NJ city: surprising leader in affordable housing

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.

"The area became predominantly rental and there's a tipping point at which the neighborhood becomes degraded, becomes transient," says Henrietta Owusu, the project coordinator for the city of Trenton. "We needed a paradigm shift in the way people looked at the neighborhood."

Construction or rehabilitation was slated to begin on more than 300 homes throughout the neighborhood soon after 1997, but ambition soon met reality. Delays and property-buying problems mounted, and the timeline for action was extended by years. It's a pattern reflected in many of the 11 Homeownership Zone projects, from Baltimore to Sacramento. Transforming a neighborhood, project administrators realized, was going to take far longer than anyone had anticipated.

"It's incremental change," says Algernon Ward, a member of the Canal Banks Advisory Board, a committee of citizens who keep tabs on government efforts in the area. "It's clearly getting better, but we've still got a ways to go, and we still suffer from the same problems many working-class neighborhoods suffer from, though some of the eyesores have disappeared. ... And the property in some areas has stabilized. My [wish] is to have this finished."

Efforts to finally complete the project, though, are now mired in a struggling economy. Where 1 in 5 applicants used to qualify to buy homes in the area, that number is now down to 1 in 15. The original plan called for everything to be done by the end of 2008, but planners have tacked on another year to the estimate.

For those currently living in the Canal Banks area, which is just minutes from New Jersey's golden-domed capitol, incomes are up and crime is down, but sustained growth has been elusive.

"If we [had chosen] a neighborhood that wasn't mostly bombed out and had started from there instead, we'd be ahead of the game," says Bill Valocchi, supervising planner for the city. "Our approach was to connect the dots to create projects throughout the area and we hoped the dots would connect over time.... We chose a neighborhood in pretty dire need."

In Indianapolis, the HOZ effort has been more obviously successful, turning a neighborhood formerly known as Dodge City for its rampant violence into a thriving adjunct to downtown. But this required the project to focus on moving upmarket as much as possible, says Stephen Goldsmith, the former mayor of Indianapolis, who is now a professor at Harvard's Kennedy School of Government.

In Baltimore, planners focused more on basic affordable housing issues in a part of the city far from areas experiencing growth, creating a problem of "new buildings and the same people and the same problems," says Clint Tearnan, Baltimore's Homeownership Zone coordinator.

The difficulty in finding the right balance of location, housing mix, and economic hope for blighted parts of a city makes it unclear if big homeownership-oriented, affordable-housing thinking will return, says William Rohe, director of the Center for Urban and Regional Studies at the University of North Carolina at Chapel Hill.

"There is no question about it, home ownership is still a part of the American dream and still something most renters aspire to," Dr. Rohe says. "But there is the larger issue of 'Is the area ... one where you ought to be encouraging people with low incomes to buy homes?' "

For Willie Mitchell, a former restaurant owner who's lived in Canal Banks for the past 65 years, the efforts to turn the area around have worked wonders. But he's under no illusions about what it will take to finish the job. "It's improved a little bit these past eight or nine years because I don't see as much drug activity," he says. "[The neighborhood] didn't go bad in [only] five or six years. It's going to take the same amount of time to bring it back."