By Maria Saporta
As published in the Atlanta Business Chronicle on October 6, 2017
OMAHA – Hundreds of people gathered from Oct. 2-4 here in the hometown of famed billionaire investor Warren Buffett to review the accomplishments of Atlanta-based Purpose Built Communities and preview its future efforts.
Buffett told the 500 attendees at the 8th annual Purpose Built conference how he was hesitant when Atlanta real estate developer Tom Cousins first approached him years ago to be an investor in the redevelopment of Atlanta’s East Lake community.
“I was skeptical, but you never want to underestimate Tom Cousins,” Buffett said. “He’s been going around like Johnny Appleseed… He has resurrected neighborhoods. There’s no one I would rather partner with.”
Buffett, Cousins and Julian Robertson co-founded Purpose Built Communities, an effort to take the East Lake formula and replicate it all over the United States. The three investors gave $25 million over five years to cover the costs of Purpose Built, and they recently renewed their commitment for another five years.
Purpose Built provides consulting services free of charge to communities that want to undergo a complete transformation from poverty to opportunity. So far, Purpose Built has 18 communities in its network. Only one city has two network members – Atlanta, which has the oldest community (East Lake) and the newest (Grove Park). But Purpose Built is working with a total of 26 communities, including eight that are prospects to join the network. Representatives from 53 interested cities attended the Omaha conference, according to Carol Naughton, president of Purpose Built.
“It’s really caught on in the last couple of years,” Buffett said. “Purpose Built is a far easier sell now than it was when it first started. It has accelerated.”
Purpose Built focuses on communities where more than 40 percent of the population is living below the poverty line. “We think there are 825 highly distressed urban neighborhoods in the United States,” Naughton said. “Location matters. If you are born poor in America, you are likely going to stay poor. Neighborhoods and racial inequality are connected. People are stuck in one place.”
So Purpose Built has been working on a strategy to break that cycle:
- It concentrates its efforts in a small geographic area;
- It replaces concentrated low-income housing with mixed income housing;
- It provides a quality cradle-to-college educational pipeline;
- It promotes community wellness – health of the residents and an improved quality of life; and
- It helps identify a community quarterback (an individual or an organization) that will work on the redevelopment over the long-term.
No city is doing a better job than Omaha, Naughton said. The Purpose Built community in Omaha is called 75 North – named for the highway that divided the area in the 1980s. Thomas Warren, chairman of 75 North, explained that people going to the airport previously had to pass through the neighborhood, so they decided to build a highway so they could avoid the area. “When the highway was constructed, it displaced 27,000 residents, and it segregated the city,” Warren said of the community that had a public housing project similar to East Lake yet was only a mile away from downtown. “We realized we could replicate the Purpose Built model here in Omaha.”
The board of 75 North includes Susan A. “Susie” Buffett, Warren Buffett’s daughter. She chairs the Sherwood Foundation, which has been the key financial backer of 75 North since it joined the Purpose Built network in 2011. Othello Meadows, president and CEO of 75 North, said 62 percent of the organization’s funding comes from philanthropy. “There are not a lot of public funds available in Omaha,” Meadows explained.
The money from the Sherwood Foundation is only part of the story. Meadows said the most important contribution has been the Foundation’s willingness to take risks and to quickly respond to opportunities. “Susie Buffett was super flexible,” he said. A mixed-use, mixed-income development known as the Highlander, being developed by the Brinshore firm, is under construction with the first phase opening up earlier this year.
Of the 101 apartments, 39 are being leased at market rate while 31 are being rented for less than 60 percent of the “area median income” and 31 percent are being leased for less than 50 percent. Eventually there will be 300 units as well as a business incubator and a community greenhouse.
Rich Sciortino, a principal of Brinshore, said Purpose Built has found the right ingredients to break the cycle of poverty.
“It is immensely difficult to change people’s lives once they’ve become parents,” Sciortino said. “We are hoping this mixed-income environment is breaking the chain for the next generation. Hopefully it will change the dynamics going forward.”
Buffett said the old public housing model did not work. But the Purpose Built model works because there’s racial diversity and income diversity, and there is no stigma for the people living in the community. “It’s a holistic solution,” Buffett said. “Schools empower a neighborhood. Children see people going off to work every day. When you have role models, you see the world with different eyes.”
Purpose Built also is aware that revitalizing a community can lead to gentrification. “In cities that are growing like Atlanta, gentrification is a concern,” Sciortino said. “In cities that are shrinking, gentrification is not really an issue.”
But he said there’s a “tipping point” when revitalization turns into gentrification. “We are trying to protect against gentrification,” Meadows said. “We bought as many lots and vacant properties as quickly as we could.”
“We are really proud of what we accomplished so far,” Meadows said, “but we have not even begun to scratch the surface.’
For Buffett, his support of Purpose Built fits in with his business philosophy. “I fund successful ideas. That works in business, and that carries over to philanthropy as well,” Buffett said. “It doesn’t happen overnight. You have to work a long time on this… But there’s a very positive message. Lots of kids will have a dramatically better chance to live healthy, productive lives because of Purpose Built.”