans to support businesses that are healthy but might be at risk.

To support communities’ efforts to identify early indicators of neighborhood change so that local stakeholders can promote development decisions that benefit current residents and businesses, the Urban Institute is working with partners in five cities (Buffalo, Detroit, Milwaukee, Phoenix, and the Twin Cities) on the Turning the Corner project. Coordinated by the Urban Institute and the Funders’ Network’s Federal Reserve-Philanthropy Initiative, Turning the Corner is grounded in a broader concept of neighborhood change—residential, commercial, political, and cultural.

In addition to quantitative data, local partners are gathering insights from long-term business owners and residents from select neighborhoods to learn about early signals of neighborhood change, shifts in the types of businesses that serve their neighborhood, and changes in interactions among community members. This project aims to inform local debate and action and to support information sharing among cities.

We will synthesize lessons from many cities to expand knowledge about how more current and fine-grained data can guide decisions toward inclusive neighborhood development.

#ShopSmall stickers are pictured at the Boston General Store in Coolidge Corner in Brookline, MA on Small Business Saturday, Nov. 25, 2017. Photo by Jonathan Wiggs/The Boston Globe via Getty Images.

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As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.