Neoliberal Urban Revitalization in Chicago

From the 2013 issue of the Advocates' Forum

Neoliberal Urban Revitalization in Chicago
Julia Conte and Janet Li

Over the last two decades, Chicago’s strategy to revitalize areas of economic decline and concentrated poverty centered on two federal housing programs: Housing Opportunities for People Everywhere (HOPE VI) and its latter incarnation, Choice Neighborhoods. This paper examines the ideological turn from Keynesian New Deal policies to neoliberal revitalization programs and explores the programs’ strategies to transform low-income, minority residents into “self-sufficient” market actors who benefit from a revitalized neighborhood’s improved amenities. Finally, the paper argues that both policies will not mitigate concentrated poverty, as its neoliberal approach is nominally redistributive. With its ability to intervene in the market and economic processes, government intervention is better positioned to address the economic and racial inequalities that produced such poverty in the first place.

This paper examines Chicago’s attempt to revitalize areas of economic decline and concentrated poverty through two US Department of Housing and Urban Development (HUD) programs: Housing Opportunities for People Everywhere (HOPE VI) and Choice Neighborhoods. These programs are decidedly neoliberal, both seeking to transform low-income, minority residents into “self-sufficient” market actors and benefit low-income residents through the “positive economic spillover” of improved schools, more businesses, and other amenities (HUD 2011a, 2). The paper begins by reviewing Keynesian-based approaches to housing policy, approaches later labeled a “government failure,” opening the way for neoliberal housing revitalization strategies. Next, it examines HOPE VI as a strategy to address urban decline and assesses its implementation in the context of Chicago’s Plan for Transformation. It then explores the Choice Neighborhoods program in terms of its proposed revitalization of Chicago’s Woodlawn neighborhood and its proposed strategy of creating “sustainable communities.” Finally, the paper argues that both these neoliberal policies cannot mitigate concentrated poverty given that they are only nominally redistributive and that government intervention remains better positioned to address the economic and racial inequalities that produced urban poverty in first place.

Urban Decline in US Cities

In the mid-1980s, the idea of urban decline was widely associated with pockets of racial segregation, concentrated poverty, deindustrialization, and abandoned or dilapidated buildings. It was framed as a problem produced, or exacerbated by, ineffective New Deal housing policies. The Keynesian premise that had emerged around the Great Depression held that unregulated markets are inherently unstable; thus, government intervention was needed to counteract instability by regulating the production and growth of the economy. Stabilizing the economy could be achieved through labor supports, employment, and social service provisions in times of unemployment. The goal was to maintain consumer demand on the micro-level and aggregate demand and economic growth on the macro-level (Caporaso and Levine 1992, 114). The federal government adopted the Keynesian idea when it enacted the following several key housing policies in the 1930s.

To prevent home loan default and guarantee adequate financing in the housing market, the federal government established the Home Owners Loan Corporation (HOLC) in 1933, created the Federal Housing Authority (FHA) in 1934, and passed the United States Housing Act of 1937. The HOLC refinanced mortgages at risk of default and appraised neighborhoods to ensure sound private investment; the FHA established minimum standards for home construction and insured private mortgages; and the Housing Act created and funded local public housing authorities (PHA) to build low-cost public housing (Jackson 1985). These programs met the Keynesian aim of offsetting an unstable market: 40 percent of eligible households signed up for HOLC assistance and the program supplied “three billion dollars for over one million mortgages” (Jackson 1985, 196). The FHA reduced private-market interest rates such that home loans rose from 332,000 in 1937 to 619,000 in 1941. By 1941, over 221 newly established PHAs initiated 300 projects and built 130,000 public housing units.

Such economic policies, however, were not designed to promote meaningful housing opportunities for all Americans, as they inadvertently advanced segregation and intensified poverty among low-income minority groups. In its appraisal system, for example, the HOLC instituted redlining, under which low-income and African-American neighborhoods were given the lowest rating of “D,” diverting any private investment in the area, while homogenous white neighborhoods (i.e., “American business and professional men”) were given the highest rating, “A” (Jackson 1985, 197). The FHA adopted HOLC’s problematic rating criteria in the late 1930s, which favored loans to white, middle-class families intent on building single-family homes in the suburbs.

Discrimination was also rampant in the administration of public housing. While public housing was initially composed of a diverse group of working-class families, its concentration in inner cities and the devolution of power to discriminatory PHAs inevitability led to substandard public housing that was exclusively populated by African Americans experiencing severe poverty (Jackson 1985). The effects of this trend are stark and apparent in Chicago. Alan Hirsch (1998) explains that Urban Renewal slum clearance and prior segregationist housing policies, coupled with white flight, created a “second ghetto” characterized by complete segregation and worse poverty and blight than had previously existed in the “first ghetto.” As racism undermined the economic aims of the Keynesian policies, it created the opportunity for the problem of urban decline to be redefined in the neoliberal framework as government failure.

Housing Opportunities for People Everywhere (HOPE VI)

In 1992, the National Commission on Severely Distressed Public Housing (NCDPH) issued a report on the state of public housing. Reflecting the suppositions of neoliberalism,[1] the report cited ineffective government management and funding as the causes of urban decline. The report found that nationwide, 86,000 units of public housing were “severely distressed,” defined in part by isolation from economic mobility opportunities and private sector development. The report proposed a variety of potential solutions including more stable funding streams (e.g., private management and low-income housing tax credits) as well as corporate, government, resident, and service organization collaboration in the planning, development, and management of housing (HUD 1992). The reconceptualization of urban blight as a problem of government failure, as exemplified in NCDPH’s report, set the foundation for the neoliberal housing revitalization strategies that followed.

In response to the NCSDPH’s report, Congress appropriated $300 million in the 1993 fiscal year to fund the Urban Revitalization Demonstration project, later to be renamed HOPE VI (HUD 2007). In its requirements, HUD emphasized community revitalization. HUD assessed grantees in four areas: extent of public and private entity involvement, extent of resident involvement/community services, capabilities of the applicant, and extent of revitalization/potential impact of the plan. Furthermore, HUD required PHAs to document conditions of severe distress, as defined by the number of families living in poverty, rates of serious crime, management barriers, and physical deterioration of the building (Fosburg et al. 1996).

In 1998, Congress passed the Quality Housing and Work Responsibility Act of 1998, which incorporated HOPE VI into Section 24 of the Housing Act of 1937. Funding peaked at $625 million, and the program solidified its commitment to localized control, resident services, and public-private partnerships. Under the new revitalization grant requirements, as outlined in the Notice of Funding Availability, HUD stipulated that no more than 20 percent of funding go to resident services, allowed PHAs greater development flexibility by removing the one-for-one hard unit replacement rule—i.e., for every unit of public housing demolished, a new housing unit must be built to replace it—expanded the allowable uses of capital and operating funds, and allowed public funding to go towards project management by private entities. HUD also applied a community-based housing model by modifying the definition of severe distress to include the relationship of the surrounding community to the physical deterioration of a building (Wexler 2001).

HOPE VI was extended another three years under the Program Reauthorization and Small Community Mainstreet Rejuvenation Housing Act of 2003. In that legislation, HUD allowed PHAs already participating in HOPE VI to receive funding and created “Mainstreet Grants” for communities with 50,000 or fewer residents. Consistent with its community-based approach, HUD again broadened severe distress to include the availability of neighborhood transportation, civic and religious organizations, and good schools (HOPE VI Program Reauthorization 2003). As of 2006, HUD awarded the greatest number of total grants—six—to the Chicago Housing Authority (Levy and Gallagher 2004).

HOPE VI did improve both individual living situations (e.g., dwellings with better appliances, architectural design exteriors, and landscaping) and overall neighborhood safety for public housing residents. A HUD-sponsored study found that HOPE VI developments reduced the overall density of housing and reintroduced sidewalks and street grids to connect developments to the surrounding community, incorporated safety design principles, and improved building exteriors (Popkin et al. 2004). In 2001, when residents lived in their original public housing developments, 90 percent of sampled HOPE VI residents reported “social disorder”—drug trafficking, drug use, gang activity, and loitering—as a “big problem.” To take just one social-disorder variable, by 2005, surveys found that those reporting drug sales as a “big problem” had fallen from 78 to 30 percent. In Chicago, residents of the Madden-Wells development reporting drug sales as a “big problem” dropped from eighty-three to forty-five percent from 2001 to 2005. Similar trends occurred in residents’ reporting of violence (Popkin and Cove 2007; Popkin and Price 2010).[2]

While such improvements are significant by themselves, it is impossible to ignore that they came through a decrease in the overall stock of public housing: only 78 percent of occupied public housing units were scheduled for replacement. The overall reduction in public housing, which counts Housing Choice Vouchers (HCV) as a public housing replacement, is unknown because HCV holders could not be identified as formally residing in a HOPE VI development. Furthermore, HOPE VI promised that market choice, created by the infusion of private entities into the public sector, would yield significant income gains among low-income individuals in public housing. The argument was that introducing private investment and middle- and upper-class residents into HOPE VI neighborhoods should enable resident access to the goods, services, and jobs available to more affluent neighborhoods.

In line with that argument, in 2000, the Chicago Housing Authority (CHA) launched its Plan for Transformation, which sought to “build and strengthen communities by integrating public housing and its leaseholders into the larger social, economic, and physical fabric of Chicago” (CHA 2013). Consistent with the tenets of HOPE VI, the Plan enlisted public, private, and nonprofit partners to invest in development funding, resident supportive services, and neighborhood resources (e.g., parks, recreational centers, and local businesses). CHA partners included the MacArthur Foundation, the Chicago Community Trust, and numerous private housing developers (CHA 2009).

Yet, as illustrated by previously mentioned resident outcomes, the private-public-nonprofit collaboration and community revitalization model encouraged by HOPE VI only addressed some symptoms of poverty, such as a crime, while structural economic and social inequalities remained intact. Some HOPE VI residents experienced a slight income increase in the aftermath of this “transformation,” yet most remain unemployed and mired in poverty. While income gains went to already employed residents—from 2001 to 2003, the share of those reporting annual incomes greater than $15,000 rose 10 percent, while the share of those reporting annual incomes of less than $15,000 dropped 10 percent—most residents remained poor. In 2003, about 67 percent of residents reported annual incomes less than $10,000 and 40 percent reported incomes of less than $5,000. Further, the percentage of residents employed remained constant, moving from 45 percent in 2001 to 46 percent in 2003 (Levy and Kaye, 2004). The factors of poor health, limited access to transportation, and inadequate job training still act as major employment barriers for HOPE VI residents (Levy and Kaye 2004). As will be discussed, the neoliberal policies outlined above have tended to address the symptoms of poverty rather than poverty itself.

Choice Neighborhoods: A New Incarnation of HOPE VI

When HUD created the Choice Neighborhoods pilot program in 2010, it intended to build on the HOPE VI components considered successful in alleviating concentrated poverty, including mixed-income developments and public-private partnerships. In addition to public housing, the redevelopment of private and federally-assisted properties were included because, it was argued, changes to public housing policy alone—which was the primary focus of HOPE VI—could not adequately decrease crime and poverty throughout a neighborhood.

Choice Neighborhoods is designed to transform neighborhoods experiencing economic decline into mixed-income communities with improved schools, local businesses, and attractive neighborhood amenities, such as recreational facilities. The public-private partnerships between various community stakeholders—private developers, residents, public housing authorities, and non-profit organizations (NPOs)—are central to this process of transformation. According to HUD, “sustainable communities” will draw middle- and upper-class families who would be economically and socially incentivized to maintain neighborhood stability and pursue community development prospects. Low-income residents, in turn, will be the recipients of the revitalized neighborhood’s “positive economic spillover” of improved schools and other amenities (HUD 2011a).

Upon launching the program in 2011, HUD chose Boston, Chicago, New Orleans, San Francisco, and Seattle as pilot cities. The cities were chosen based on the level and quantity of “severely distressed” housing and how it impacts the neighborhood, the concentration of poverty based on the average median income (AMI) of residents, and the respective neighborhoods’ ability to build on its developmental, commercial, and neighborhood assets (i.e., its “long-term viability”) (HUD 2010). The Chicago neighborhood of Woodlawn was awarded $30.5 million for its redevelopment efforts and can serve as an illustration of how the program works on a local level.

Woodlawn, located on the South Side of Chicago, is predominantly African American and low-income. Its borders are 60th Street to the north, 67th Street to the south, Lake Michigan to the east, and Martin Luther King Drive to the west. The pilot focuses on Grove Parc Plaza, a low-rise affordable housing project considered as and surrounded by severely distressed housing, as defined by HUD. According to a report by the Preservation of Affordable Housing (POAH), Woodlawn was chosen as the site of a Choice Neighborhoods pilot due to the organizing efforts of residents (HUD 2011b, 1). The planned demolition of the Grove Parc Plaza housing project led its residents to seek “partners who would rebuild their homes in the community versus scattering their households across the city.” Woodlawn’s revitalization team in charge of planning and redevelopment consists of the following four entities (HUD 2011d, 1):

1) Lead applicants and Housing Implementation Entity: POAH and the City of Chicago. POAH is a non-profit organization responsible for implementing the Choice Neighborhoods plan and overseeing the demolition, reconstruction, and rehabilitation of housing units. The City of Chicago will “deploy its administrative, regulatory and financial powers to ensure all [team members’] effective performance of their roles” (HUD 2011d, 1).

2) People Implementation Entity: Metropolitan Family Services (MFS). MFS is responsible for implementing various social services, such as housing search assistance, employment and mobility services, and case management services.

3) Education Implementation Entity: University of Chicago Urban Education Institute (UEI), in partnership with Woodlawn Children’s Promise Community (WCPC). UEI and WCPC are responsible for revamping the elementary, middle, and high school curriculum in three of Woodlawn’s high-resident-enrollment schools. WCPC also provides after-school programming, technology assistance, and family and social supportive services (in coordination with MFS).

4) Neighborhood Implementation Entity: Woodlawn New Communities Program (WNCP). WNCP serves as the liaison between residents and the revitalization team. WNCP is also responsible for attracting business and economic development prospects to Woodlawn, as well as addressing neighborhood needs and issues (e.g., crime).

HUD serves as the funder and facilitator of such partnerships. Its primary role is to dispense funds to a wide range of stakeholders and activities to give “local partners the flexibility they need to deal with the full range of distressed properties that often blight neighborhoods of concentrated poverty” (HUD 2011d, 1). The team tasked to implement Woodlawn’s revitalization managed to turn the initial HUD grant of $30.5 million into $230 million in the name of fulfilling the neighborhood’s “long-term viability” (HUD 2011a, 3).

The redevelopment plan calls for making the Grove Parc Plaza into a 420-unit property of mixed-income rental and for-sale units (210 of which will be Section 8 rental units). There will be an additional 400 off-site units (168 of which will be Section 8 rental units). Loans will be provided to 75 home buyers at 80 percent AMI and to small local developers to rehab or renovate 100 units housing, bringing total unit delivery to 995 units (HUD 2011c, 1-2). Housing redevelopment will be accompanied by the creation of recreation and community spaces such as school parks, a large community resource center, and a new MetroSquash athletic and educational facility (HUD 2011c, 6).

In anticipation of criticisms similar to ones levied against HOPE VI—namely, that the program lacked safeguards to ensure that poor communities would be able to stay in their neighborhoods once development took place—HUD devised two strategies for Choice Neighborhoods: 1) strengthen the role of non-profit organizations (NPOs) in the revitalization team to address residents’ needs and promote residents’ voices, and 2) reinforce the “right to return” commitment to residents as well as a strict one-for-one hard unit replacement policy (HUD 2011c, 6).

By granting NPOs the power to make decisions that typically fall under the purview of PHAs and private developers, Choice Neighborhoods seemed to ensure that low-income residents without market-based leverage and power nonetheless had an outlet for their needs. But, the prominent role that NPOs play in Choice Neighborhoods is not a guarantee that residents’ interests will be met. For example, in Woodlawn, one of the NPOs working on the neighborhood’s revitalization is the University of Chicago, which has a historically contentious relationship with Woodlawn and its surrounding neighborhoods that dates back to an urban renewal project in the 1950s that displaced many low-income Black residents (Hirsch 1998). Given this precedent, the University may still have interests in Woodlawn other than merely promoting the interests of low-income residents.

As for the second strategy, to ensure the “right of return” and minimize displacement, the legislation restricted the use of HCVs to “limited cases, where there is an adequate supply of affordable rental housing in areas of low poverty” (Testimony of Secretary Shaun Donovan 2010). However, this “right of return” is only guaranteed for lease-compliant residents whose housing is redeveloped. What about the low-income residents who are not protected by the “right of return”? Furthermore, if one concedes that the mixed-income model works to a degree, and some residents indeed benefit from relationships with their more affluent counterparts, obtain a better job, and become more realized market actors, what about the residents who are not as well-positioned to attain such economic mobility? If we consider Mary Pattillo’s (2007) argument that neighborhood revitalization is “a more polite term for gentrification since revitalization without the intervention or introduction of the gentry is rare” (8), then such residents will not only find themselves still poor, but actually worse off—disempowered and priced out of their neighborhoods by the very people whose presence is supposed to benefit them—than they were prior to neighborhood revitalization.


In its near twenty-year history, HOPE VI changed the way US cities mitigated areas of concentrated poverty—from a “bricks and mortar” improvement of public housing to a neoliberal strategy of community economic development, mixed-income housing developments, and governance structures that brokered private and public interests. While the program improved the safety and housing conditions of some low-income residents, it did not fully address the myriad issues that hinder residents from achieving economic and social mobility such as unemployment and mental and physical health problems. Choice Neighborhoods, created in 2010, sought to better address the aforementioned issues adopting a holistic neighborhood revitalization strategy.

The rhetoric of neoliberalism emphasizes free markets, the exercise of individual liberty, and the efficient allocation of resources[3] as a means to poverty alleviation. Yet, it is precisely these emphases that undermine HOPE VI’s and Choice Neighborhoods’ ability to address the structural economic and racial inequalities underlying poverty. The pursuit of free markets is incompatible with poverty alleviation particularly in the form of wealth redistribution and social justice, as individual liberty runs counter to the “pursuit of social justice, [which] presupposed social solidarities and a willingness to submerge individual wants, needs, and desires in the cause of some more general struggles for, say, social equity” (Harvey 2005). Peterson (1981, 37-38) further explains the tension between market efficiency and redistribution:

Operating efficiently hardly means operating so as to enhance equality. One cannot redistribute wealth without making someone worse off at the same time others are made better off. If a society has great inequalities in the beginning, it does not reduce these inequalities merely by increasing its efficiency. Consequently, the pursuit of a city’s economic interests, which requires an efficient provision of local services, makes no allowance for the care of the needy and unfortunate members of the society. . . . Since the person or entity that pays the mean dollar in taxes is likely to be better off than the low-income residents of the community, increased redistribution from the richer to the poorer implies a reduction in the services of the person paying the mean tax dollar receives as a proportion of the amount he pays in taxes.

Instead, HOPE VI and Choice Neighborhoods offers a problematic, nominalform of redistribution: some low-income residents gain access to better quality housing and new amenities offered by the infusion of or proximity to new private capital and economically-advantaged middle- and upper-class residents. But these neighborhood revitalization policies do not provide long-term safety-net supports, which are essential for residents to ward off the effects of gentrification and benefit from the new neighborhood economy. A disconnect between the rhetoric of neoliberal housing policies and its actual manifestation contributes to the persistence of concentrated poverty.

Given its ability to intervene in the market and economic processes, the state is arguably better positioned to address larger structural inequalities than the market itself, which accepts economic volatility and the inevitability of producing winners and losers. While government policies and practices under Keynesianism were at times flawed or misguided, what must be said in defense of those older interventions in the housing of all people was that they demonstrated a much higher and significant regard for the collective welfare than its successor ideology, neoliberalism.


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[1] Neoliberal theory asserts individual freedom is the bedrock of a well-functioning society. The state “should favour strong individual property rights, the rule of law, and the institutions of freely functioning markets and trade” as a means to guarantee individual choice (Harvey 2005, 64).

[2] In 2001, 75 percent of sampled HOPE VI residents reported “violence”—shootings, attacks, and sexual assault—as a “big problem.” Considering the social disorder variable of “violence,” surveys found that those residents reporting shootings as a “big problem” dropped from 67 to 26 percent from 2001 to 2005. Further, by 2005 residents across all housing types, (e.g., public housing, voucher holders, unassisted living) experienced similar safety gains (Popkin and Cove 2007; Popkin and Price 2010).

[3] In reference to a Pareto efficient outcome: it is a point at which no one can be made better off without making another person worse off.