Intro to Section 4, Capacity Building for Community Development & Affordable Housing

The Section 4 Program strengthens the nation’s lower-income rural and urban communities by bolstering non-profit community developers that build and invest in those neighborhoods. Since 1993, Section 4 has been the catalyst for these non-profit Community Development Corporations (CDCs) to revitalize lower-income neighborhoods and communities through the expansion of affordable housing, job creation, economic development, and other activities. Section 4 is the only program at the U.S. Department of Housing and Urban Development (HUD) specifically designed to build the capacity of non-profit CDCs.

How does Section 4 work?

Section 4 provides grants on a competitive basis to national intermediary community development organizations, which in turn provide training, education, financial support and development assistance to local CDCs throughout the country.
Section 4 funds are matched on a 3 to 1 basis, and then used to leverage additional private capital. Total aggregate leverage has consistently been in the range of $20 or higher for each dollar of Section 4 funding.
Intermediaries provide vital oversight and compliance functions. They are responsible for delivering plans to HUD outlining how the dollars will be invested, selecting the qualified organizations to receive the funding, pre-funding the organization, monitoring their use of the funds, and reporting the results to HUD. Only after deliverables are met does HUD reimburse intermediaries.

What are the outcomes?

Helping Communities and People in Need Nationwide

From 2014 to 2018, Section 4 funds have been deployed by 973 CDCs and other non-profit developers. Since the program’s inception, Section 4 has benefited all 50 states plus the District of Columbia and Puerto Rico.
From 2014 to 2018, Section 4 has helped create or preserve more than 39,000 homes and attracted over $7.7 billion in investment for lower-income neighborhoods and communities across the country.
Section 4 has also provided disaster recovery relief and has been used to assist communities impacted by Hurricanes Katrina, Sandy, Harvey, Irma, Maria, Michael, the California wildfires and other federally declared disasters.

Strengthening Local Non-Profits

A 2011 independent study by Social Compact assessing the effectiveness of Section 4 found that despite severe economic challenges, the median operating budgets for Section 4 assisted CDCs grew over 157 percent between 2001 and 2009. This has resulted in increased potential for revitalization, inspiring further investment in areas in which traditional investors have seen little value.

Proven Results

Evaluations – ranging from the federal government’s U.S. Government Accountability Office and Office of Management and Budget to independent research organizations like the Urban Institute and Social Compact – attest to the effectiveness of the Section 4 model as well as the efficacy of the intermediaries that administer the program.

What has been LISC’s involvement?

Since the initiation of Section 4, LISC has invested Section 4 resources to build the capacity of 1,168 CDCs in 299 cities and rural communities across 48 states, the District of Columbia and Puerto Rico.
LISC Section 4 investments have positively impacted communities as diverse as the Mid South Delta; small urban communities such as Providence, Rhode Island; larger sprawling cities such as Phoenix, Arizona; and urban cores such as the Bay Area in California.
From 2009 to 2018, LISC’s Section 4 investments in both rural and urban areas have leveraged more than $6 billion in direct real estate investments and have assisted in building, renovating, or preserving approximately 33,099 affordable housing units.
LISC has also invested Section 4 money in programs that address critical national challenges. These initiatives support a wide variety of programs such as green building, the development of healthcare and childcare facilities, the strengthening of neighborhood commercial corridors, job creation, and community safety.

What can Congress do?

Preserve Section 4 and provide funding of at least $40 million.

The Section 4 Program is the sole source of funding at HUD that provides financial support and development assistance to non-profit CDCs to support their housing and community revitalization efforts.