Why do community development projects fail

Visitor Question: I was just wondering why community development projects funded by our taxpayer dollars sometimes seem to fail miserably. What are the key factors in whether a project fails?

Editors Reply: As you probably know, community development projects are extremely varied. On any given day, savvy people might call a low-income housing development, an effort to organize a neighborhood association in a middle-class neighborhood, a project that narrows down a street that is too wide to install wider sidewalks and a bike lane, or planting spring bulbs in flower boxes along a small commercial street a community development project.

So your question is difficult to answer. However, we considered it carefully and feel confident that the major causes of most failures at any one of these types of projects fall into one of three categories.

1. Immediate failures because funding is never raised to actually build or do the project account for some community development project failures. Many great-looking streetscapes and handsome buildings never locate the funding they had anticipated from some combination of government sources, private developers investing in equity, and conventional lending or even CDFI lending. (CDFI means community development financial institution; see our article on what is a CDFI.)

2. The market for what was built was insufficient or soon became anemic. I think of a nearby very large strip center that launched with a famous big box store as an anchor tenant. A few mid-sized chain stores also signed leases initially, and some of the smaller spaces were leased. However, when the big box chain failed, that space became empty, starting off a sequence of business failures and then refusal to renew leases when initial leases began to expire.

As we write this today, the center sits almost completely empty, two highly successful chain fast food restaurants are vacant and boarded up, and the city in question is left holding the bag because it issued revenue bonds, and the revenue is not materializing. But the pigeons have really good digs because the buildings are still in decent shape.

So some otherwise smart people were way too optimistic about the market for this type of development in this location, since hardly a single storefront was leased a second time. From what I understand, the city did not seek a second and third opinion and relied solely on the developer and their own overworked staff to evaluate market demand.

As this particular example points out to me, the city also seriously underestimated competition from nearby cities that were seen as trendier.

3. Personality conflicts account for the demise of another chunk of community development projects. In these instances, either a project never occurs, or it struggles through early phases only to fall apart when differences cannot be reconciled. This category includes partnerships that disappear or in the case of a legal partnership, are dissolved.

This happens in neighborhood associations, nonprofit organizations that often sponsor socially motivated development projects, and in governments when particular offices that need to cooperate cannot get along or develop rivalries.

4. This brings us to the problem of succession. In governments, this is very easy to see when leaders are defeated at the polls and an opposing political party or faction takes over and reverses course. It also happens in for-profit development firms when a CEO or CFO is ousted and the successor does not believe in the project. And yes, even at the neighborhood association level, a regime change can mean that a project either fails because of inattention during the transition or is actively rejected by an incoming administration.

All of these difficulties also ensue when a prime mover of a project dies or moves away. Often when someone really is the "go-to" person for a community project, whether that is an annual festival, a cleanup campaign, fundraising for a neighborhood, grant seeking, or a recurring survey or evaluation of some sort, the project fizzles completely because no one wants to take over the responsibilities. Another possibility, perhaps more likely, is that someone initially agrees to take over the initiative, but then is unable to pursue it with the same skill, passion, and resourcefulness as the founder of the community development project.

Incidentally, divorces can be pretty bad for community development projects too, if the parties had been cooperating to launch a specific construction project or soft project promoting community betterment, beautification, or economic development.

5. An important category of failure can be attributed to changing tastes. Once upon a time, going to the shopping mall was the coolest thing for just about every age except the oldest of the elders. Now certain demographic and taste groups would not want to show up on Facebook admitting to being in the mall.

And these giant rotations of public taste in entertainment, shopping, architecture, and gathering places can cause really regrettable failures in community development, especially when a project is conceived and initiated toward the end of a cycle of popularity.

6. Finally, we would point to ignorance of the people making the decisions. That is why we emphasize over and over again on this website the importance of gaining an overview understanding of cause and effect in community development. It is true that success and failure factors can be highly idiosyncratic, and it is equally valid to view the number of factors figuring into success or failure in community development as a very big number.

Nevertheless, we are completely confident that it is also true that if you somehow think the rules don't apply to you, you probably will fail. Understanding cause and effect is your best protection against failure.

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