Nathan Mayfield is an unlikely savior of inner-city Trenton. A former troublemaker from the wrong part of town, he used to think that saving himself meant leaving his shrinking, dying city. But when his dad became ill, and he realized that leaving wasn't an option, the young school guidance counselor found himself buying a new house two years ago in an area long famous for drugs, violence, and race riots. He couldn't be happier.

"It's like something in a cocoon that, after a struggle, becomes a butterfly," Mr. Mayfield says of Canal Banks, now lined with newly constructed homes.

He harbors dreams of dental school, but while the country endures economic meltdown, he plans to stay put. "This city has a lot of potential, and a part of the city reaching that potential is [by] making sure there is no exodus from the city," he says.

The Canal Banks transformation was a long time coming. For the past 12 years, this section of Trenton has been ground zero for one of the most ambitious federal affordable housing programs in decades. The experiment is just now coming to completion here, reviving debate over what it will take to revitalize troubled neighborhoods at a time when cities have been chastened by job losses and skyrocketing foreclosures.

The idea to rescue Canal Banks and 10 other unstable areas nationwide relies on an idea – homeownership – that now might seem almost quaint, if not misguided. The Homeownership Zone (HOZ) demonstration program, launched in 1996 by the US Department of Housing and Urban Development, has tried to turn entire neighborhoods around by flooding small, poverty-stricken areas with hundreds of new homes to be purchased by working-class, mostly first-time home buyers.

And it's an effort that seems to be working. Only a small handful of homes have gone into foreclosure – the result, administrators say, of extensive, mandatory pre-and postmortgage counseling that steered homeowners away from adjustable-rate loans.

"The intent was really to remake these neighborhoods, to give them some sort of identity," says John Kromer, a senior consultant at the Fels Institute of Government at the University of Pennsylvania and Philadelphia's former director of housing. "It was very ambitious.... It really was a radical departure from what had been done before."

Before the HOZ experiment was launched, the federal government had mostly retreated from building affordable housing. High-rise housing projects had largely been written off as dangerous failures that concentrated poverty. The HOZ project flipped this first strategy on its head, requiring a comprehensive neighborhood plan, a mix of people from different income categories, a mandate to work with the community and local NGOs, and permanent single-family homes.

"I think it's one of the more intelligent things HUD has done in its history," says Alan Mallach, a senior fellow at the Brookings Institution and Trenton's director of Housing and Economic Development at the time of the HOZ launch. "Homeownership is not a panacea, it's not for everyone, and doing it wrong can create more harm than good. But the fact is, it can be a valuable tool to stabilize and strengthen neighborhoods."

Different cities pursued radically different strategies in pursuit of the HOZ goals, with some demolishing troubled neighborhoods entirely. Others, like Trenton, adopted an "in-fill" strategy, buying up vacant properties and lots, and constructing in the gaps between other buildings.

All projects had to reserve at least half of newly constructed homes as affordable housing. But sales of market-rate homes – a sign of the strength and desirability of a neighborhood to higher-income individuals – has varied greatly.

In Canal Banks, incomes were $10,000 less than in the city as a whole. Manufacturing jobs were disappearing. The area had lost almost a quarter of its population from 1990 to 2000.

Page: 1 | 2