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For release on delivery
Noon EDT
May 3, 2006

Community Revitalization: Lessons from Anacostia

Remarks
by
Ben S. Bemanke
Chairman
Board of Governors of the Federal Reserve System
before
Operation HOPE's Anacostia Economic Summit
May 3, 2006

I would like to thank Operation HOPE and the host committee for inviting me to
participate in today's summit. I would also like to congratulate John Bryant and the staff
of the Anacostia HOPE Center on this anniversary and on your many contributions to this
community over the past year. I recently visited the HOPE Center and saw some of the
services it offers in financial education, small business development, job training, and
computer literacy. These activities contribute to the revitalization of this community by
helping residents gain access to resources they can use to improve their economic
situations and prospects. Institutions such as the HOPE Center and THEARC (Town
Hall Education, Arts, and Recreation Campus) bring people together and give them a
sense of being part of a larger community.
Today, I will share some thoughts on economic revitalization, highlighting two
general themes. The first theme is the importance in community economic development
of strategic collaboration among public, private, and nonprofit organizations. Working
together, these three groups of actors can achieve much more than they could on their
own. The second theme is the need for a comprehensive approach to revitalizing
communities, one that focuses on the economic and cultural viability of the community as
a whole, not only on the construction or rehabilitation of individual homes and
businesses. In my remarks I will focus on the experience of the Anacostia neighborhood
in the District of Columbia, which offers useful illustrations of both themes.
Anacostia: Looking Back

To think about Anacostia's future it helps first to recall its past. I recently toured
some of the neighborhoods southeast of the Anacostia River and gained an appreciation
for both the rich history of the area and its great promise. Many of the buildings in this

-2area are architectural treasures. The older houses date from the late 1800s, when
Anacostia was home to a large working-class community. The residents included, of
course, Frederick Douglass, known as the Sage of Anacostia, a man whose dedication to
lifelong learning and to the battle for racial equality still has the capacity to inspire.
In the early to middle twentieth century, Anacostia offered affordable homes and
wide open spaces--at that time, it had only 5 percent of the District's total population but
40 percent of the District's vacant land. In the 1920s, Anacostia had a higher percentage
of homeowners than other sections of the District, with apartments accounting for less
than 1 percent of its dwellings. Indeed, during a six-year period of rapid expansion
following World War I, when Anacostia's population surged 56 percent, more than 1,800
detached and row houses were constructed in the area, but only four apartment
buildings. 1
However, the pattern of residential construction and homeownership in Anacostia
changed dramatically over the following decades. During the 1920s, 1930s, and 1940s,
policies designed to eradicate tenements in central D.C. resulted in Anacostia, with its
relatively large tracts of undeveloped land, becoming home to large numbers of lowerincome families displaced from other parts of the city. In the 1950s and 1960s, the
growth of the city's population, the expansion of the central business district to
accommodate the burgeoning federal government, and urban renewal projects led to
substantial increases in the demand for new housing in the city, particularly for lowerincome residents. By 1967, the need for affordable housing in the District led the

1 American Studies at the University of Virginia, "The Changing Face of Anacostia: Public Housing and
Urban Renewal," http://xroads.virginia.edul-CAP/ANACOSTWpublic.html.

-3planning commission to call for the construction of 65,000 units of new housing, with
30,000 of those units to be located in Anacostia.
The result of these developments was an apartment-construction boom that
ultimately changed the character of the area. As the community's stock of public and
rental housing increased, Anacostia shifted from being a community of homeowners to
one of renters, with a high concentration oflower-income households. As we have seen
in other cities, large-scale public housing projects have often become liabilities to the
community. Anacostia struggled as public housing complexes fell into disrepair, many
homes were abandoned, crime rates increased, and poverty rates climbed. The economic
vitality of this historic community was undermined, and previously healthy
neighborhoods were destabilized.
Anacostia Today
Today, however, Anacostia looks to be on the way back. Leaders in the public,
private, and nonprofit sectors have a new vision for the area--one of mixed-income
neighborhoods, vibrant commercial and retail centers, expanded neighborhood amenities,
and strong community institutions. These partners are playing different but
complementary roles, bringing both capital and expertise and ushering in a new wave of
economic development in the area.
In the public sector, both the federal and city governments are supporting
development in Anacostia through their investments, often leveraged with private money.
On the federal side, for example, the Department of Homeland Security's new
communications center and other planned development on the St. Elizabeth's property
will bring jobs and economic activity to the neighborhood. The city of Washington is

-4making a number of important investments here as well. For example, the Anacostia
Gateway project will include two buildings, one that will house offices ofthe D.C.
government, the other (which will be a joint venture of the Anacostia Economic
Development Corporation and the National Capital Revitalization Corporation) providing
commercial office space. The city has also made a major commitment for the
construction of a baseball stadium, as you know. In the sphere of housing, an entirely
new community is rising up at Henson Ridge, bringing residents with a range of incomes.
The city took a leadership role in this project, demolishing the public housing previously
on the site and then arranging the financing of the new construction through a
combination of public bond issuance, private equity, and a successful competitive
proposal to the U.S. Department of Housing and Urban Development.
The promise of these investments for Anacostia's future is supported by recent
research, which has highlighted how carefully targeted public investment can help to
jump-start urban revitalization. 2 An illustration not too far from here can be found in
Richmond, where the city played a lead role in finding the funds to develop mixedincome housing in seven distressed neighborhoods. After five years, the housing values
in those communities increased nearly 10 percent per year faster than in the city of
Richmond as a whole. 3
But public investments alone are generally not sufficient to re-establish the
economic viability of a community. For development to be truly sustainable, private
2 Bruce

Katz, Brookings Institution, "Transformative Investments: Unleashing the Potential of American
Cities, AprilS, 2006,_http://www.brookings.edu/metro/speechesI20060405_ TransfomlativeInvestments.pdf
John Accordino, George Galster, Peter Tatian, "The Impacts of Targeted Public and Nonprofit Investment
on Neighborhood Development: Research based on Richmond, Virginia's Neighborhoods in Bloom
Program," July 2005,
http://www.richmondfed.orglcommunity_affairs/topical_essays_andJesources/pdf/nibJesearch.pdf.

3

-5capital is also needed. Successful private investment in economically challenged areas
can be rewarding, but it requires substantial expertise, local knowledge, and a vision of
what the community can become. In this community, several innovative private
developers have shown what is possible by collaborating with the city, financial
institutions, and nonprofit organizations to rehabilitate and construct thousands of new
mixed-income housing units for both renters and owners.
A key element in the success of much ofthis private-led development is the
insight that, to achieve economically viable communities, building housing units is not
enough. For people to find an area an attractive place to live, they need a range of
services, community institutions, and places to shop and work. Accordingly, developers
building in Anacostia have included in their plans community amenities such as day care
centers, shuttle services, and recreation programs for resident children. Developments
like Asheford Court, a new mixed-use, mixed-income community, will include a
supennarket, restaurants, and shops. Even as they make communities more attractive,
these amenities create new jobs and provide opportunities for small business
development.
Together with actors in the public and private sectors, leaders in the nonprofit
community have an important role in the redevelopment of Anacostia as well,
particularly in creating the social infrastructure that improves the quality of life. I have
already alluded to Operation HOPE and the important work that it does in helping
residents become more financially literate, which paves the way for more people to own
homes and to start small businesses. Nonprofit community development organizations,
such as East of the River Community Development Corporation, the Anacostia Economic

-6-

•
Development Corporation, and the Marshall Heights Community Development
Organization have supported retail development. With the support of the Local
Initiatives Support Corporation, over the past twenty years these organizations have
worked to bring projects such as the Good Hope Marketplace and the future Shops at
Park Village to the area. Guided by leaders who have a personal commitment to the
success of their communities, these nonprofit organizations have led the way in meeting
the needs of residents for affordable housing and in helping to attract private investment
and development.
Nonprofit educational and cultural organizations are also at the heart ofthis
community's revitalization. The network of nonprofits that worked together to create
THEARC--the Washington Ballet, the Corcoran Gallery of Art, the Levine School of
Music, and the Boys and Girls Club--is a model for strategic partnerships. THEARC also
provides vital services, such as the Children's Hospital family wellness center, a
significant resource in a community that previously had no health-care facilities.
Again, the development philosophy that we see at work in Anacostia is one that
focuses not only on the construction of individual homes and businesses but on the
broader social and economic environment in the community. As every successful
developer knows, real estate markets are driven not only by the characteristics of the
physical structures, though those are important, but also by the accessibility of goods and
services that current and future residents want, such as schools, shops, and transportation.
Data on business patterns offer some insight into the positive changes in
Anacostia, as well as the remaining challenges. In the communities which I had the
opportunity to visit, the number of business establishments increased by about 7 percent

-7between 1998 and 2003. 4 In light of the public and private investments in this
community, it is not surprising that some ofthe most rapid growth was in the number of
firms in construction (64%) and in the finance and insurance industries (47%). Industry
data for these communities reveal significant increases in the number of establishments in
educational services, such as academic and arts schools and training centers (a 118%
gain); professional, scientific, and technical services such as offices of lawyers and
engineers (a 35% increase); and health care and social assistance including medical care
and daycare centers (a 15% gain).5 Although the rate of homeownership in Ward 8 is
still only about half the average for the city as a whole, progress has been made on that
count as well. From 1990 to 2000, the homeownership rate in Ward 8 increased by 22
percent, and I have little doubt that further improvement has occurred since 2000, given
the completion of765 owner-occupied housing units since 2001 and an additional 210
under construction due to be completed by 2006. 6

Beyond Anacostia
What does Anacostia's experience offer for other communities confronting
economic decline, given the reality of limited resources and the financial risks associated
with redeveloping distressed areas? One lesson is that public, private, and nonprofit
development partners must be increasingly innovative in their work. First, they must
identify the strategic investments that have the potential to transform neighborhoods and
stimulate ongoing private investment and economic activity. As I have noted today,

u.s. Census Bureau, North American Industry Classification System, zip codes 20020 and 20032,
http://censtats.census.gov/cbpnaic/cbpnaic.shtml.

4

5

Ibid.

6 D.C. Office of Planning and NeighborhoodInfo DC, Neighborhood Profiles,
http://www.neighborhoodinfodc.org!wards/nbr-"roCwrd8.hunl.

- 8-

success in community development requires a comprehensive approach--one based on the
recognition that vibrant communities offer their residents not only a place to live, but also
access to services, to community institutions, and to places to shop, work, and enjoy
recreation as well. Many of the development initiatives that have taken place in
Anacostia have made good use of this insight, combining housing development with
other amenities such as recreational areas, retail outlets, or cultural institutions like
THEARC.
Second, the community leaders, government officials, lenders, and developers
now involved in helping to rebuild communities must keep working to find new partners
and new sources of capital. In this respect, it is encouraging to see how much more
professional the whole field of community development finance has become. For
example, over the past twenty-five years, innovative lenders at banks and at community
development financial institutions have demonstrated that investments in community
economic development can be rewarding in the financial sense as well as in the social
sense. With that demonstration, new financing structures may continue to emerge that
can help mitigate decreases in government funding. The expansion of secondary markets
for affordable housing and community development loans will, I hope, provide increasing
liquidity that allows the redeployment of capital for new development efforts. What we
see today in Southeast D.C. demonstrates that smart public and private investment can
create a virtuous circle of economic growth and opportunity. I am optimistic that the
positive changes that we see in Anacostia can be replicated in economically challenged
communities throughout the country.

-9My optimism also stems from the commitment demonstrated by the participation
today of leaders from all levels of government, banking, the corporate sector, and
nonprofit institutions. Today's summit underscores your commitment to increasing
opportunity for lower-income individuals and communities. I join you in celebrating the
ongoing revitalization of Anacostia and the potential for similar communities throughout
our nation. I commend you for your leadership and look forward to your continued
success.