It’s a familiar story in the urban core of Kansas City: First, one house falls into disrepair because of death or unemployment, while another is abandoned because clear title to the property can’t be obtained. The weeds grow tall, porches collapse, abandoned cars clutter the street and soon the block — then the neighborhood — is in full-fledged decline.
Some variation of this story has been repeated an estimated 5,000-plus times in recent years in Kansas City’s urban core, still recovering from the subprime mortgage crisis as well as decades of residents’ flights to the suburbs. Now, these vacant structures blight their blocks and neighborhoods, provide refuge for criminal activities, decrease property values and depress the spirits of those living near them as well. They sap the overall vitality of our communities.
Recently, Legal Aid of Western Missouri, which provides legal services to low-income people who cannot afford attorneys, has partnered with AltCap, a community development financial institution, to undertake a new and innovative initiative to help reduce the number of vacant houses and improve the living conditions of Kansas City’s poorer citizens. The initiative is called KCSIP, the Kansas City Social Investment Pool.
For many years, Legal Aid has worked to remove vacant houses from our inner-city neighborhoods by bringing legal actions to provide valid legal titles to the abandoned properties, and also by assisting neighborhood associations in vetting contractors to upgrade the properties to make them marketable and habitable. These efforts have made hundreds of houses available to low-income families, but they are only a drop in the bucket in the overall battle against blight.
Now, Legal Aid and AltCap have established a loan pool of almost $500,000 to provide short-term, market-rate loans to smaller contractors to rehab abandoned homes. Fewer than 10 individuals provided the seed money by investing in KCSIP, understanding the risk that they might not receive a monetary return or even get back their original investment.
Their motivation to invest? An investment strategy that emphasizes a social return versus a purely economic return on investment. KCSIP investors represent a growing trend in investment called “social impact investing,” in which investors are seeking benefit to society at large, as well as a monetary return for their money.
Safe and affordable housing is a key to breaking the cycle of poverty in the urban core. Studies have shown that “adverse community environments,” such as poor housing quality and affordability, poverty and community disruption lead to more domestic violence, divorce, homelessness, substance abuse and other “adverse childhood experiences” that impact children and adults for their lifetimes. A goal of KCSIP and the social impact and return it offers to investors is to improve living conditions in the central city and reduce these adverse experiences.
A recent Legal Aid survey showed that housing is a concern for 65.9 percent of our clients. Among community and neighborhood organizations, safe and affordable housing concerns are the No. 1 issue.
In addition to rehabilitating homes, KCSIP’s short-term loans will enable contractors to hire laborers, plumbers, electricians and other construction trades, creating local jobs and supporting economic activity in the community. As loans are paid, more loans will be made to more contractors, further boosting economic activity in the central city.
Like a pebble dropped in a pond, this innovative loan pool will create ripples that spread along the streets and neighborhoods of the central city, providing safe and secure housing for more low-income residents and helping improve the lives of the city’s residents. We hope KCSIP will inspire and serve as a model for new and larger revolving loan pools in the future.
Jerry W. Venters is a retired federal bankruptcy judge in Kansas City and serves as the president of the Board of Trustees of Legal Aid of Western Missouri.