Nonprofit Neighborhoods: How Not to Fight Poverty

Wishing to end poverty “wherever it existed,” LBJ acted not with government aid, but with a non-profit. The results have been catastrophic.

When President Johnson set out to eradicate poverty “wherever it existed,” he chose to act not with a direct government program, but with a nonprofit. Action for Boston Community Development (ABCD) was chosen as the administrative model for Johnson’s Great Society and, specifically, his War on Poverty. In adopting that model, the federal government applied the experimental design of President Kennedy’s targeted and much smaller juvenile delinquency program to Johnson’s much, much larger ambition. As if that wasn’t enough of a leap, ABCD had only been founded in 1961; by 1964, it was the basis for a wide-ranging national program.

In her excellent book Nonprofit Neighborhoods, Claire Dunning traces the origins and consequences of the federal government’s reliance on neighborhood-based nonprofit organizations for the provision of anti-poverty social services. Johnson’s Model Cities program, a key element of the War on Poverty, created a new role for city government as a federal and philanthropic grant manager. Rather than fund state and city governments to construct public housing or run public healthcare systems, the federal government gave grants to nonprofits like ABCD to provide disparate services. This represented a fundamental restructuring of the federal government’s relationship to state and municipal governments and the role of philanthropy in public policy more broadly. Most visibly, it drove a shift in municipal governance: replacing local governments’ direct provision of public goods and services with administrative management of contracts with private organizations.

Government policy—and, especially, poverty policy—is today governed by the administrative structure developed by those 1960s and 70s policymakers. That structure can be described in a variety of ways: private federalism, creative federalism, privatized exclusion. It’s federalist because it combines top-down policy-making with decentralized state and municipal administration. It’s private because it delivers services through non-public nonprofit organizations and draws on funds from private foundations. It’s exclusionary because it is rooted in scarcity and employs competitive grantmaking to select particular organizations and neighborhoods over others.

Some government and philanthropic administrators intended sponsorship of neighborhood nonprofits to correct the harms of top-down, displacement-driving urban renewal projects. But that approach, ultimately, has pitted nonprofits against each other in a struggle for short-term grant funding and, as a result, constrained them politically.

In place of a politics focused on addressing the root causes of poverty through direct investment in fundamental public goods, the emphasis on engaging nonprofits has promoted a systems-change model that’s focused on how social welfare is funded, administered, and delivered, rather than what is being delivered.

Having worked for over a decade in the New York City public and nonprofit sectors, I have seen how much public and philanthropic funding is focused on addressing the symptoms of poverty rather than its underlying causes, trapping people in a perpetual client relationship with social service providers. And I have also seen how a focus on “community participation” can undermine—and even co-opt—more direct forms of political organizing around economic and social interests that cut across urban neighborhoods.

“Community-based” and “participatory” are the watchwords of our philanthropic and nonprofit age. Foundations, social sector leaders, and activists tout these commitments as innovative and the path to delivering justice. The Ford Foundation highlights “participatory grantmaking” as a philanthropic practice that has “been increasingly receiving interest in the past two years” and “deserves continued attention.” Similarly, the Open Society Foundations market “community-based services” and partnerships with “community-based organizations” as central to many of their US programmatic ventures.

Self-described community-based participatory research and design processes promise people a chance at shaping their own lives. At their best, they bring people who are affected by particular policies, or who have direct experience of particular programs, into decision-making processes, which, ideally, produce more effective and equitable services. More often, however, such processes identify needs that are either too fundamental for a particular program to address or too vague to be of any use in shaping better policy.

Contemporary top-down, monied interest in “community participation” is today promoted as “innovative.” But, as Dunning’s book shows, that interest is not new. Commitment to participation has been central in shaping the governance of public and foundation-funded poverty programs, beginning with the War on Poverty. And it reflects deeply-rooted views of racial representation and social innovation, which prize changes in process over changes in substance.

Neighborhood nonprofits became vehicles for debt-financed economic development projects, moving even further away from direct provision of public goods and services.

In the early 1960s, federal urban renewal policy was reworked in response to public criticism of what James Baldwin accurately described as “Negro removal.” Under President Kennedy, the federal government incentivized local agencies to work with community organizations on their renewal plans in an effort to avoid the displacement of whole communities. Later, President Johnson’s War on Poverty extended this engagement with nonprofit organizations to the delivery of health, education, and other welfare services. Most significantly, Johnson’s Model Cities program established a direct administrative and financial relationship between the federal government and those types of organizations.

This created “nonprofit neighborhoods,” which Dunning defines as “places where neighborhood-based nonprofit organizations controlled access to the levers of political, economic, and social power and mediated the local manifestations of the state and market.” In drawing our attention to the importance of those places, she emphasizes the way the neighborhood emerged as an important site of governance, and looks “beyond individual organizations and beyond distinct policy arenas of housing or social services to underscore the structural embedding of nonprofits in urban governance.” Dunning’s detailed account of how this played out in Boston—one of the first cities to win federal grants for community organizations and a model for federal programs as they evolved—illuminates both the promise and the long-term consequences of this approach.

The central legislation of the War on Poverty was the Economic Opportunity Act, which launched the Community Action Program. This 1964 program formalized the federal government’s investment in new and existing nonprofit organizations, in both urban and rural communities. The legislation also charged that these investments would be made with the “maximum feasible participation of the poor.”

Though legislators had included that phrase offhandedly, local activists took them at their word. Fighting for a seat at the policy-making table, activists ultimately were able to secure legislative amendments requiring one third of grantee organization boards to be made up of poor people. This victory was more than just symbolic. In some instances, it enabled neighborhood residents and community leaders to shape plans for housing and commercial development, or to design and provide welfare services in a way that increased residents’ trust in service organizations and made it easier for them to access essential services.

But in the long run, those successes were the exception rather than the rule. Instead, this new model—a federally funded and administered urban governance structure that delivered services through neighborhood nonprofits—ultimately brokered public participation and access to services through organizations that were financially dependent and, as a result, politically inhibited. Moreover, as Dunning puts it, “this circumventing of actual political power in favor of a version mediated by private, nonprofit organizations was precisely what enabled nonprofit neighborhoods to exist.”

In Boston, the city set up a department to oversee the federal programs and monitor nonprofit grantees, as well as a board that included nonprofit representatives with the authority to approve contracts. Those nonprofits engaged in a variety of activities: from running processes to engage neighborhood residents in planning for neighborhoods slated for urban renewal; to administering food assistance, early childhood education, health care, and legal service programs; to running programs focused on addressing the “culture” of poverty. They also advocated for particular municipal investments in neighborhood infrastructure, but, when they addressed housing, it was typically through middle class home rehab programs as part of urban renewal, rather than the construction of public or other affordable housing.

In the mid-1970s, the federal government consolidated funding for urban renewal, Model Cities, water and sewers, historical preservation, and rehabilitation loans into a single block grant, which was then doled out in smaller grants at the local level. Dunning convincingly argues that Johnson’s “liberal version of devolution and decentralization” laid the foundation for Nixon to experiment with block grants, revenue sharing, and other mechanisms “that solidified the federal government’s retreat from American cities.”

Ultimately, that retreat culminated in the creation of the community development corporation (CDC) as the vehicle for urban economic development. CDCs were, moreover, an outgrowth of “nonprofit neighborhoods”: they were established as nonprofits; sometimes run and staffed by people who had worked in other government and philanthropically funded organizations; and as property-holding organizations, were presented as a form of the community control that Black activists had fought for in the 1960s.

With community development lending requirements for financial institutions and grants to CDCs, the 1977 Community Reinvestment Act and Neighborhood Reinvestment Corporation made the CDC strategy federal. As part of a broader reconfiguration of state economic policy to drive development, Massachusetts created intermediary organizations to channel public capital to nonprofit community developers. The Ford Foundation structured a portion of its working capital as loans and other financing vehicles, paid in part through an independent nonprofit, Local Initiatives Support Corporation, which supported revenue-generating projects and pressured CDCs to prioritize financial goals over political ones.

In this way, neighborhood nonprofits became vehicles for debt-financed economic development projects, moving even further away from direct provision of public goods and services.


Failed Infrastructure Is Failed Politics

By Joanne Randa Nucho

Dunning demonstrates how nonprofit neighborhoods were circumscribed in ways that undermined the possibility of structural economic improvement. Municipal government became a grant manager, rather than direct provider of public goods, and nonprofits had to compete for federal grant funding, constraining political activism explicitly and implicitly.

All that seems right. But it’s also useful to show how Dunning’s analysis fits into a broader story: how welfare expansion has been deployed as an alternative to economic transformation.

As political scientists Frances Fox Piven and Richard Cloward have argued, the expansion of government-funded welfare has historically been a response to a rise in or fear of political unrest. In the 1960s, the federal government hired thousands of social workers and lawyers who helped people apply for relief, and this happened in the cities where political turmoil was the greatest.1 Moreover, historian Karen Ferguson—who focuses more than Dunning on the relationship between the federal government and philanthropy in this period—emphasizes how the Ford Foundation saw ensuring social stability as an explicit goal of its domestic program. This program was run by men who believed in a well-engineered “welfare-market-society” free from political interference, and who, in turn, designed and funded a lot of what became the War on Poverty.2

Some Great Society staff did see reform of local government as their real charge. Still, they ultimately reformed local administration in a way that was politically manageable, and stopped short of challenging the political constituencies that had a stake in maintaining control over public goods like housing, healthcare, and education. As Piven and Cloward put it:

To have acceded to some of the demands of blacks—a halt to urban renewal, integrated schools, access to white neighborhoods, apprenticeships in white unions, and the like—would doubtless have spelled the demise of many political leaders tied to traditional white constituencies, so blacks got few concessions in these areas. What they did begin to get was more relief benefits: more people began to apply for relief, and more of those who applied were admitted to the rolls.3

Furthermore, federal and local administrators’ focus on community development and participation was shaped by a social science-driven, pathologizing response to the economic problems of poor Black neighborhoods, which in turn directed and constrained the politics of their neighborhood grantees. In the 1960s, the Ford Foundation promoted the continued isolation of the Black urban poor, so that they could achieve the necessary “social development” to be assimilated into the mainstream American economy. They also created the idea of community action agencies and saw grassroots participation as, in Ferguson’s words, “a kind of necessary group therapy initiated by outside experts for neighborhood people otherwise unable to think and act on their own behalf.”4

This intersected for a time with the Black Power Movement’s goals of racial separatism and the development of Black leadership, and Ford supported short-lived demonstration projects for community control of a number of New York City school districts. But those projects exposed the weakness of “social development through participatory democracy” within impoverished, postindustrial communities. Residents often had little time to show up to school meetings and, in some neighborhoods, were both more transitory and less supportive of cultural education than activists acknowledged. Moreover, as soon as Ford experienced pushback on the more radical aspects of their partners’ work, they retreated, letting the demonstrations fail.5

This experience laid the groundwork for Ford’s turn to the CDC as a way of reorienting its, and the federal government’s, work in urban neighborhoods. Above all, Ford saw CDCs as way of developing Black leadership outside of the volatility and uncertain coalition building of political processes. The whole federal and philanthropic project of urban community development was ultimately justified in terms of the cultivation of these “public entrepreneurs,” as there was little evidence of material economic improvement in the neighborhoods into which public and philanthropic funds had flowed.

Dunning uses the example of Black community activist and Boston politician Mel King to illustrate how even activists who had a clearer structural analysis of the economic problems of their neighborhoods were ultimately compelled to align themselves with the government’s funding priorities. When King started out, he worked at a youth employment organization, saw that it was a problem that he could only place youth in badly-paid restaurant or hospital jobs, and advocated for active job creation, apprenticeship programs, and service industry pay and stability protections. But later, as a state representative, King focused primarily on expanding state support for CDCs.

King’s shift was symptomatic of how the War on Poverty redirected employment policy in a way that circumscribed all subsequent policy debates. As political scientist Margaret Weir explains, employment policy was subsumed under federal poverty programs, which offered job readiness training disconnected from the needs of the labor market and functioned as income maintenance programs.

Community action programs became, in effect, separate institutions for the Black urban poor, inadequate to doing more than just local service delivery.6 Worst of all, as a result of racist stigmas, these programs received insufficient political support7 and, as limited service programs, hindered public understanding of the deeper causes of Black poverty. In that way, the shift away from government programs to nonprofit grants didn’t just fail to win the war on poverty, it made it harder to see and diagnose the very sources of that failure.

Dunning’s history helps us see how the federal government’s administrative structure for anti-poverty programs—theorized by social science–driven philanthropists and established by public policymakers—ultimately served to perpetuate urban poverty.

The orientation towards participation was officially meant to make social services more accountable to those served, but it actually insulated the administration of social welfare from genuine political accountability. Neighborhoods found themselves trapped between an array of private organizations running pseudo-democratic processes and a remote and unaccountable federal and philanthropic bureaucracy. Moreover, although the orientation towards neighborhoods overlapped for a time with Black activists’ demand for self-governance, it ultimately and systematically undercut their and others’ most radical aims, which focused not on community control of urban neighborhoods but on breaking down barriers to broader labor and housing markets.

The public solution to poverty and to a lack of political accountability is not to build better nonprofits. It is, rather, to build a functioning public sector that invests in public goods, in order to address the exclusionary structures that create poor neighborhoods. Participatory grantmaking cannot make that possible. It’s a political demand we must make of our government.


This article was commissioned by Sophie Gonick. icon

  1. Frances Fox Piven and Richard A. Cloward. Regulating the Poor: The Functions of Public Welfare. (New York: Vintage Books, 1993), 198.
  2. Ferguson, Karen. Top Down: The Ford Foundation, Black Power, and the Reinvention of Racial Liberalism. (Philadelphia: University of Pennsylvania Press, 2013).
  3. Piven and Cloward, 242.
  4. Ferguson, 60.
  5. Ferguson, 132-165.
  6. Weir, Margaret. Politics and Jobs: The Boundaries of Employment Policy. (Princeton, NJ: Princeton University Press, 1992), 75-78.
  7. Weir, 63 & 98.
Featured image: Frank J. Aleksandrowicz, Model Cities Building at 55th & Cedar Streets. Photograph courtesy of Wikimedia Commons (CC BY 1.0).