Remarks of Secretary Shaun Donovan at the "Investing What Works: New York City" Conference

Tuesday, December 3, 2013
New York, NY

As prepared for delivery

Thank you very much, Nancy (Andrews), for that kind introduction and for your incredible leadership.

I'd also like to thank the entire Low Income Investment Fund organization, the Federal Banks of New York and San Francisco, and all your partners, for organizing this important forum. And of course, I'd like to thank all of you in the audience for the valuable work you do every day. 

The people in this room are giving our nation's most vulnerable communities the greatest gifts possible: new hope and opportunity. 

By turning problems into promise, you are both strengthening neighborhoods and our entire nation. I appreciate all that you do and am thrilled to be here today with so many dynamic leaders.   

In so many ways, this feels like a homecoming. In addition to being a native New Yorker, as Nancy mentioned, I had the pleasure of writing a chapter in the Investing in What Works book with my colleagues, Secretary Sebelius and Secretary Duncan.

And I'm so glad that this project is resonating across the country. Its success is a tribute to Nancy and her team. It's also indicative of larger truths.

That Americans are eager to combat poverty and inequality. They believe these problems are solvable through partnership - not partisanship or posturing. 

And they aren't interested in sound bites that impact news cycles; they are interested in solutions that will impact generations of Americans.

I know you are committed to these goals. So am I. And so is President Obama. 

Zip Codes Should Not Determine Futures

As the President has often said—despite going to some very prestigious schools—his greatest education came from his days working as a community organizer on the South Side of Chicago.

He saw firsthand what the pain of poverty does to neighborhoods. He saw the toll that crumbling schools, boarded up businesses and unsafe streets took on families. 

He saw young people whose futures were more likely to be determined by the zip codes they grew up in rather than their potential, no matter how hard they or their parents worked.
And it's simply a moral failure for our country when we can type a young person's address into Google Maps and, more often than not, predict their future.

It's also an economic calamity for our cities and our nation. Every year, the U.S. loses half a trillion dollars because of kids growing up in poverty. 

Most of these costs are obvious: the costs of crime and health care. But the single most harmful cost is the lost productivity and potential of kids.

Not only do young people lose when they don't get a fair shot - we all lose. That's why the President has made providing ladders of opportunity to all communities a top priority.

A New Federal Approach

The first step in this approach has been breaking free from what hasn't worked in the past: the old federal government approach to urban renewal.

In previous decades, Washington officials would often look at a community in distress and see only the problems. They would take the arrogant view that they knew best, while ignoring the assets on the ground.   

They would come in and wipeout entire neighborhoods, creating a Tabula Rasa. As a result, we saw the creation of huge housing complexes like Cabrini-Green in Chicago, Pruitt-Igoe in St. Louis and the Marcy Projects here in New York.  

But, in many cases, these efforts made the problems worse because when a family chooses a home, they are choosing more than just shelter. They are choosing job opportunities, schools, public safety, transportation and more.

And too often, the federal government didn't take into account these other building blocks when developing communities. In fact, government often made things worse. 

This is a reality that President Obama saw when working in some of the poorest neighborhoods in the United States. That's where he learned, in his words, that "real progress does not come from the top down, not just from the government. It comes from people."

That's why all of us in the Administration have taken a fundamentally different view of development:

• by taking a comprehensive approach to community revitalization instead of addressing problems in isolation;
• by working with local leaders to support their vision for their communities; and
• by embracing creative new solutions to old problems, especially in this fiscal environment.

Placed-Based Work

The first step in this work is to ensure that the federal government is working well with ourselves. Of course, this is common sense but, as we all know, government doesn't always do "common sense" well.

In the past, agencies tended to stay in their lanes. HUD worked on housing. The Department of Ed worked on schools. The Department of Justice worked on safety. 

And even though these issues are connected in communities, there was often little coordination between agencies to maximize impact. That's why President Obama has made this practice a thing of the past with efforts like the Neighborhood Revitalization Initiative.

Launched early in his first term, this interagency effort between HUD and the Departments of Education, Health and Human Services, Justice and Treasury eliminated many of the silos that hindered progress.  

Together, we are working to support local leaders who are transforming distressed communities into sustainable, mixed-income neighborhoods.

At the center of this initiative is Choice Neighborhoods, which builds on the HOPE VI public housing revitalization program pioneered by HUD Secretaries Jack Kemp and Henry Cisneros.

With strong bipartisan support, HOPE VI has created nearly 100,000 homes units of mixed income housing, roughly half of which are public housing. It has also leveraged twice the federal investment in additional capital - clearly a win for residents and the communities they live in.

To build on this success, Choice Neighborhoods was launched to expand our efforts to transform distressed, federally assisted housing into healthy mixed income communities.  

It also provides more flexibility to use the funding for critical neighborhood improvements, as well as services, to create access to all the critical tools that families need to thrive. 

Since 2010, roughly $230 million in Choice Neighborhoods implementation grants have been awarded to cities across the country. These cities have leveraged these grants to attract over $2 billion in additional capital to create new schools, park space and transit options, and improve public safety.

It's forged dozens of partnerships between not only housing authorities and owners of multifamily housing, but also school district, universities, police departments and hospitals.
And this work is literally changing lives.

Last month, I was in Chicago touring the Woodlawn neighborhood on the South Side.
As many of you know, this is an area that has been in distress for many years - suffering in a variety of ways, from a lack of jobs to high levels of crime. 
In fact, when I traveled to the neighborhood in August of 2011, I arrived just hours after a drive-by shooting left four teenagers wounded. So there were a lot of problems in the area. But its residents didn't accept this fate for themselves.

Where others saw problems, they saw potential. And they crafted a comprehensive vision to transform the neighborhood.

HUD believes in their vision and, two years, ago, awarded the City one of the first Choice Neighborhoods grants, totaling roughly $30 million. Work is currently underway and, on my recent visit, I had this incredible experience standing in the middle of the street.

Looking one way, I saw the work being done to transform distressed Section 8 Grove Parc Plaza Apartments into mixed-income units. I could also see all the other work being done to reshape the area into a vibrant urban community.

When I looked the other way, I saw vacant lots and other signs of urban decay. Transformation was literally occurring thanks, in large part, to local leaders like you. In fact, I want to congratulate the "community quarterbacks" designated under the Partners in Progress initiative announced today.   

The role that they have agreed to take on is hard but crucial - and it really can change places and lives. The belief shown by Partners in Progress—that we can do more when we work together, and create ladders of opportunity—is also the foundation of the President's Promise Zones effort.

As many of you know - this effort is designed to:

• revitalize the hardest-hit neighborhoods in the country;
• accelerate the progress of community leaders who are working together with a commitment to results; and
• help struggling Americans join the middle class. 

HUD's Choice Neighborhoods effort will partner with an array of programs and assistance from a variety of other agencies, to support Promise Zone strategies. If Congress enacts them, tax incentives will also be available to businesses that hire residents or make investments in the Zones.  

Working with local partners in these areas, we are going to:

• transform the housing so everyone has a affordable and decent place to call home;
• ensure that every child gets the educational support they need to succeed from the cradle to college to their career;
• improve public safety so residents don't have to live in fear in their own neighborhood; and
• create jobs and increase economic activity to help hard-working families get a leg up into the middle class.

In short, we are going to turn communities of despair into neighborhoods of hope - and our momentum is building. We recently closed the application period for the first round of Promise Zone designations and will make that announcement soon. 

And early next year, we will open up the application process for the next round. I urge you to spread the word about this opportunity. I also ask that you continue to educate your friends from the private sector about the Promise Zones initiative.

At HUD, we've been working tirelessly with business leaders to get them to buy-in to this work and the response has been overwhelmingly positive.

Their feedback reiterates the "Investing What Works" principles of:

• leveraging private investments with public dollars;
• incorporating locally-inspired and tested solutions; and
• scaling promising efforts with the help of larger businesses that have investments in these communities.

Clearly, the possibilities to turn around troubled neighborhoods are great so I ask you to make your voices heard in support of our budget requests for grants that can shape sustainable communities.

This includes:

• $400 million for Choice Neighborhoods;
• $300 million for the Department of Education's Promise Neighborhoods effort;
• significant increases to Justice's Bryne Criminal Justice program;
• as well as Promise Zone tax incentives.

Let's work together to ensure that every child's future will be determined by their ability - not their address.

New Sources of Funding for Proven Solutions

I want to conclude by talking for a moment about additional opportunities that exist right now to move the ball forward in this effort. Taking a step back, it must be frustrating for all of you—implementing innovative practices like the "community quarterback" model across the country—while so little seems to get done in Washington. 

Meanwhile, we in the Administration have to own that the rollout of the Affordable Care Act has been challenging - and has put many our allies and supporters in a challenging position. 

You aren't alone in your frustration. I am frustrated. So is the President. The good news is that progress is being made. 

The website now works for the vast majority of users. And in the larger picture, more and more Americans will have access to quality, affordable health insurance.

Make no mistake: this is a game-changer. It is a game-changer for individuals and families who have access to health insurance they can afford. And it is a game-changer for the communities and neighborhoods we have been talking about today. 

The ACA will enable state and local governments, the private sector and community-based non-profits across the country to access funding for a broad range of activities tied to positive health outcomes - from traditional doctor's visits to housing-based supportive services, previously unavailable.

Equally important, the ACA creates incentives to invest these new dollars in what works—in interventions that yield proven, cost-effective outcomes

That is what today's gathering is all about. And looking forward with this new opportunity in hand, we must ask ourselves: how do we move from innovation to evidence-based practices we can scale to turn around the lives of individuals and distressed neighborhoods, providing ladders to opportunity for all?

In that regard, I want to highlight a particular opportunity to shift our nation's safety net to the more evidence-based foundation that has been today's focus, while leveraging private capital to do so. 

A number of you have been involved with Jonathan Greenblatt and others in the Administration, who have been exploring strategies that fall under the broad umbrella of "Pay for Success," - including one such strategy known as Social Impact Bonds. 

New York City is, of course, at the center of this movement. Linda Gibbs is the public sector "mother" of the first social impact bond in the US, working with Goldman Sachs to use private investment capital to fund an evidence-based recidivism reduction intervention at Riker's Island, where the City pays only if the intervention works.

Looking forward in the bigger picture, HUD has been an enthusiastic supporter of the Administration's Pay for Success efforts. And today, I wanted to make you aware of two important recent developments in this area that should interest anybody who cares about investing in what works. 

First, as I am sure all of you know, two weeks ago, HUD issued its guidance around the second tranche of Hurricane Sandy funding, providing an additional $5 billion in CDBG assistance.
The guidance specifically encourages the use of the funds to support evidence-based interventions, including through social impact bonds and other pay-for-success strategies.

With this step, we are making a declaration that in addition to rebuilding the physical structures damaged by Sandy, we must also help those affected so they are better able to reach their full potential and withstand life's challenges.
Second, I would encourage you to pay attention to the Treasury Department's request for input on the design of the $300 million fund proposed in the Administration's fiscal year 2014 budget to support pay for success activities. 

As you know, pay-for-success strategies—especially social impact bonds—challenge government to do business differently. Often, as in the case of energy retrofits, government budgeting needs to accommodate the provision of ‘upfront' capital, while the payoff occurs only over time. 

This is not an easy lift. Similarly, cross-silo pay for success strategies—such as the proven intervention of permanent supportive housing—require an ability to monetize savings generated in one system or level of government to pay for an investment in another.  

My former Bloomberg and current Obama Administration colleague Tom Frieden calls this the "wrong pockets" problem. The President has proposed this groundbreaking $300 million in mandatory funding, administered by Treasury but with input from every agency working on pay for success, specifically to address these challenges. 

We need your help to ensure that Congress includes this funding in the budget. Please make sure they understand the importance of this fund to scaling investment in what works.

Is it different? Yes. But we've got to tell our representatives that this kind of out-of-the-box thinking is needed more than ever. So please, make your voices heard. 

Conclusion

You are the most effective messengers because you know how to get things done.

Every day, you show that you are not about rhetoric, you are about results; that you are not about self-interests, you are about the common interest; that you are not about politics or partisanship, you are about people and progress.

Quite simply, I consider all of you to be the Neil Armstrongs of the community development movement, taking big leaps on behalf of mankind.

Breaking new ground with your pioneering work.

Unafraid to offer up new ideas to tackle old solutions.

Guided by your belief that every human life has value and that even our greatest challenges can be solved.

That's why it's been such an honor to work with you over the years. And I look forward to working with you for many years to come to fight for those enduring values and principles that we all share: community and opportunity for all.

Thank you.

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