Running head: PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH Promoting Effective Public Service through the Third Sector of the Economy: Engagement of Nonprofits in the Housing Market of Metropolitan Louisville Kentucky Joshua O Odetunde Ph.D. Student Department of Public Policy & Administration Walden University Minneapolis, Minnesota
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 2 Promoting Effective Public Service through the Third Sector of the Economy: Engagement of Nonprofits in the Housing Market of Metropolitan Louisville Kentucky Joshua O. Odetunde, Ph. D. Student October 2, 2015 Presented at the third of four panels on Nonprofit Leadership and Management at the Southeastern Conference on Public Administration (SECoPA), North Charleston, SC., September 30 October 3, 2015. Joshua O. Odetunde is Ph. D. student in the Department of Public Policy & Administration, Walden University Minneapolis, MN. Contact me at joshuatunde@gmail.com. While this paper is largely based on completed dissertation yet to be published, the paper has not been vetted or edited by any faculty in the University. It is being posted on Research gate as working paper for peer critiques and comments. Abstract Based on findings from researching the engagement of the nonprofits in metropolitan Louisville housing market, it is argued that a more effective public service such as affordable housing could be promoted through the third sector of the economy using the nonprofits as policy instruments. However, it is essential to recognize and understand the role of the nonprofits as the third sector in the market economy. While the boundaries among the public, private, and third sectors in market economies could remain a contested arena, the impact of disregarding the third sector on low-income households in the current local housing market is significant. Instead, they could also be empowered to gain access into more efficient market for social change.
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 3 Promoting Effective Public Service through the Third Sector of the Economy Recognizing and understanding the third sector of the economy is essential to effectively promote public service through the nonprofits as public policy implementation instruments, particularly in the housing market. Public policy instruments involve using economic tools and regulations for implementation. The economic implications of those tools and the interpretations of those regulations are not only understood differently by individuals, they are understood differently in various areas of knowledge and in various contexts. Thus, they are commonly treated as part of a rationality of methods without any autonomous meaning (Lascoumes & Gales, 2007, p. 1). In other words, methods or strategies developed to implement public policies are commonly based on assumed interpretation of regulations and assumed economic implications in terms of social control. It is assumed that people who will be affected by the public policy will respond in certain economically rational or socially acceptable way. Also, the usual assumption is that public servants to be involved in the implementation process have public service motivation so that the policy instrument provides the means for achieving the public policy goal. Therefore, it is reasonable to conceptualize any public policy instrument developed in any field of study as a condensed form of knowledge about social control and ways of exercising it (Lascoumes & Gales, 2007, p. 1). Hence, attempts to privatize public service delivery in the New Public Management (NPM) have taken various forms while raising various public concerns because economic implications and regulatory needs are understood differently depending on the context (Sedjari, 2004). Public concerns have been about accountability, efficiency, costs, effectiveness, performance, social justice, or the nature of the policy instrument besides the public policy goal itself (Acar, Guo,& Young, 2008;
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 4 Fernandez, 2009; Bilik, 1990; and Demirag & Khadaroo, 2008). Greene (2007) argued that the transfer of some types of government services to the nonprofit sector for implementation holds great potential for the improvement of service delivery (p. 2) if a number of supportive conditions are in place. However, it has been found that privatization research lacks understanding the nature and scope of informal service delivery relationships between nonprofits and local government (Gazley, 2008, p. 141). This lack of understanding is particularly reflected in the metropolitan Louisville housing market. It has long been understood that individual household can only gain access into the local housing market through some sort of communal efforts. Thus, in the United States housing finance system (HFS) has evolved from an informal communal arrangement to one of the most well-functioning and extensive financial intermediation systems in the world (Integrated Financial Engineering, Inc., 2006, p. 2). It has become the public policy in the United States for households to gain access into their local housing markets through mortgage loan assistance programs (Greenspan, 2011) but not every household could be carried along. This leveraging approach to boost housing supply in the market was reinforced by the establishment of Fannie Mae in 1938 and Freddie Mac in 1970 (Pickert, 2008). In the Housing Act of 1949, a decent home for every American family was the declared goal. A decent home was not to be the exclusive right of families with certain levels of income. However, millions of low-income families depending on rental homes are either living in public housing, on public subsidies, occupying inadequate housing, or homeless. This is because they are in the same housing market with a cross-section of American families who are either in some protected classes or who are not necessarily on low-incomes (Alexander, et. al., 2011). At the
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 5 same time, a significant number of foreclosures, often resulting in vacant or abandoned housing units annually, have become a problematic feature of metropolitan Louisville housing market (Metropolitan Housing Coalition, 2011). It is aptly stated that the housing needs of low-income families and vulnerable populations occur (and must be addressed) in the context of the larger housing market (What Works Collaborative 2012, p. 2). Also, it is clearly stated in the history of Habitat for Humanity that what the poor needs is not charity but capital, not caseworkers but co-workers (Habitat for Humanity, 2010, para. 3). Every household should be empowered to gain access into the local housing market to acquire the capital asset in order to ensure social justice based on the historical evolution of housing finance system. However, despite significant engagement of the nonprofits, affordability and efficiency of the local housing markets remain major housing issues in 2015 because the nonprofit role as the third sector of the economy is commonly misconceived or not recognized. The sector is misconceived both by the nonprofit organizations and the public sector or governments attempting to use them as public policy instruments to complement public policy. This misconception is reflected in the gross inefficiency of the local housing market in terms of supply and demand. Sanchez (2015) pointed out that economic trends and housing finance practices reinforce long standing neighborhood segregation (p. 782) across the United States. The issues of neighborhood segregation in the local housing market are multi-dimensional because housing needs and land management issues in terms of supply and demand are involved. Jois (2007) argued that policy makers must recognize the linkage between urban policy, affordable housing, civic participation, and American democracy in order to successfully increase both affordable housing and civic engagement (p. 2). The linkage is land management
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 6 that must include all aspects of its use, value, development, and tenure (Enemark, 2009) in the context of the local housing market. Nonprofit organizations seeking to ensure social justice in the local housing market have to deal with those basic aspects of land management to be effective as the third sector of the economy. To the contrary, however, it was found in exploring the role of nonprofit organizations in metropolitan Louisville housing market that they are not effectively engaged to complement public policy as the third sector of the economy. Odetunde (2015) found that all nonprofit organizations take government grants as contractors, like any other private establishment, to produce affordable housing. Rather than leveraging low-income households to gain access into the local housing market through innovative leasehold arrangements among the households, nonprofits are still focusing on developing programs to subsidize those households. Ironically, homelessness and inadequate housing persist among low-income households at the same time with significant number of foreclosures often resulting in vacant or abandoned housing units in the local housing market. In the nonprofit sector, the local housing market is commonly conceptualized in terms of market-rate and subsidized housing units instead of being conceptualized in terms of demand and supply for housing as capital assets. Nonprofits are not effectively engaged as the third sector of the economy to complement public policy due to the ambivalent dichotomous concept of the local housing market. The ambivalent concept of the local housing market is reinforced by the large gap in literature about the complementary role of the nonprofits as the third sector of the economy. Generally, the macro-economic and micro-economic aspects of the local housing market are hardly linked in public policy literatures. Public policy in the housing market has not been
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 7 identified as a subject matter (Odetunde, 2015). Conceptual understanding of the local housing market as the market for housing as capital assets among the households has not been developed in literatures or in practice. With these gaps in literature the local housing market continued to be conceptualized in terms of market rate and subsidized housing units. Low-income households are restricted to rental housing market or left to depend on public subsidies without the complementary role of the nonprofits as the third sector of the economy to ensure social justice. Thus, the research question had to focus on how the housing assistance programs and services of the nonprofit organizations are also empowering the low-income households in practice. An exploratory case study approach had to be used across nonprofit organizations providing various forms of housing assistance programs and services to low-income households (Odetunde, 2015). There is no program or service encouraging building and preservation of home-equities for affordable leasehold arrangements among the households in the local housing market. All nonprofit programs and services continued to reinforce the prevailing dichotomous housing market comprising of market-rate and subsidized housing units as if low-income households are excluded from being empowered to gain access into the market. Yet, the public subsidies some of the low-income households receive are not entitlements (Mierzwa, Nelson & Newburger, 2011). Public subsidy programs do not empower low-income households as active participants in the local housing market. Recognizing the complementary role of the nonprofits as the third sector of the economy is the key to promoting effective public policy of affordable housing for low-income households in the housing market of metropolitan Louisville Kentucky. Local housing markets in the United States evolved from informal communal arrangements among households leveraging one another
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 8 to acquire housing as capital assets into the public policy of guaranteed low interest rate mortgage loans. Policy makers could and should conceptualize injection of fund into the housing market as no more than stimulating the communal economic activities. It is not to encourage profiteering as in the larger context of the stock market but to encourage leveraging one another to acquire housing as capital assets. The declared goal in the Housing Act of 1949 is for every American family to have a home. It is certainly not public policy that homeownership should be the exclusive right of households with certain levels of income and even credit worthiness. However, this has inadvertently become the common assumption in the nonprofit sector and even among scholar-practitioners in the housing market. Therefore, promoting effective public service that ensures social justice for every household in the local housing market requires recognizing and encouraging the complementary role of the local nonprofits as the third sector of the economy. The third sector of the economy is indispensable to reconcile the national culture of individualism, competition and personal achievement with empowerment of the community through active participation of every household in a more efficient local housing the market. Low-income households could be empowered when there are various innovative and affordable leasehold arrangements for negotiation in the local housing market. A duly constituted nonprofit social enterprise with professional capacities could bring about positive changes in the local housing market. Although nonprofits are often classified with the private sector (Xu & Morgan, 2012) in the new public management, they can be distinguished from the sector. While nonprofit could operate profitably like private business, such profits are normally used to further the mission of the nonprofits if duly constituted. While the boundaries between the market and the
PROMOTING EFFECTIVE PUBLIC SERVICE THROUGH 9 state like the boundaries between private for-profit businesses and nonprofit social enterprises could remain contested, there are pragmatic reasons to recognize and understand the third sector of the economy for promoting effective public service in affordable housing.
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