The overall market conditions in a region, city and specific neighborhoods have a large impact on the community development system—they shape the demand for housing, goods and services and new business formation and the resulting market support for new development.

_This is the final installment in a series of posts about the new working paper, The Capital Absorption Capacity of Places: A Research Agenda & Framework.

Resource Document: The Capital Absorption Capacity of Places: A Research Agenda and Framework
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We view this paper as the basis for continuing dialogue and invite your reactions and comments. Please respond below in the comment section or by emailing Robin Hacke at rhacke@livingcities.org. _

The working paper, The Capital Absorption Capacity of Places provides a good starting point to expand our thinking about what factors shape the effective investment of capital to improve low-income communities. It emphasizes the systematic nature of this process, in which capital investment involves an “ecosystem” of stakeholders, institutions and policies. As a complement to this ecosystem view, the paper argues that we should pay attention to the functions that must be delivered for capital to be deployed and generate positive community development outcomes. This functional view of the system is a valuable contribution that will help practitioners, policy makers and funders evaluate the strengths and weaknesses in their community development system, identify critical gaps and craft effective responses to address these gaps. This “functions and system” view provides a more comprehensive framework and promises to provide more insight than thinking in terms of financing gaps, tools and individual institutional capacity, which is often how capital supply and absorption issues are conceptualized.

In spirit of clarifying and improving the paper’s framework, I have two comments.

The first concerns an important omission: how the market and market conditions shape the community development environment, system and capital absorption. The overall market conditions in a region, city and specific neighborhoods have a large impact on the community development system—they shape the demand for housing, goods and services and new business formation and the resulting market support for new development. A city and neighborhoods with strong market-driven demand will have more capital absorption capacity on both the demand and supply sides: there will be more developer and business interest in pursuing projects and a larger supply of investment capital. Furthermore, a stronger market means higher rents and prices so that less subsidy and other financing support is needed and it creates a stronger public and civic bargaining position to gain greater social benefits from private sector investment. A strong market is perhaps the most important component of the “enabling environment” and serves to reduce the scope and scale of the functions that community development ecosystem needs to deliver.

My second observation is that the deconstruction of the system into the five functions presented in the paper somewhat obscures the process involved in generating desired community development outcomes and how this process affects what needs to be done. Another lens through which to view the community development ecosystem and associated functions is how well it accomplishes three core community development processes: (1) developing a shared vision or plan and strategically aligning the policies, investments and actions of varied stakeholders and institutions to support the vision; (2) implementing the projects, programs, and other activities needed to advance the vision; and (3) generating the desired community development benefits and impacts from the project and program investments. The capital absorption and community development capacity of a place might also be viewed and evaluated by how well it is accomplishes these three processes with the functions and capacities linked to each process.

Karl Seidman is a Senior Lecturer in Economic Developmen & Head of Housing, Community, and Economic Development at the Department of Urban Studies and Planning, Massachusetts Institute of Technology

Related Articles:

_ From Transaction to Transformation: The Capital Absorption Capacity of Places_

_ Understanding the Capital Absorption Framework: Early Insights from Two Cities_