Next Steps: Establishing and Expanding Food Hubs for Food Deserts

by Walker Wells, Lily Kelly and Gina Goodhill Rosen Graphic by Tim Bevins

The following is the final installment of a three-part blog series summarizing the results of our research into the role that food hubs can play in neighborhood sustainability and the urban food network. The previous blogs can be found at Food Hubs Part II and Food Hubs Part I.

In our last installment, we explored some of the different forms that food hubs can take and the various services that they can provide to increase access to fresh foods for residents of food deserts. However, as we have mentioned, food hubs are not typically considered a standard tool to address the presence of food deserts, despite their effectiveness at supporting local food economies. Traditionally, food hubs have been considered a tool for providing services and support for small farmers in rural areas, not urban residents of food deserts. We believe that food hubs could be seen instead as part of a complete rural/urban food system, which could open up new sources of funding and support for their establishment and expansion.

UrbanFoodHub graphics blog 3
UrbanFoodHub graphics blog 3

In this post, we will explore some of the circumstances required for a food hub to be viable and effective, and propose a few next steps for policymakers and funders that could increase the prevalence of food hubs that serve food deserts. When we explored the forces at play concerning where food hubs locate, we approached the question from a food hub operator’s perspective. What conditions and funding opportunities could make it beneficial to them, and in particular to their bottom line, to locate in a food desert?

Funding and Financing

Food hubs are typically funded through one of more of the following methods: federal government grants, philanthropic foundations, social impact investors, corporate sponsors, small business loans, and private sources of debt or equity. While these funding and financing sources may support the efforts of those already planning to expand or focus their market to underserved areas, it is not typically that there are either requirements or incentives for establishing food hubs that serve food deserts. Furthermore, there are often mismatches between the relatively modest amounts of funding that are needed to launch a food hub and the amount that can be obtained through the formal government programs. For example, New Market Tax Credits (NMTCs) have been used in several locations to finance healthy food businesses in low-income communities. But the vast majority of NMTC transactions exceed $5 million an amount of funding is more in line with what is needed for a medium-sized supermarket[1]. The complicated and expensive process required to apply for and receive NMTC funds makes applying for a smaller amount of funding impractical, thus excluding this option for many food hubs.

The inflexibility in funding can also be a challenge when trying to establish a multi-function food hub. For example storage and sorting areas are seen as an essential component of a food hub and would not be questioned in a funding request to purchase and renovate a building. But the inclusion of retail storefront or a teaching kitchen may be questioned, as they represent a different type of use, operation, and organizational capacity. Funders often need to be educated to understand how the features work together to be able to fully address issues of food access or how various partner organizations will work together to create an effective and stable long-term operation strategy.

Regulatory Compliance

Another challenge that food hub owners and operators face is compliance with food safety regulations, local zoning, and building codes. The extent of regulation varies depending on the type of food hub. Aggregation centers, for example, have relatively few regulations with which they must comply[2]. Processing centers, however, face a longer list of regulations. Regulations increases further if the facility includes food preparation, has a shared kitchen, or if food products are labeled as organic[3].

Currently, the FDA regulates most food handling through a uniform food code enforced by local health departments. At the very least, processing staff must obtain a food-handling certificate, such as Servsafe, and the facility will need liability insurance. According to the food hub operators interviewed by Global Green, zoning compliance is not typically difficult, as food hubs can be located in either commercial- or industrial-zoned areas. Access for trucks and providing sufficient space for storage, sorting, and distribution may be easier in industrial areas. But food hub models located in commercial area are better suited to include the small retail storefronts that can better serve food deserts.

Recommendations

Food hubs are an emerging tool for promoting community sustainability. We have a unique opportunity to shape the role they will play in our food system. Based on the stakeholder interviews and research conducted by Global Green, the following recommendations are offered as ways to increase the potential for food hubs to be a positive force in ameliorating the issues associated with food deserts.

  • Establish funding incentives . For-profit food hubs have an incentive to serve in upper-income markets and neighborhoods where they can get higher prices for their products. Incentives are needed for food hubs to serve or be located in low-income communities. Some government grants for urban food production do require that a specific percentage go towards projects serving low-income communities, but food deserts are not specifically identified. State and federal government grants should provide additional “bonus” funding for food hubs that specifically serve food deserts, in addition to the percentage of funding that’s already set aside for low-income communities.
  • Offer right-sized and flexible funding. NMTC funds, Department of Agriculture grants, and other sources of funding used by food hubs should recognize the amount of funds that are typically needed, reduce the cost and complexity of application, offer increased flexibility, and enable several food hub projects to be bundled together to increase funding and implementation efficiency.
  • Streamline permitting and regulatory enforcement. Cities and counties that have neighborhoods categorized as food deserts by the USDA should remove barriers that would discourage a food hub from being established in commercial or mixed use zones. Local governments should offer an expedited approval process or permit fee waivers to encourage food hubs to choose a food desert location. Health and food handling regulations should be clarified to address the specific types of storage, sorting, and distribution processes that are typical of food hubs.
  • Create a certification for food hubs that serve food deserts. Organic and Fair Trade certifications help growers validate their claims and increase sales. A certificate for food hubs that verifies the service to food deserts could provide multiple benefits. First the certification would be valuable when securing funding or financing. Charitable funders would likely look more positively toward a food hub that is specifically addressing food access concerns. This type of certification could also be used by the US Department of Treasury for defining preferred uses of New Market Tax Credits.

[1] Capital for Healthy Families & Communities. “Healthy Food Markets”. The Low Income Investment Fund.      n.d.. <http://www.liifund.org/projects/healthy-food-markets/>

[2] Ribley, Warren, Tim Lindsey, Tom Jennings, Jim Slama, et. al.. Building Successful Food Hubs. January 2012. pg. 9, 11, 19-22, 35 <http://www.familyfarmed.org/wpcontent/uploads/2012/01/IllinoisFoodHubGuide-final.pdf>

[3] Ibid, page 35