New Research Shows What Community Development Organizations Need Most: Support to Grow Their Organizational Capacity
Recent research highlights the importance and needs of nonprofit community development organizations. LISC’s Mark Kudlowitz examines how this data informs our work and the need for additional resources to support these groups’ abilities to help communities across the country.
Many nonprofit community development corporations (CDCs) lack one crucial component when developing and implementing community strategies: capacity—the organizational ability to marshal human, financial and other resources to make meaningful change for the people and places they serve.
While the needs of underserved communities and populations are vast and span all areas of community development, many of the organizations that serve them are under-resourced and understaffed, burdened by their small size and lean budgets. Even large CDCs face operational challenges that hinder their ability to grow to meet ever-evolving local needs.
These CDCs are critical to revitalize communities, whether it be to advance affordable housing, education, healthcare, job training, commercial development or other programs. We know that community development organizations, large and small, have the local expertise and connections needed to ensure that resources reach the most vulnerable populations and places. This is a guiding principle of LISC’s work. We believe that to transform communities, local organizations and residents must have adequate capital, support, and capacity needed to create impact.
To help empower communities, we have staff on the ground working with local leaders in 38 cities and a network of over 140 rural organizations that reach over 2,400 counties nationwide. This boots-on-the-ground approach means we’re able to connect residents to the capital and programs to build resilience and opportunity.
The Grounding Values Study
While LISC has seen firsthand the challenges and successes of CDCs, there has been a lack of data to illustrate that anecdotal evidence. In fact, the last research report on the state of the CDC field was published over 15 years ago. This is why LISC supported the National Alliance of Community Economic Development Association’s (NACEDA) Grounding Values research, a three-year study to better understand the financial health, programs, and location of CDCs across the U.S.
Through an initial analysis of tax data, NACEDA found that there are 5,720 nonprofit housing organizations operating in the U.S., with over $54 billion in assets, of which more than $19 billion are in real estate. While the sector has seen steady growth over time, many organizations reported shrinking operating margins and declining net income. Large groups, which receive the lion’s share of government revenue and donations, hold 84 percent of the sector’s total revenue and 71 percent of total assets. Smaller CDCs rely more heavily on earned income, and have far less cash on hand than larger nonprofits and are much more likely to experience negative net income, financial disruptions, and insolvency.
NACEDA also commissioned a survey of CDCs and that data will be coming out later this year.
Need for Additional Capacity Building Resources
So what can we learn from the Grounding Values study? The data indicate a clear need to improve the financial resiliency and sustainability of all CDCs, with assistance structured to support organizations of all sizes, while being responsive to communities. This is why LISC believes that the federal government must do more than provide resources to support local organizations’ programs and project-level investments. It must also invest directly in these organizations to support their capacity to deliver critical services, and to help them develop innovative approaches that can then be disseminated and replicated in other communities.
LISC calls on Congress to continue supporting the U.S. Department of Housing and Urban Development’s (HUD) Section 4 program, the only federal program designed to build the capacity of CDCs. Through this partnership with HUD, LISC deploys funding to CDCs in urban, suburban, rural, and Native areas to increase organizational capacity for their affordable housing or economic development projects. From 2018 – 2022, Section 4 funds have built out the capacity of almost 1,000 nonprofit housing organizations across the U.S., allowing them to hire additional staff, expand the reach of existing programs, and better serve their neighborhoods.
As NACEDA highlights, capacity constraints are greater for smaller organizations and those working in the highest poverty communities. Federal investments, such as those through USDA’s Rural Community Development Initiative (RCDI), allow rural nonprofits to better scale their operations to respond to housing and community development demands. Our Rural LISC Team is an annual recipient of RCDI funds and has deployed over $3 million to build the capacity of 67 CDCs across 32 states. These rural CDCs are using RCDI resources to develop childcare facilities, affordable housing, workforce development programs, and meet other local needs.
LISC has also advocated for the revision of the Community Reinvestment Act rules to support CDCs by allowing operating grants to be included as an eligible activity under the community development services test; this would pave a clear pathway for rewarding these critical investments.
The Grounding Values study offers insight into the state of the CDC field, and more data will be available soon. The information published thus far speaks to the financial reality that many CDCs face and allows funders to examine where they can help fill gaps. We hope that federal and private funders will use this information to increase revenues for CDCs so they ultimately have the organizational capacity to meet the critical needs of communities nationwide.
About the Author
Mark Kudlowitz, Senior Policy Director
Mark advocates for federal policies which support multiple LISC national programs, including: Affordable Housing, Rural Development, and Transit Oriented Development. Before LISC, Mark worked as the Policy Director of the U.S. Department of Housing and Urban Development’s Office of Multifamily Housing Programs and also worked for over seven years at the Community Development Financial Institutions Fund at the U.S. Department of the Treasury. Mark managed affordable housing and community development programs at the District of Columbia’s Department of Housing and Community Development and held multiple positions at the Housing Assistance Council, a national rural affordable housing organization. Mark earned his B.A. from the University of Florida and M.S.W. from the University of Michigan.