Study: Inner-city economies are undervalued

Persuading grocery stores, banks, movie theaters and chain restaurants to open in inner-city neighborhoods has typically been a tough sell.

Many aren't convinced that there's enough population and purchasing power to justify the business investment.

New research from Social Compact, a Washington, D.C., nonprofit group, may finally dispel those myths. Social Compact's study of Miami's Liberty City, Overtown, Wynwood, Allapattah and Little Haiti found a population that is 39 percent larger and an average household income that is 29 percent higher than traditional data sources show. The research group also found that Miami's informal economy accounts for $183.6 million, or 11.6 percent of the total household income within the study area.

These numbers confirm what community leaders in South Florida and other areas nationwide have long suspected: The U.S. Census and other traditional data sources don't present an accurate picture of the economy in inner-city neighborhoods.

The reason for the undercount includes things like multiple families living in one apartment or people who work off the books and pay bills in cash.

''The numbers we found all point to the vitality of Miami,'' said John Talmage, chief executive of Social Compact, whose Miami research was partially funded by the John S. and James L. Knight Foundation. ``These neighborhoods have the density and the income to support significant additional retail.''

''The challenge is to make sure it's investment that supports the needs of the existing community,'' Talmage said. ``We don't want these numbers to be used to displace people.''


Social Compact's findings are critical because it is population and purchasing power that developers, retailers and banks use in calculating whether to invest in these areas.

''You know intuitively that the market is there,'' said Barbara Romani, community relations director for Citibank Florida. But ``nobody is going to make major business decisions based on that. You need facts.''

While Social Compact has performed similar research in 10 other communities, the percentage of undercounted residents in Miami was greater than anywhere else across the country.

A key reason is that Miami's rising housing costs have forced multiple families or generations of the same family to live in one apartment or house. The study found that the average household size in the area is 3.47 people, compared with 2.88 found by the market research firm Claritas using Census data.

Another factor: the large population of both immigrants and African-Americans, which tend to historically be undercounted by the Census. Plus, there's been the recent building boom in Miami's urban core.

''Other cities will see one or two of these factors,'' Talmage said. ``We've never seen all those factors come together like they have in Miami.''

Social Compact's numbers are derived from a ''drill-down'' methodology that combines dozens of wide-ranging data sources to provide an insightful and localized picture of a neighborhood. The Miami project, which began last fall, included the analysis of 36 databases of things such as building permits, property records, driver's licenses, utility records and credit bureau reports.

What the research also found is that even though the services in their communities are lacking, these residents spend money. Social Compact found that those living in the study area spent $1.5 billion in 2006, and almost half of that was on retail.

''There is a perception that people in lower-income communities don't have disposable income,'' said Debra Sinkle Kolsky, president of Redevco, the developer and owner of the Shoppes at Liberty City. ``The reality is they don't have debt, which gives them more liquidity to spend on basic needs. This will help dispel a lot of those myths.''

Miami city leaders agree, which is why they are excited about using Social Compact's findings as a catalyst for driving major change.

''I'm ready to begin a traveling show to sell the retailers and the business community about investing in these neighborhoods,'' Miami Mayor Manny Diaz said. ``It's a tremendous untapped resource that exists in these communities. There is an opportunity for these neighborhoods to see the kind of economic activity we've been seeing in the rest of the community.''

Diaz is so bullish on Social Compact's research that he has convinced the group to go back and expand its research this summer to include the entire city. Talmage is also going to serve as an unpaid advisor to Diaz regarding economic development.

The hope is that if the findings are consistent, there will be enough data to warrant a Census challenge. Talmage estimates Miami could have 150,000 uncounted.


Since its first study in 1999 in Chicago, Social Compact has done similar research in other U.S. cities, including New York, Houston, Jacksonville, Detroit, Cleveland and Oakland. Not including Miami, they've documented 650,000 uncounted residents and $18.2 billion in uncounted aggregate income. The results have led to investments including retail development, new bank branches and more small-business lending.

In Houston, the research spurred more than $50 million in redevelopment of the city's oldest mall, which was more than halfway empty and has been revitalized with big-box retailers. In Harlem, Fleet Bank decided to open two bank branches and three ATM centers, plus increase its small-business lending.

But in Miami, Social Compact hopes to be able to take things even further.

For the first time, the organization will stick around for the next year to work with the city and businesses to help use these numbers to spur investment.

''For the first time, there is an active movement to see things change in my district, and people are inspired by that,'' said Miami City Commissioner Michelle Spence-Jones, whose district includes the study area. ``Overtown and Liberty City have been at a standstill for so long. It's time for something to happen.''