Welcoming remarks to the 2006 National Community
Green Valley Ranch, Las Vegas, NV
By Janet L. Yellen, President and CEO of the Federal Reserve Bank of
For delivery on Monday, March 20, 2006, 9:10 AM Pacific Time, 12:10 PM Eastern
Good morning. I'm Janet Yellen, President and CEO of the Federal
Reserve Bank of San Francisco. On behalf of the San Francisco Fed and
our co-hosts, the Federal Deposit Insurance Corporation, the Office
of the Comptroller of the Currency, and the Office of Thrift Supervision,
I'm delighted to welcome you to Las Vegas and to the 2006 National
Community Reinvestment Conference.
This is actually the second time we've held this conference
in Las Vegas. The last time we were here was in 1998, and the city
has grown significantly in the last eight years. Back then, there wasn't
an Eiffel Tower in the middle of the Strip.1 But
there were already signs of community development pressures as a result
of the region's
rapid growth. Since 1998, these pressures have only increased. The
poverty rate in the region has increased, and the income gap between
rich and poor has grown.2 At the same time,
house values have skyrocketed, and while this growth has had benefits
for the local economy, it has
also made the area less affordable to low-income families.3
This "tale of two cities" highlights the need for community
development, and its role in ensuring that low-income families and
neighborhoods benefit from macroeconomic growth. When we hosted our
first community reinvestment conference in the early 1990s, it was
focused primarily on educating banks about the Community Reinvestment
Act. In the past year and a half, the regulatory agencies have issued
major revisions to the CRA, and, as before, one of the goals of this
year's conference is to help you to understand the new regulations
and provide you with information on how to meet your CRA obligations.
But this conference is about more than just the letter of the CRA.
It's also about finding innovative solutions to the community
development challenges facing fast-growing places like Las Vegas, older
cities like Detroit, and rural areas like California's Central
Valley. Everyone in this room has made a commitment to expanding opportunity
for low-income families and to revitalizing low-income communities.
So while the details of the CRA regulations are important, the main
objective of this conference is to give you the chance to focus on
the underlying goal of your work and to share challenges and best practices
with your colleagues in the community development field.
In my remarks today, I would like to reflect on the ways in which
the community development field has changed since the urban renewal
programs of the 1950s and 60s. This history demonstrates the tremendous
capacity for the field to adapt and to find more effective ways of
serving low-income families and communities, while at the same time
reminding us that neighborhood poverty is not something that is easily
To give us a framework for understanding the history of community
development, I'd like to talk about New Haven, Connecticut,
because the urban renewal efforts coincided with my own time there
as a graduate
I moved to New Haven in the late 1960s to study economics at Yale
University. I was drawn to economics, not, as you might think, as
a result of an
early fascination with interest rates, but because I wanted to understand
the underlying causes of the Great Depression. At its peak, the number
of unemployed during the Great Depression stood at over 13 million
people.4 To put that number in perspective,
there were nearly twice as many unemployed workers during the Great
Depression as there are
today, even though our population has more than doubled.5 My
passion for economics—and for my job at the Fed—stems
from the belief that monetary policy is an important tool that can
to minimize the likelihood of such an event happening again, and
the suffering that an economic downturn can inflict on American families
When I arrived in New Haven in 1967, the city was
at the tail end of one of the most massive and ambitious urban
renewal projects in
country. Between 1954 and 1967, the city spent more than 27 million
dollars in federal grants to completely rebuild the downtown area—twenty
times more per capita than what New York City spent over the same
period.6 Dilapidated tenement buildings
were replaced with modern high-rise
apartments. Small commercial streets were converted into shopping
malls. And neighborhoods were flattened to build freeways linking
to the growing suburbs. The city's mayor proclaimed that
urban renewal would "make New Haven the first slumless city." President
Johnson's Secretary of Labor called New Haven's redevelopment
efforts "the greatest success story in the history of the
The success story was short-lived, however, and by
the time I arrived in New Haven there was already evidence of
the negative impacts
of urban renewal on the city and its residents. By 1967, more
percent of New Haven's population—about 22,000 people—had
been displaced to new neighborhoods.7 More
than 2,000 small businesses in the downtown area were also dislocated.8 The
city's low-income families, particularly African-American households,
concentrated in mammoth public housing projects like Elm Haven.9 And
the newly built freeways ripped through the urban fabric of the
isolated neighborhoods, and contributed to the exodus to the
suburbs. Rather than creating the first slumless city, efforts
renewal in New Haven had unintended consequences, creating neighborhoods
high levels of concentrated poverty, unemployment, and crime.
Our understanding of the principles underlying effective community
development has evolved considerably since 1967. A couple of years
ago, I had the opportunity to return to New Haven and to visit Monterey
Place, a HOPE VI project located near Yale University.10 Rather
than monolithic brick buildings that characterized the Elm Haven public
housing project, Monterey Place consists of a mixed-income community
with townhouses designed to mimic traditional New England architecture.
The development, funded by a mix of public and private dollars, is
managed not by the Housing Authority but by a private company. There
are efforts to link the community to the neighborhoods surrounding
it, and several of the units offer homeownership opportunities for
low-income families. The development also includes a new public school
and a community center that offers social services and classes to local
The contrast between the urban renewal programs of the 60s and HOPE
VI encapsulates how much approaches to community development have changed
in the last forty years. Let me highlight just four of those changes.
The first major change has been in the field of community development
finance, evidenced by the diversity of institutions and organizations
that are represented in the audience today. Whereas early efforts at
urban renewal were funded largely by centralized federal grants, today's
community development projects are more likely to be financed by a
combination of public and private dollars. The Low Income Housing and
New Markets Tax Credit programs, for example, both reflect a shift
in the federal government's role in community development. Instead
of providing funds directly to neighborhoods, these programs encourage
private investment by offsetting risk through tax incentives and credit
enhancements. The community development finance field has become extremely
innovative in the way it secures both equity and debt financing, and
has brought a much wider range of investors, lenders, and funders to
The second major change has been the shift away from building
large public housing developments like Elm Haven in New Haven or
Cabrini Green in Chicago. Research has documented the social and economic
associated with de-concentrating poverty, whether by helping families
re-locate to higher income neighborhoods or by building new mixed-income
developments in the place of distressed public housing.11 On
balance, programs like HOPE VI have sparked significant improvements
distressed neighborhoods.12 These
neighborhoods have seen declines in crime and unemployment, and increases
values, and private investment.
The third major change has been a
renewed emphasis on developing comprehensive approaches to solving
neighborhood poverty—strategies that go
beyond rebuilding the "bricks and mortar" of the community
and that focus on expanding opportunity for low-income families.
In New Haven, for example, urban renewal replaced dilapidated homes
new buildings, but it did not address other needs like employment
opportunities for displaced factory workers. As some of the sessions
in the conference
will illustrate, there is a better understanding of how to develop
holistic approaches to meeting residents' needs by supporting
entrepreneurs, providing job training, offering asset building
products, and facilitating transportation and child care.
change, and perhaps the most important, has been the
recognition that resident participation is vital to the success
of any redevelopment
effort. In New Haven, the renewal task force did not include
any affected residents or businesses, and in the words of one federal
community was seething" at what they perceived to be a complete
disregard for their well-being.13 Today's
community development efforts are much more likely to involve
residents in the planning
and design of their community, encompass a wide range of community
and partners, and build on local economic priorities and assets.
changes in the community development field have fundamentally altered
the theory and practice of neighborhood revitalization, and
there is evidence of the success of these efforts in many communities
across the United States.
But, the lessons from the past should also
caution us against thinking that there are easy solutions to neighborhood
poverty. Even the elements
of successful community development that we are talking about at
this conference are difficult to implement well. For example, building
communities—as with HOPE VI—has promoted economic growth
and has revitalized a number of distressed neighborhoods. But it has
also led to an overall reduction in the number of subsidized rental
units for low-income residents, at a time when demand for affordable
housing is growing. Moreover, these efforts often displace residents
from communities where they have established strong social networks.
Are there better ways of revitalizing neighborhoods that don't
involve resident displacement? What new financing tools or programs
are needed to provide for a wider range of affordable housing options?
while taking comprehensive approaches to neighborhood poverty and
engaging residents are critical to sustainable community development
efforts, they also require significant time and resources. Research
on comprehensive community initiatives shows that the process of
building and revitalization can take decades. How do you reconcile
this long-term commitment with the need to satisfy the annual reporting
requirements of funders, or the short-term expectations of shareholders?
Given the reality of limited resources, is it really possible to
implement programs that address all of the factors that contribute
poverty? If not, which problems should be addressed first?
no easy answers to these questions, and I think they underscore the
extremely difficult nature of your work. The goal of this year's
conference is to give you an opportunity to discuss these difficult
questions and to learn from your colleagues. It is only through this
type of open engagement and willingness to learn that we will be able
to foster long-lasting change.
In conclusion, I would personally like
to recognize the positive impact that your work is having in low-income
communities. Forget for a minute
about your "outstanding" CRA rating and think instead of
the families you helped find a suitable home, the small store you helped
to finance, or the savings accounts that you opened. All these activities
help to strengthen our nation's low-income communities, and we
look forward to hearing more about your successes over the next three
days. Thank you. I hope you enjoy the conference.
1. The Paris hotel was built in 1999.
(2005) Income, Earnings, and Poverty from the 2004 American Community
Survey. U.S. Bureau of the Census: American Community Survey Reports
The poverty rate in Clark County increased from 9.9 to 12.7 percent between
2000 and 2004. Data from the American Community Survey also show a drop in
the median income and a larger proportion of families earning less than $25,000
between 2000 and 2004. A study by the Center on Budget and Policy Priorities
showed that income inequality in Nevada increased between 1990 and 2000.
Unfortunately, the lack of annual data at the local level makes it
difficult to estimate exactly
how much change there has been between 1998 and 2006, but interviews with
local nonprofits support this assessment.
3. National Association of Realtors
(2006). Quarterly median house price data, 1998-2005. The data show
that house prices in Las Vegas have gone up 151
the first quarter of 1998 and the last quarter of 2005.
4. Estimates of the number
of unemployed during the Great Depression fall between 13 million
and 15 million people. The 13 million figure is from R.W. Hafer
(2005). The Federal Reserve System: An Encyclopedia (Wesport and London:
5.Fifteenth Census of the United States: 1930; Population Volume II:
General Report/Statistical Subjects, Washington: US Government Printing
1933, Page 25. The population
of the U.S. has gone from 122,775,046 in 1930 to 281,421,906 in 2000.
The unemployment level in February 2006, as reported by the Bureau
6. Douglas W. Rae (2003) City: Urbanism and its End. New Haven
and London: Yale University Press, pp. 324, 353
7. Rae (2003), p. 339.
8. Rae (2003), p. 343.
9. Rae (2003), p. 383.
10. The New Haven Housing Authority received a $46
million HOPE VI grant to demolish and redevelop Elm Haven. Over a
12-year period, the
805 units at Elm Haven
were replaced with approximately 600 units, of which 400 are
11. For a review of the research findings from
the Gautreaux and Moving to Opportunity Demonstration projects, see
of Choice and
Connection: The Evolution of Neighborhood Policy and What
it Means for
the United Kingdom.
The Brookings Institution: Washington, D.C.
12. Susan J. Popkin
et al. (2004). A Decade of HOPE VI: Research Findings and Policy
Challenges. The Urban Institute: Washington,
13. Rae (2003), p. 350. See pages 351-357 for a more detailed
discussion on the lack of resident participation in urban
renewal and its consequences.
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