Community Development Corporations
By Ian Pulsipher
Community development corporations (CDCs) are nonprofit, community-based organizations originally created to improve the physical infrastructure of poor neighborhoods and distressed communities through housing development. Today, these corporations operate in thousands of economically diverse communities as a comprehensive way to improve their development potential through real estate development, economic development and human service projects. After almost 40 years of operation, the positive evolution of the communities that they serve, as well as that of the actual CDCs, has been documented in findings from major studies. An important factor in the success of these corporations has been the support they receive from various sources including state governments that assist them in financing, planning and operation.
What are CDCs?
Since the creation of the first CDC through federal legislation in 1966, the basic structure and goals of these organizations have largely remained the same. They are formed by community residents, small business owners, congregations and other civic organizations to effect projects that enhance community development. Community residents serve on the board of directors and advisory boards ensuring a strong and proximate connection to the needs, values and goals of the community. The first were created in urban blighted neighborhoods, but their general expansion has brought them to rural communities as well.
Especially during formative years, CDCs rely on funding from outside sources to begin and maintain their operations and activities. Their funding comes from many sources and has evolved over time. Today, these corporations receive operational and financial support from national intermediary organizations such as the Enterprise Foundation and the Local Initiatives Support Corporation; donations from private philanthropists and foundations; as well as contributions from local banks, corporations and individuals; direct financial support from federal sources including the Department of Housing and Urban Development; and from appropriations through state and local governments.
In addition to this outside support, after successful establishment, CDCs often acquire and command real assets—a significant difference from other public or nonprofit community development organizations—as they often own and manage their real estate developments well beyond initial creation, especially in the case of housing developments.
CDCs’ work mainly concerns physical development and revitalization of communities. Real estate development has traditionally formed the core of activities, with the development of affordable housing units, including their construction, renovation and management, as the most common focus. Besides housing, they also develop commercial and industrial facilities, as well as community facilities for health care, education and other neighborhood programs. To further improve the quality of life of community residents, some corporations have successfully expanded beyond real estate into economic development, business promotion and public safety projects such as job creation and youth programs, micro-business development and lending, and criminal re-entry programs.
Findings from Major Studies of CDCs
A number of studies have been conducted on CDC performance. Two particularly comprehensive studies yielding insightful results were conducted by the National Congress for Community Economic Development in 1998 and the Urban Institute in 2002.
NCCED’s national survey found that CDCs grew from the original 15 created in the late 1960s to approximately 3,600 by 1998. In addition to growth in numbers of organizations, the survey reported that since operations began, CDCs created 550,000 units of affordable housing and 247,000 private sector jobs.
Using case study and econometric approaches, the Urban Institute’s study found that as an industry, CDCs yielded positive growth in size and in contributions to neighborhood revitalization during the 1990s. In addition to an increased ability to influence neighborhood economies and address community challenges, they were found to be successfully expanding their efforts beyond real estate development and into other community revitalization programs.
State Cooperation and Support
State support for CDCs includes both the direct cooperation, assistance and funding and the indirect support through existing state programs and policies that were not designed specifically for CDCs but nevertheless facilitate their success.
Direct state cooperation with and support for corporations includes state technical assistance teams or specialists, often from the state’s economic development office, working with CDCs directly; grant programs administered and or funded by the state; and tax credits for businesses, corporations, insurance and financial firms that donate to CDCs or their projects.
In Michigan, Community Assistance Teams serve as one-stop contacts for CDCs providing information and guidance on the use of financial assistance, state incentives, and development tools and strategy. Missouri’s Department of Economic Development program provides grants from $20,000 to $100,000 to CDCs on a competitive basis for innovative and creative development programs and services focused on assisting low-income residents. South Carolina’s Community Economic Development Act passed in 2000 but no appropriation has been made to allow direct financial assistance. Financial support of projects, however, has been encouraged from the private sector by a 33 percent tax credit on investments in state-certified corporations.
In addition to these programs designed and administered to provide direct assistance to CDCs, other state development and incentive programs also provide indirect support. Programs such as low-income housing tax credits, affordable housing loan funds, community development block grants, revolving loan funds for CDC creation and operation, and financial incentives through enterprise zones are all tools designed to facilitate development on statewide and community levels that CDCs can use to further their efforts in the development of their communities.
Selected References:
Coming of Age: Trends and Achievements of Community-Based Development Organizations. Washington D.C.: National Congress for Community Economic Development, 1998.
State Economic Development Agencies and Chambers of Commerce
Walker, Christopher. Community Development Corporations and their Changing Support Systems. Washington D.C.: The Urban Institute, 2002.
www.knowledgeplex.org
Contact for More Information:
Ian Pulsipher
NCSL—Denver
(303)-364-7700 ext. 1649
ian.pulsipher@ncsl.org
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