Develop resilient, and self-sufficient financing arrangements

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Develop Resilient and Self-Sufficient Financing Arrangements

The ambition

Many community-led initiatives for sustainable and just cities rely on public funding (subsidies, grants etc) to carry out their activities. But changing political priorities and economic crises can restrict this funding. Developing a financial arrangement that contains a well thought-out value proposition, delivery, and capture, as well as considering the model’s risks, such as being tied to single sources of funding, will make them more resilient in the face of austerity. However, this is no easy task, since many of community-led projects serve low-income residents and cannot rely on them to finance it. Additionally, since funding sources and business models (often) also reflect the values of the organization using them, community-led organizations and projects may have to think carefully about accepting funding from bigger institutions, as it potentially may conflict with their own political views and environmental and societal goals. But high quality interventions can also be relatively low-cost, both in start-up costs or in upkeep, which reduces risk of investment without reducing potential positive impact.


Examples

Repowering, London

Inner-city community energy in London: After the steep decline and cancellation of the FIT subsidy for community energy, Repowering sought out alternatives such as private investment and conducted pilot projects for a peer-to-peer energy trading system (Q24). Repowering took measures to reduce exclusion of low-income residents and energy beneficiaries by keeping the threshold investment for members relatively low, around £50. By making the project more inclusive with low barriers to entry, community workshops, and open general meetings, they were also able to increase their community basis and strengthen their community funding sources. They also created a Community Energy Efficiency fund for non-investors, further increasing alternative revenue streams (Q16b).

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Foodsharing, Berlin

Foodsharing is run by unpaid volunteers, including developers, foodshares and foodsavers and refuses any public funding or subsidies. Relying on their own ressources is part of the political line of the organization as it tries to operate without financial transaction. Foodsharing members promote the “free”.

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Community Land Trust, Brussels

Community-led affordable housing in Brussels: Although CLTB faces obstacles in growing their budget in tandem with their organization, their revenue streams are highly diverse and thus could be resilient enough to maintain stability if one funding source dries up. While 40% of their budget relies on government subsidies, the other 60% comes from a variety of grants, household mortgages, membership fees, ground leases, crowdfunding, and donations (Q21). Importantly, CLTB launched the cooperative “Common Ground” [1] in January 2021, which partners with the social economy sector to attract private and citizen finance for land purchases and management under the CLT model. Finally, the CLTB’s first project was their pilot, but with a business model proven successful they can be eligible for additional, long-term support.

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Superblocks, Barcelona

Superblocks in Barcelona: The Superblocks interventions are seen as a relatively low-cost, high-impact initiative (Q25). The highest expenditures were attributed to upfront costs for construction and reworking city transport, with little additional costs for maintenance. Furthermore, because the Superblocks project is embedded in many other sustainability and development plans in Barcelona, their funding source is relatively secure (Q26a).

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For interesting examples of business models for Nature Based Solutions, see the NATURVATION project’s Business Model Catalogue [2].

Relation to justice in urban sustainability governance

Developing resilient and self-sufficient financial arrangements for urban sustainability and justice initiatives may address the consequences of Unquestioned Neoliberal growth and austerity urbanism, a driver of injustice previously explored by UrbanA. This refers to processes of privatization, commercialization, budget cuts and state withdrawal from various sectors. While this arrangement does not address the root causes of neoliberal austerity urbanism, it may lessen its impact on urban sustainability and justice by enabling initiatives to remain financially viable and therefore to continue their operations. However, special care will need to be taken to ensure that these financial schemes do not exclude low-income groups who cannot afford to pay for the benefits of the initiative themselves and are of little relevance to potential sponsors.

Critical reflection

While developing a financial arrangement that is able to remain viable amongst public funding cuts and other ripple effects of economic crises may make an initiative more resilient and therefore able to continue delivering its benefits to communities, it may set a precedent for underfunding similar initiatives, thus downplaying responsibility for collective welfare. In other words, public authorities may be tempted to limit public funding and support in the future if they see that organizations can “make it on their own”. This could in turn reinforce the driver of injustice which the arrangement is trying to circumnavigate. There is also a risk that projects in low-income communities cannot afford to financially support initiatives nor gain the necessary start-up investment if the project is untested. Community members may be hesitant to invest in a project without a sense of trust that they will receive a return-on-investment.

Examples

Repowering, London

Inner-city community energy in London: One notable obstacle was the difficulty raising funds (£58,000) for BES1 from community members. Since it was a new project, with no track record, individuals were hesitant to invest. Additionally, while many made pledges, this proved not to be a reliable indicator of actual financial support. Once BES1 was established, it was easier to find investors for the others because the community had more trust in the organization and had seen an instance of success (Q23d).

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Covid-19 connection/How does this enabling arrangement play out under the conditions of a pandemic?

The Covid-19 crisis has highlighted the importance of developing resilient financial arrangements for any initiative. In such a crisis, sources of funding are directed to new immediate priorities, such as health care and social supports, meanwhile governments around the world wrack up huge debts. In the long-run economic recovery stimulus may be positive for urban sustainability and justice initiatives if it is directed towards a just green recovery (check out Carbon Brief’s tracking of green recovery plans [3]).