efficiencies of scale in concentration; in other words, dealing with one $10,000 lender is easier than dealing with 10 $1,000 lenders, but when it comes to the other end-placing the investments-in many respects, there's an efficiency of scale in a decentralized program. When you talk about the kind of monitoring, management, and technical assistance that's required to make community investment work effectively, then being close to the community and having a geographical proximity is very helpful. So our feeling was, for practical and political reasons, that there needed.to be an The more low-income people do through their own contributions of labor and capital to improve their COJ!lmuni ty, ~he more they will tend to accelerate the forces that will ultimately displace them from the neighborhood., informal network of community investment vehicles or community loan funds; that we need a new sort of element in the infrastructure of finance in this society. So what we began to do was identify some areas in which we had been active and had good contacts and recognized the presence of a number of potential borrowers and lenders and then to suggest the development of a local or regional community loan fund .. '. . · The most important feature of the loan fund, I think, is that we have insisted that any group that we work with in the development of a community loan fund . must bring together in the or-ganizing committee, and the board, and the management structure of the fund, three different kinds of people or kinds of skills. We want to see representation of the potential lender constituencies. People from the churches, individual investors, from the financial community, foundations, ~hatever. Equally important is representation from the potential borrower constituency. It doesn't have to be groups that themselves will be getting loans, but people who are out there-day in and day out-on the street, involved in low-income community development. You need their contacts, you need their perspective, and yo1:1 need their peer judgement. And the third type of person you want involved in the loan fund are people with the technical skills to service the fund-attorneys, accountants, whatever-and people with the technical assistance skills to serve the · · borrowers. Because our argument has been that what makes community investment work is a close, ongoing tie to the neighborhood and to the community development sector. Low overhead and low transaction cost and the ability to integrate technical assistance with the March/April 1985 RAIN Page 9 lending function. If you've got those three qualities in a program, we think that community investment.is financially ~swell as socially responsible. If you're lacking any of those components or qualities, then we think 'community investment is, as the conventional wisdom used to be, .a high-risk venture: ... RAIN: This question seems fundamental to what you're doing. Why shouldn't land be a commodity? Matthei: Why should land not be regarded as a commodity? Number one: Because land is largely not of human creation, it's finite in its amount and infinite in its term of existence. It's the same land that our ancestors lived on, it's the same land and the only land that our descendants will have to live on. And it is a finite resource upon which all life on earth currently depends. That is fundamentally different in character than improvements-buildings, for instarn,:e-which are much mote significantly the work of human hands, and the product of human imagination. They are quite finite in their term of existence, and infinite in their multiplication·. You can build a house, tear it down, build.another one, tear it down, and build another one. The land remains the same. So we .would say there is a fundamental character difference between land-and by land, I mean also natural resources-and buildings and improvements.... Now in another sense, let's take a look at the equity limitation, which is inherent in your question, why should it not be a commodity, is why can't we buy it, sell it, trade it, and speculate upon it. We would say that a land trust, in its program of equity limitation, through which it provides the leaseholder, the resident family, ownership and equity based on the value of their own investment of labor and capital oyer time in those improvements-you have a real dollar equity for what you've put into those improvements, adjusted for inflation and depreciation, but you don't benefit from the appreciating market value of the property-we . would say that is not confiscatory.... I think people think of land reform very ~ften as a form of confiscation. We need a new sort of element in the infrastructure of finance in this society. We are not talking about confiscation. We are talking about looking at property value and understanding its origin, and distinguishing between that part of property value which accrues because of investment of labor and capital by the resident, the owner, the user, and that portion of property.value which accrues because of community-wide development efforts, public investment, or larger ma!ket forces which can't be attributed to one owner. We're saying, what you put in in labor and capital, that you have a legitimate claim on. But if the Arabs raise the oil price, and consequently half the people in the suburbs want to move into the inner city to cut their
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