Your Town Doesn't Need a Developer
It needs to be one
I watched a YouTube video recently about toxic charity. The creator’s thesis was that mission trips and overseas donations are often unintentionally harmful because they decimate local industries and, without teaching an actual skill, they just keep people stuck in a cycle of dependency. A group that flies in and builds a family a house feels generous, and it is, but it doesn’t leave the family with any resources to solve their next problem on their own.
Weirdly enough, it made me think about municipalities.
Many small towns run almost entirely on grants. To be fair, every government organization takes advantage of grants, from state level to large cities to the tiniest of towns. The problem arises when grants are the only way anything gets done rather than being leveraged to build any capacity of its own between one grant cycle and the next. It creates a level of dependency that a town can get stuck in the same way a person can, doing fine as long as the help keeps arriving, and in a serious jam the moment it doesn’t.
So what can a town actually do to build some capacity so it isn’t waiting on the next grant cycle? That question got me thinking about all the empty, dilapidated buildings that sit on small town Main Streets.
The Building Every Town Already Owns
Every town has them. Many towns own at least one of them. A tax-delinquent property the city ends up with almost by accident, because nobody paid the back taxes and the county eventually handed it over. And almost every town does the same thing with it, selling it fast to whomever will take it off the books, usually for close to nothing. The building goes back on the tax rolls, the city gets a small check, and everyone moves on.
That’s a one-time payout, and it feels like a win because a problem property became someone else’s problem. But that actually creates two problems: 1) when you sell it for almost nothing, it’s often bought by somebody who doesn’t actually have the money to renovate it, so it simply remains an empty, dilapidated building, and 2) it doesn’t build anything the town can use again.
What very few small towns do is treat the building the way a private developer would by fixing it up and either finding a tenant to lease it to for income or selling it for a real return once it’s worth something. Private developers do this constantly in towns of every size. There’s no reason a town can’t do the same thing for itself and build exactly the kind of capacity that keeps it from being tied to the grant-funding hamster wheel.
Why does this matter?
Economic development is just as important to a tiny town as it is to a big city. Unfortunately, a tiny town typically doesn’t have the resources to invest in itself in any meaningful way. Some larger towns solve this with a dedicated sales tax. A penny or two carved out specifically for economic development instead of the general fund. It works, and it’s worth knowing about. It just doesn’t have nearly the same impact in a town with one gas station and a Dollar General, because there’s no real sales tax base to carve a penny out of in the first place. That’s what makes real estate the option worth walking through here. It doesn’t require an existing tax base to get started, just an asset and a tenant.
I want to focus this specifically on towns under a thousand people, because that’s where I see this idea matter most, and where it’s hardest to picture. A lot of towns that size have quietly lost hope that anything is going to change, not from a lack of caring, but from watching enough cycles go by where nothing did.
I want to spend the rest of this on two questions. Can a town this small actually pull this off? And if the answer is yes, how does it actually start?
Yes, and here’s the proof
Before getting into how, it’s worth settling whether a town this small can actually pull off something like this at all. Dieterich, Illinois is the clearest answer I’ve found. It had roughly 617 residents in the early 2000s and was watching its school district edge toward closure. Village leadership created a residential TIF district and effectively became its own real estate developer. They bought land, developed it into building lots, and sold those lots at a real loss, as little as $5,000 each when the actual development cost ran closer to $30,000, betting that the property tax increment from all the new houses eventually built there would outweigh what the village lost upfront.
It worked.
Only six of the original 130 lots are still unsold. The village’s population grew to 890 by the 2020 census, nearly doubling. The school stayed open, and Dieterich has since built a new community center funded partly through the same TIF district. In 2020 they even built a house and raffled it off, sold at $100 a ticket, to draw attention to a new subdivision, more than covering the cost of the house in the process.
Dieterich did this with land instead of a building, and by selling instead of leasing, so it doesn’t hand us a ready-made playbook for the version this piece is actually about. What it hands us is proof that a town under a thousand people can run a multi-year real estate operation, take on real financial risk, and come out ahead. That’s the piece that carries forward. The rest, land versus building, selling versus leasing, is a matter of matching the tool to whatever opportunity is actually sitting in front of a given town. TIF specifically has its own intricacies that vary by state, and this piece isn’t the place to untangle them.
What Dieterich doesn’t prove
I went looking for a town this size that did the same thing with a commercial building instead of housing lots—bought it, fixed it up, and leased or sold it for a return, and I couldn’t find one. That might mean it’s a genuinely underused idea. It might also mean there’s a reason it hasn’t caught on that I haven’t run into yet. Either way, I’d rather say that upfront than dress up Dieterich as proof of something it didn’t actually do. What it proves is the capability. The commercial building is another iteration of this concept.
So from here on I’m going to focus on the version most small towns are already staring at every day: the dilapidated buildings downtown. Not because it’s the better option and not because anyone’s proven it out at this scale yet, but because it’s the one almost every town already has sitting right in front of it, whether or not it happens to own one already.
How to get started
Find the tenant before finding the building, if possible.
The safest version of this isn’t renovating first and hoping. It’s identifying a business that wants to open but can’t afford the buildout, then acquiring and fixing a building around that specific need. If no single tenant exists, a shared space works too. Find one empty building, offer reduced rent, and fill it with two or three small entrepreneurs instead of waiting on one big one. Many building owners have run this exact play successfully, and there’s no reason a town can’t do it too.
Start with whatever’s already sitting there.
Many towns already own an empty building. Often a tax-delinquent building nobody’s dealt with. That’s the free starting point. If nothing like that exists, the first acquisition is where a grant genuinely earns its place. CDBG’s economic development set-aside is explicitly built for acquiring and rehabbing commercial buildings, and USDA’s Rural Business Development Grants and some state Main Street programs cover similar ground. A bank loan works too. The particular program isn’t as important as the end result. Whichever one gets the first asset into the town’s hands is the right one.
Decide where the revenue goes before revenue starts coming in.
If you don’t settle this in advance, real estate income could easily disappear into the general fund and get spent on whatever need rears its head that year. The simplest fix is a restricted account, walled off by policy so it can only be used for this purpose. That’s a simple enough way to start, since a lot of towns this size don’t have the staff to justify anything heavier yet.
Once there’s more than one asset in the portfolio, it’s worth creating an actual public development authority or redevelopment authority instead. This is a separate legal entity chartered under state law with its own small board, so the revenue is protected by its own charter rather than by whoever happens to be on council that year.
Underwrite for a reserve before anything else gets paid.
If the town is leasing out a building, the first dollars from rent go into a maintenance reserve specific to that building, before anything else. Skip this and the town has just recreated a smaller, private version of the same deferred-maintenance problem it’s trying to get out from under.
After the reserve is funded, the rent covers any loan payment on the building, then a small cushion for the months it might sit vacant between tenants. Whatever’s left after that is real surplus, and that’s the money that goes to work on the next building.
If the town is selling lots or buildings outright the way Dieterich did, there’s nothing left to maintain once the sale closes, so the money works differently. It covers whatever debt or upfront cost funded the development first, then goes straight back to work on the next acquisition.
These two paths carry very different levels of risk. Leasing a building the town already owns is low risk. Worst case, the town still owns a building. Dieterich’s build-and-sell approach is real, uncapped risk taken on all at once. A town doesn’t have to start at Dieterich’s end of that range. Starting with the lower-risk lease model and only taking on land-development-scale risk once there’s a track record and a real reserve behind it keeps a bad outcome from hitting the town’s core budget.
Let that surplus buy the next thing.
This is the part that turns one lucky project into an actual strategy. A few years of stabilized income, whether from a lease or from lot sales, gives the town a track record and a revenue stream a bank will lend against or straightforward cash to reinvest directly. That’s how the second building or the second phase of lots gets funded without needing an outside program to make it happen at all.
If getting a tenant into the building is a struggle, some small towns run their own revolving loan fund through USDA. The town borrows from USDA at around 1%, relends to local businesses at a somewhat higher rate, and the margin covers the cost of running the fund while repayments cycle back out as new loans. That fund can specifically help the next tenant afford their buildout, which is often the actual barrier once space is ready.
When City Hall Can’t Carry It Alone
If city hall doesn’t have the bandwidth to lead this, that doesn’t mean it can’t happen.
In towns under a thousand people, there’s usually only a few full-time people running all the departments, and a multi-year real estate project is a hard thing to prioritize on top of everything else that’s actually on fire that week. What many towns do have is a few residents who want to see something happen and have some money of their own to put toward it. That’s a real asset the town can work with.
The town and a group of residents can work together to make this happen. The town buys and holds the building. A group of residents, organized as a member-managed investment club LLC, the same structure a group in Ord, Nebraska used to fund a spec building and a housing project, separately invests in whatever business wants to move in, covering the buildout or startup costs the building itself doesn’t solve. It’s a real public-private partnership. Public capital holds the real estate, and private local capital gets the business open.
None of this has to be built from scratch inside city hall, either. Regional councils of governments and multi-county economic development districts often provide exactly this kind of capacity to small member towns as a shared service, and state Main Street programs typically come with technical assistance staff who’ve walked other towns through this before. A development authority board doesn’t need to be pulled only from elected officials either. A retired banker, a former realtor, or a local contractor sitting on that board is often how a town this size actually gets expertise it doesn’t have on payroll.
In a town this size, the people running city government and the people forming an investment club might be the same handful of people, and pretending otherwise would be dishonest. The ethical way forward is disclosure and recusal. Anyone with a stake in the investment club discloses it and sits out the vote on that specific deal.
Some of the payoff in this model isn’t rent or lot sales at all. The moment a business occupies a building or a family moves into a new house, sales tax and whatever else that activity generates starts flowing to the town immediately, independent of what the development entity itself earns. Dieterich didn’t just sell lots, it saved a school district, which is the kind of return that never shows up on a balance sheet but is exactly why the town took the risk in the first place.
The honest caveats
To be clear, this article simplifies a lot. Municipal finance law, TIF eligibility, procurement rules, and public authority statutes vary by state and sometimes by the size of the town, and none of that fits into a newsletter. I’m not a lawyer, an accountant, or a bond attorney, and nothing here should be read as instructions. It’s a way of thinking about an asset a lot of towns already have and mostly throw away, not a step-by-step plan. Anyone actually doing this needs their own city attorney and their own numbers.
It’s worth addressing one objection directly. This isn’t government competing with private investors. There’s rarely a private developer looking at a town of 500 people in the first place. The choice usually isn’t between the town doing this and someone else doing it; it’s between the town doing it and it not happening at all.
Lastly, none of this works without real demand behind it—a tenant who’ll actually sign a lease or a housing market that’s actually being held back by a lack of available lots rather than a lack of interest in the town at all. Dieterich’s story is a real risk that paid off, not a formula guaranteed to work everywhere. The village took a genuine loss on each of those first lots and had to wait years to find out if the bet was right.
This process is slow, often measured in years for a single building and more like a decade or two for something like Dieterich’s turnaround. It doesn’t replace the grants that fund water and sewer work, and it isn’t trying to. The point is that a town that owns and runs even one income-producing asset has a small, compounding source of money it controls itself, one it can put toward the next building, the next lot, or eventually the next need, without waiting on someone else to fund it.
Like a charity that teaches someone a skill rather than just handing over free stuff, a grant is an amazing tool when it’s used to build something a town can own and grow, not just to patch the same problems over and over again. That’s how a small town stops waiting around for an outside organization to save it and begins saving itself.
These posts are brought to you by Econ Dev Ops, providing administrative support for Chambers of Commerce and economic development organizations. It’s hard to champion your community when the back office is on fire. Learn more at econdevops.com or reach us at hello@econdevops.com.
Sources
Governing, “Rural Illinois Towns Defend Their Quiet Communities” (Dieterich, IL): https://www.governing.com/community/rural-illinois-towns-defend-their-quiet-communities
Ford County Chronicle, “Dieterich’s growth setting the example”: https://www.fordcountychronicle.com/articles/opinions/dieterichs-growth-setting-the-example/
Resource Bank, “Dieterich, Illinois: A Small-Town Success Story”: https://www.inspirerenewenjoy.com/solve-challenges/attract-tourists/p/item/2511/dieterich-illinois-a-smalltown-success-story
Dieterich, Illinois — Wikipedia (population data): https://en.wikipedia.org/wiki/Dieterich,_Illinois
eCFR, CDBG eligible activities (Title 24, Part 570): https://www.ecfr.gov/current/title-24/subtitle-B/chapter-V/subchapter-C/part-570
USDA Rural Development, Intermediary Relending Program (IRP): https://www.rd.usda.gov/programs-services/business-programs/intermediary-relending-program
Ord Nebraska Economic Development, Loup Valley Investment Club: https://ordnebraska.com/economic-development/business-incentive/
MRSC, “Public Development Authorities (PDAs)”: https://mrsc.org/explore-topics/economic-development/financing/public-development-authorities