Davenport Institute

Research Reports

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Common Paths: Connecting Metropolitan Inner City Opportunities

Thomas Tseng

May 1999

IV. SOUTH LOS ANGELES: BEYOND THE PERCEPTIONS

Among the collective imagination of mainstream society, the name South Central Los Angeles evokes images of crime, gangs, unemployment, blight, riots, and uneasy racial tensions. Not surprisingly, these images are overwhelmingly negative. To many, South Central Los Angeles is the epitome of the inner-city ghetto.¹² Distorted in part by the media and popular culture, representations of South Central LA consistently reflect a bleak, despairing view of the neighborhoods and communities that comprise the area.

This image of a ravaged, destitute ghetto, however, is an inadequate portrayal of the real conditions experienced by residents and businesses in South Los Angeles neighborhoods. Based on a deficit-oriented view, it excludes many of the positive characteristics and features existing in the area. The predominant, onesided view of South LA as only a troubled community, to the omission of its positive aspects, undermines the real capacities and potential that exist in the area.

Although it is usually discussed as a single, homogeneous area, South LA is actually composed of many neighborhoods and communities, each with unique characteristics, attributes, and textures. Crenshaw, Hyde Park, Morningside Park, Watts, Florence, Compton, Inglewood, and many other South LA neighborhoods and districts comprise a rich tapestry of communities that have historically been the center of L.A.'s African American culture—and now increasingly Latino as well.¹³

Descriptive Changes in South Los Angeles

According to current estimates, South Los Angeles is composed of approximately one million residents.¹⁴ As defined here, the area covers seventy-seven square miles and contains an extremely dense population. Contrasted to the entire county, South LA is nearly six times as dense with 12,400 people per square mile, compared to 2,200 in Los Angeles County.¹⁵

Like the broader metropolitan region, South LA is an area undergoing tremendous flux. Historically, South LA has been the center of African American life and culture for thousands of black Angelenos. But over the past two decades, the area has undergone massive changes in its population and ethnic composition.

Some demographic changes of South LA include:

(1) Population Growth

Despite business/capital flight and out-migration of a large residential base, South LA has actually continued to experience substantial population growth. Between 1980 and 1990 alone, the population of South Los Angeles increased by 132,000 people. ¹⁶ This represents a growth rate of approximately 16 percent, only 2.5 percent below the countywide growth rate of 18.5 percent during the same period.

Population growth is a major distinction of South LA in comparison to other urban communities across the country. In contrast, many other urban communities around the country have experienced significant population losses from flight. For instance, in examining the population trends of four other major U.S. cities—New York, Chicago, Philadelphia, and Detroit-population declines in central/inner cities have been the norm. Considering the historical trend of out-migration by middle-class residents and relatively low levels of new land development compared to new suburban areas, this growth is astounding.

Table 2 reveals absolute population declines for New York, Chicago, Philadelphia, and Detroit from 1970 to 1996. In contrast to these declines, the table shows the growth in population within South Los Angeles during the same period.

(2) Immigration and a Growing Latino Base

The majority of the population growth has originated from massive immigration over the past thirty years from Mexico and Central America. This immigration has profoundly shaped the ethnic character of South Los Angeles. Consequently, the ethnic composition of South LA's population has transformed from a predominantly African American population to a burgeoning Latino presence. In many parts of South LA, Latino immigrants have become the majority of the population base.

From 1980 to 1990, the percentage of African Americans in the area shrank from 64 percent to 47 percent of the total population. The area lost more than 72,000 people, or 14 percent of its African American resident base. On the other hand, Hispanics rose from 23 percent to 42 percent of the area's total population in the same period. During that time, the Hispanic community added more than 216,000 people to the area, more than doubling its total population base.¹⁷

By all estimates and projections these trends are continuing. Hispanics are currently approximated to be more than 50 percent of the area's population, with African Americans dipping to below 40 percent.¹⁸

The maps (see following page) show the general demographic shifts that have occurred in South Los Angeles. The Latino community has grown to become the largest ethnic population in the area, particularly the eastern half of South LA, where its population is especially dense. As the Latino presence has increased, higher concentrations of African Americans have shifted westward or to other parts of the region.¹⁹

(3) Working Poor, Not Jobless Poor

Unlike the pervasive joblessness and unemployment faced by other inner cities across the country, many people living in South Los Angeles are actually involved in full- or nearly full-time work.²⁰ High degrees of labor force participation accompany the growing ranks of Latino immigrants. For instance, more than 80 percent of all Latino males in South Central LA are involved in the labor force.²¹

A significant number of those who live in households where the income for a family of four is less than $16,000, the federal definition of poverty, are actually working. Of those households living below the federally defined poverty line, more than half have at least someone working in the household and are engaged in full- or nearly full-time work.

Although the issue of low wages is an urgent concern, the high levels of labor force participation run contrary to perceptions that joblessness and welfare dependency dominate the area.

Challenging Perceptions: Examining the Assets

In the past, attempts to create solutions aimed at South LA fixated on the array of urban problems plaguing the area. This deficit-oriented perspective was used to highlight the woes and maladies of inner-city communities in order to bring necessary attention to these problems. Although this approach has been effective in pinpointing the challenges and often in leveraging needed support, it has also inadvertently served to stigmatize South LA communities as places primarily known for their social and civil disorder. The tendency to see only the problems has overshadowed perceptions of LA as places of livelihood and opportunity.

Increasingly, a new consciousness among concerned community stakeholders has taken hold that seeks to promote and nurture the latent assets of a community.²² This new ethos aims to unveil and support the many good things in South Los Angeles, which are rarely given the same degree of attention as the problems. Assets, those aspects that are valued by the community while at the same time adding value to it, are an integral part of the social and economic fabric of an area. In addition, they represent a base to grow upon and offer opportunities for potential growth and development.

South Los Angeles possesses substantial economic assets and opportunities upon which to build. Despite the serious challenges it faces, sizable viability and potential exist in the area's economic base. With the proper nourishment and resources, these assets can be leveraged and transformed into economic growth and prosperity.

Although many kinds of community assets exist, the following emphasizes and discusses a few of the economic assets in South LA.

• Strong Industrial Manufacturing Base

The greater Los Angeles region in general, as the largest industrial center in the country, possesses a high concentration of manufacturing within its inner-city areas. More than 15,000 manufacturing firms have been previously identified in neglected areas, which employ approximately 360,000 people.²³ This is far more than either the cities of New York or Chicago.²⁴

Despite overall declines experienced by manufacturing over the last thirty years, particularly in durable manufacturing, South Los Angeles maintains a large, resilient, and robust industrial base, which continues to be an important source of employment for numerous residents and new immigrants. Substantial concentrations of manufacturing activity exist in many parts of the area, particularly in the corridor lying between the 110 freeway and Alameda Avenue.

The 1999 Dun & Bradstreet database shows that the overall economic base of South LA includes 27,000 establishments that employ more than 310,000 people. As Table 3 shows, the most vigorous portion of the area's economic base is unquestionably in its industrial sector.

Although manufacturing companies make up just 10 percent of the area's establishments, they generate more than 84,000 jobs or 27 percent of total employment, which is second only to employment in the services sector. However, a large portion of the services sector also includes public and nonprofit establishments.²⁵ If these are not included, the services sector-including health care, business services, accounting, insurance, legal, and engineering, among others- comprises 24 percent of the employment base, just below the area's manufacturing levels.

Industrial employment is nearly equally divided between durable and nondurable goods. Some of the largest manufacturing subsectors in South LA include apparel and textiles, metals and machinery, food processing, and furniture. Although the manufacturing sector is not expected to reach the same commanding levels of employment as it once did, a surprising surge of growth has occurred over recent years in nondurables.²⁶ Led by the apparel, textile, and food processing industries, the growth of these industries has been a significant source of employment for many South LA residents, particularly for immigrant Latino workers. Manufacturing also indirectly stimulates employment in other industries through its demand for goods and services, such as transportation, warehousing, and business services.²⁷

• Large Consumer Market and Substantial Unmet Demand for Goods and Services

Despite low per capita income levels, a substantial aggregate market demand exists in South Los Angeles. Because the area contains a dense, growing population accompanied by high rates of labor force participation, aggregate disposable income levels are considerable. The high population density comprises a sizable consumer base and commands substantial purchasing power. Aggregate income levels are currently estimated to exceed $10 billion annually.²⁸

This pie is also growing. Total income for the area doubled between 1980 and 1990, as aggregate income levels rose from $4.2 billion to $8.4 billion.²⁹ Aggregate income levels are currently estimated to be $10.4 billion, and, if trends hold, they are anticipated to reach $11.8 billion by 2003.³⁰ This growth can be attributed to the aforementioned population growth, combined with significant increases in per capita income levels.

Despite the presence of a large and growing market, South LA is woefully underserved. Compared with the rest of LA County, we find that South LA, per capita, has 65 percent fewer grocery stores, 40 percent fewer banks and other financial institutions, and 20 percent fewer clothing stores.³¹ Most residents shop outside the area because many of the retail goods and services offered within the neighborhoods do not adequately meet the type of goods in demand. This is particularly true in the case of retail grocery goods, where the dearth of grocery stores in South LA generates a substantial unmet demand. In a previous RLA study conducted in 1995, residents in one targeted South LA area spent roughly $1 billion in retail grocery goods. However, it was estimated that approximately $412 million of this was spent outside the targeted market area.³²

The demand for retail grocery store goods shows there is a large, unsaturated, and underserved consumer base in South Los Angeles. Existing stores have also been inadequate in meeting the demand for ethnic goods spurred by changing demographics. The influx of immigrants of diverse nationality has created a huge niche opportunity for retailers to cater to these ethnic preferences.

A market demand not only exists for basic goods and services but for disposable goods and services as well. The overwhelming success of the Magic Johnson Theaters, opened in June 1995 at the Baldwin Hills- Crenshaw Plaza Mall, tapped into a large unmet demand for entertainment consumption. The theater ranked fourteenth in California and is among the top fifty in the country in terms of gross sales.³³ Similarly, when businesses take the time to discern the tastes and preferences of inner-city residents, they successfully tap into a significant consumer base for particular types of disposable goods and services. For instance, urban franchise concepts selling products such as athletic shoes, luxury items, and mailbox services have proven viable once a thorough examination of local consumer preferences have been determined.³⁴

• A Stable and Growing Housing Market

South Los Angeles possesses an extensive base of well-maintained, single-family neighborhoods. In many neighborhoods across South Los Angeles, there is a large stock of Craftsman-style bungalows and homes that are an important cultural asset to the community. Many of these homes have been targeted for historic preservation.³⁵

A stable housing market exists and home values have generally remained steady, despite general volatility in the region's housing market. Following the civil unrest in 1992, as home values in the region plummeted due to the recession, prices of homes in South LA remained stable.³⁶ Additionally, a high home occupancy rate has remained consistent; only 6.6 percent of housing units in 1990 were vacant.³⁷

Population growth has created a huge demand for both affordable and single-family housing. The area represented a tremendous opportunity for first-time homebuyers, particularly in the Latino market.³⁸ • A Large Labor Force

Population growth has continued to surge in South Los Angeles, creating a large potential labor pool. Although unemployment is higher in the area than the rest of the region, many of the newcomers are eager to work and are actively seeking employment.

To a surprising extent, many companies in the area have cited the labor force as one of the key reasons they remain competitive.³⁹ Over 25 percent of South LA residents work in the manufacturing sector, while more than 30 percent are involved in production-oriented occupations, such as crafts and precision production, machine and transport operation, and labor and handling.⁴⁰ Likewise, greater than 30 percent of industry employment is in service-producing sectors.⁴¹ These labor market segments perform critical roles in sustaining the regional economy.

• Strategic Location for Industry and Trade

Centrally located, South LA lies adjacent to major transportation corridors that offer important locational advantages for businesses. Proximity to critical infrastructure provides the area's economy with quick and easy access for moving freight by both air and/or water.

The Century Freeway, which lies on the southern border of South LA, offers a direct connection to Los Angeles International Airport. The proposed high-speed rail along the Alameda corridor will provide easy access to Downtown LA and the Ports of Los Angeles and Long Beach. Alameda Avenue itself is a major transit corridor lined with a large number of warehouses and manufacturing companies.

The opportunities and assets described here are only a partial listing of South LA's economic asset base, but these examples are healthy indications of vitality. Not discussed here is a wide variety of other community assets, including nonprofit institutions, civic associations and community groups, a large number of churches and other faith-based groups, cultural institutions, community facilities, universities and colleges, and countless others. Moreover, South LA is becoming uniquely positioned as a center for sports, culture, and recreation, due in part to recent developments such as the construction of the Staples Center, a soon-to-be refurbished Coliseum for a new NFL expansion team, and the newly built California Science Center, to name a few. These assets are immensely important in expanding the capacity of South LA to become a strong, viable economy.⁴² The sustained development of these assets will be critical to generating enduring economic development and reversing neighborhood blight and decline.

Signs of Renewal: A Multipronged Approach

Despite this era of limited government resources, urban revitalization efforts have continued to move forward. Signs of renewal can be observed all across South LA, involving multiple sectors of the community— public, private, and nonprofit—demonstrating that urban renewal requires a multidimensional approach. The models discussed here also reveal that developing and strengthening the assets of an area like South Los Angeles require significant levels of partnership, collaboration, and trust between various sectors.

• Public/Private Partnership

Although public/private partnerships exist in many forms, these alliances are increasingly becoming the main paradigm for inner-city development projects. Budget constraints experienced by all levels of government have forced the public sector to seek new ways of supporting urban revitalization efforts. As a result, governments are forming partnerships with businesses and nonprofits as a means to advance inner-city initiatives. These alliances leverage the unique strengths and resources of all stakeholders involved. It has also meant, in many instances, that government no longer assumes the primary leading role.

While the role of government has significantly changed, it still plays a critical role in renewal, especially in the right partnership arrangement. Public agencies such as the Community Redevelopment Agency (CRA) possess powers of eminent domain that are used to acquire land for redevelopment purposes. For private developers, this drastically reduces costs and barriers associated with land acquisition. Problems of land assembly and parcelization are also resolved through this approach.

Public/private partnerships have been instrumental in developing projects all across South LA. The Baldwin Hills-Crenshaw Plaza Mall, the Magic Johnson Theaters, Vermont Slauson Shopping Center, and numerous other supermarket and housing developments are but a few successful outcomes of these pairings and demonstrate that collaborative approaches between government and the private sector do work. These successes will pave the way for additional public/private partnerships, particularly for redevelopment strategies, which increasingly require the tools and leverage opportunities each respective group brings to the table.

• Immigrant Entrepreneurialism

Falling under the radar screen of the general public is a burgeoning immigrant economy driven by immigrant entrepreneurs who have recognized the huge potential of South LA's Latino market. Capitalizing on the area's escalating Latino population, many businesses have emerged that cater to their tastes, preferences, and eating habits. Latino supermarkets, mid-sized grocery stores, and delicatessens have sprung up, selling a variety of foods and grocery items to the local consumer market.

Development of these stores has occurred without the benefits of public subsidies or incentives. Many carnicerias, tortillerias, and mercados have entered the area, recognizing compelling market demand and a strong consumer base for their products. Similarly, large, full-service grocery markets, such as El Tapatio and Superior, have emerged in South LA where major supermarket chains have not. These stores have captured a large market share relinquished by many of the major chain supermarkets, due to inflexible building templates.

A large number of these new businesses operate independently, and some operate strictly on a cash basis. The impacts of these businesses are difficult to measure, but their proliferation is impossible to ignore. Their growing presence signals a budding immigrant economy that compels further analysis.

• Community Economic Development Approaches

South LA is rich with a growing network of community development organizations. More than 130 community-based development organizations exist in Los Angeles.⁴³ These organizations embrace a neighborhood-based approach to improving the conditions of their communities and maintain a large role in building upon local neighborhood assets and expanding local capacities through a variety of programs. A significant number of community development corporations (CDCs) are engaged in developing programs in affordable housing, commercial and industrial development, workforce preparation and training, and job creation.

CDCs range from large, well-established institutions, such as Drew Economic Development Corporation (Drew EDC) and Watts Labor Community Action Committee (WLCAC),⁴⁴ to other organizations like Concerned Citizens of South Central (CCSC), Dunbar Economic Development Corporation (Dunbar EDC), Esperanza Community Housing Corporation, and Vermont-Slauson Economic Development Corporation (VSEDC). Faith-based community development has also been integral in fostering revitalization strategies. Subsidiaries of long-standing South Central churches, such as First African Methodist Episcopal Church (FAME Renaissance) and West Angeles Church of God in Christ (West Angeles CDC), have become influential participants in stimulating renewal in their local communities. Similarly, community development financial intermediaries (CDFIs) are a growing presence in the community development network, making a substantial impact by brokering capital to neglected, underserved areas. CDFIs provide microenterprise lending, financial literacy education, credit counseling, homeownership education, debt financing, small business assistance, and loan origination for the economic base of their targeted communities.

Collectively, this community development network is producing concrete results in communities throughout South Los Angeles. Nonprofit developers, for instance, have developed 15,000 units of affordable housing throughout the city and are a major source of new housing development in South LA's neighborhoods.⁴⁵ Although still a cottage industry, community development initiatives have made considerable inroads in improving the communities and neighborhoods they serve. They represent a unique and integral part of South LA's institutional and social fabric.

Continuing Challenges

Although there are many encouraging signs of revitalization, the work is far from finished. The challenges facing South LA are serious and multifaceted, and results cannot be achieved overnight. The root causes of decline and poverty are deeply embedded and require persistence and a long-term perspective. Some of the continuing challenges that remain include:

• Access to Capital

The businesses that comprise South LA's economic base are severely underserved by financial institutions. A substantial number of the area's businesses are small- and mid-sized establishments. In fact, more than 52 percent of the area's employers have ten employees or less.⁴⁶ Many of these urban businesses are generally overlooked or neglected by major banks because they operate without solid business plans and lack financial management or accounting systems, so they are likely to be rejected for financing.

Access to capital is a major challenge for South LA businesses and must be overcome so businesses can achieve greater levels of capital and job formation. In addition to financing, these businesses also lack the necessary business expertise and financial management structures to manage debt and plan for growth.

• Labor Force Training and Development

Welfare reform will alter the local labor market pool in an enormous way, and adequately preparing people to work in today's rapidly shifting economy must be among the highest priorities of any revitalization approach. As thousands of people come away from public assistance, they require an immense amount of job preparation to obtain work and become productive members of the labor force.

Training and workforce development will have to target a wide array of people: former welfare recipients, the unemployed, and the working poor, to name a few. These challenges are considerable and will demand the concerted efforts of job training institutions, regional occupation centers, community colleges, communitybased organizations, and many others. Upgrading skills in a new economy for the region's disadvantaged populations will be a monumental task for years to come.

• Land Use and Real Estate Development Issues

The availability, assembly, and cost of land are large hurdles for the physical redevelopment of South LA's neighborhoods. In order to meet the rising demand for goods and services, upgrading the area's commercial corridors and creating new retail development is necessary. Substantial financial resources are necessary for new development to occur in inner-city areas. This is attributed to several factors:

• High land prices and the costs of development

Contrary to popular belief, South LA is not a low-price market. Land acquisition costs are high, making the financing of new construction extremely difficult. The asking price for land parcels in South LA can be onerous, and landowners in the area are willing to sit on their properties while the land remains unused or underutilized. Since holding costs are nominal, these properties can remain unused for years.

In addition, added costs of doing business in the area increase the overall costs of development. These include insurance fees, taxes, utility fees, a burdensome permit process, and security costs. Added costs can significantly alter profit margins below investors' preferred ranges.

• Land parcelization, configuration, and assembly

Many available land configurations in South Central LA neighborhoods are small and irregularly shaped. They do not fit into the preferences of many real estate developers or large tenant profiles. In these cases, parcels must be assembled to attract supermarket chains or large commercial retail developments. However, aggregating small, scattered parcels of land for large construction projects is difficult, due to multiple ownership patterns. Consolidating lot parcels owned by different owners can be laborious and expensive.