A Cross-Sector Coalition Raises Nearly $1 Billion to Tackle Racial Wealth Inequality in the Twin Cities
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GroundBreak partners at a community briefing. Photo: Molly Miles
With the 2020 police murder of George Floyd and the massive uprising that followed it, Minneapolis and its twin city St. Paul gained an association with systemic racism in the U.S. and the simmering rage that racism has inspired. Last month, a coalition of over 40 Twin Cities cross-sector partners, including representatives from the area’s philanthropic, banking and government sectors, announced an effort that they hope will foster something better — a nearly $1 billion (and counting) program to begin solving the disparities of housing and business ownership that plague the area’s Black communities.
To do it, the collaborators behind GroundBreak want to create an entirely new financial system. They plan to use the nearly $1 billion they’ve raised so far to mobilize more than $5 billion over the next 10 years. Beyond that, they hope to use their model to gather such overwhelming evidence of its effectiveness that similar coalitions across the country will duplicate it.
“Cooperatition” and a new model of doing business
GroundBreak was originally announced in May of 2022. Since then, the group has held 23 meetings with hundreds of community members and financial experts to create a workable plan to make tangible progress on closing the Twin Cities’ racial wealth gap. Though such disparities are present in cities nationwide, the Twin Cities’ racial wealth gap is one of the worst in the country. For example, 70% of white families own their homes but, as of 2021, only 20% of Black families could say the same.
GroundBreak has some commonalities with Chicago TREND, another philanthropic/for-profit sector collaboration seeking to expand Black ownership and economic opportunities, which I also wrote about recently. But where the TREND entities are focused specifically on neighborhood shopping centers, GroundBreak is working on what could be called the “big four” of building and maintaining financial stability and generational wealth: home ownership, entrepreneurship, commercial development and affordable rental housing. To that end, Groundbreak’s organizers have identified specific impact goals including financing 11,000 new Black homeowners, 5,000 Black entrepreneurs, 60 Black-led neighborhood commercial developments and 23,500 units of affordable housing.
Another thing that GroundBreak has in common with TREND is that there are a lot of moving parts. According to a report the collaborative issued during its October 30 public launch, the GroundBreak financial system will include both flexible capital and lending commitments from financial institutions, along with a combination of grants, guarantees for loans, low-cost, patient capital and special-purpose credit program loans.
Philanthropic support is one key component of the GroundBreak concept, as is partnering with the area’s financial services industry. Philanthropies based in the area like the Bush Foundation, McKnight Foundation, GHR Foundation and Pohlad Foundation are among the backers providing the initial $926.5 million that has been raised so far, along with financial institutions including Huntington and U.S. Bank.
McKnight Foundation President Tonya Allen called GroundBreak a “cooperatition” model, “meaning that by cooperating and sharing our best practices and most compelling ways of doing this work, we will raise the bar” for every area lender. “Anyone who wants to make a loan to a family of color or to a family that has been distanced from opportunity will have to step up their game” to compete with what’s being offered by GroundBreak, she said. GroundBreak estimates that the collaborative will be able to “unlock” $3 in private-market capital for every $1 of flexible capital it provides.
If all of this sounds like the kind of complicated undertaking that could take several years or more to get off the ground, last month’s announcement may come as a surprise: GroundBreak’s organizers have already approved the organization’s governance and operations structure and expect to be able to start offering its financial products by the end of next year.
Pohlad Foundation Vice President and Executive Director Susan Bass Roberts likened GroundBreak to a more complete version of a philanthropic collaborative. Such collaboratives are “meaningful and important,” she said, “but all the voices aren’t at the table; all the expertise isn’t at the table when we do that.” Rather than being a frustrating experiment in herding cats, Bass Roberts said, collaborating across sectors with people who really know what’s involved in moving capital and “know where the pitfalls are, what the barriers are, and can help us think through the answers” is the reason that GroundBreak has been able to move so quickly.
In that sense, GroundBreak offers another good example of something we’ve seen quite a lot of lately: philanthropy collaborating across sectors to address entrenched, place-based problems. While such work can be complex, the rewards — like cultivating government support, and, in this case, drawing in cross-sector expertise — can be well worth it. As my colleague Wendy Paris has written, place-based foundations, with the community trust their work has engendered, are situated to leverage their reputations to bring disparate players to the table and get them working together. The result can be far more impactful, and possibly much longer lasting, than what the individual organizations could have accomplished alone.
“A targeted, universalist approach”
For GroundBreak’s organizers, their effort is a chance to create a rising tide to raise all boats — starting with the ones that are sitting lowest in the water to begin with.
GroundBreak’s model is a “targeted, universalist approach,” said Allen of the McKnight Foundation. “We recognize that this issue around closing the wealth gap is broader than just one racial group. It is actually all racial groups, right?” The ultimate goal, she said, is to center people who are furthest away from power, “starting with Black families and Black borrowers, because the wealth gap is so large for this particular population,” and then use the experience and lessons gained to inspire similar programs that take a much broader approach. If GroundBreak’s policies and protocols work for Black families, Allen said, they will also work for Asian and Hispanic families, and for white families that may live in areas or circumstances that keep them from being connected to wealth.
Further, while GroundBreak itself is centered on Minneapolis and St. Paul, Allen is clear that the collaborative hopes to inspire similar efforts around the U.S. “We believe that this is going to be a model for the entire country,” she said. “We want people to know that they, too, can do this work.”
