Boosting the Capacity of CDCs

Despite documentable growth in the number and capability of community development corporations (CDCs) across the country, many observers of the field still believe that limitations in the abilities of individual groups hinder the industry as a whole. These observers suggest that problems among a handful of the older and larger CDCs are symptomatic of an inability of CDCs to address seriously the complex difficulties of most low-income communities. Making this issue more important, many of these CDC-naysayers are in a position to influence the allocation of public resources, thus constricting the flow of money to CDCs in many cities.

While some CDCs have experienced life-threatening problems, many are being made more efficient through increased attention paid to their organizational capacity over the past few years. The National Community Development Initiative (NCDI), a $250-million 10-year-long effort underwritten by 18 national funders – foundations, lenders, insurance companies, and HUD – is one such program that seeks to enhance the work of CDCs in 23 large cities.

In every city covered by NCDI, the community development industry has grown. For example, the number of CDCs capable of producing an average of at least 10 housing units a year grew from 104 groups in 1991 (the first year of NCDI funding) to 184 in 1997 – an increase of 77 percent. IRS data shows that average annual expenditures by CDCs per NCDI city rose 63 percent between 1991 and 1994 (the last year for which we had data). The number of “top-tier” CDCs in these cities rose 45 percent over NCDI’s first six years.

Of course, progress was not uniform among NCDI cities. But, interestingly, there is a trend of greater growth among CDCs in those cities with less history of CDC activism. During NCDI’s first six years, cities without a long track record of CDC activism started catching up with the more mature CDC environments (such as New York City, Chicago, Boston and Philadelphia).

Why was such growth possible? Three factors were found to be most important. First, more money is flowing to the field from such sources as the federal government (HOME allocations started flowing to cities in the early 1990s, in many cases doubling the funds usable by CDCs and other developers of affordable housing), banks, and foundations.

Second, leaders from local government, industry, philanthropy, and the national and local community development intermediaries have emerged as active supporters of community development. These leaders have been able to convene new partnerships and collaborative funding arrangements.

The third reason for CDC growth is the increased attention paid to organizational capacity and program expertise in virtually every NCDI city. NCDI money alone helped over 300 CDCs in the 23 cities, and that funding was only a small part of the investment in CDC capacity over six years.

In their role as partners with the NCDI funders, the Enterprise Foundation and Local Initiatives Support Corporation (LISC) played a major part in drawing attention to CDC organizational needs. The two intermediaries successfully convinced local funders that paying heed to organizational capacity would lead to greater production and broader agendas among the CDCs. In most NCDI cities, this attention was the first sustained attempt at capacity building in the field.

Enterprise and LISC employed five types of capacity-building programs in NCDI cities, often using more than one in each city. These included long-term training programs, grants to individual CDCs to target specific needs, learning-by-doing through project targeting, use and promotion of local CDC associations, and core operating support programs.

Core Support

The core operating support programs are perhaps the most far-reaching in the intermediaries’ work with CDC capacity. Of course, they provide significant funding to the selected groups, but they also provide more than money.

First, the programs link their funding to technical assistance. Many programs commission in-depth assessments of participating CDCs and then offer training or other assistance to the groups to overcome deficiencies. In Washington, DC, for example, the Community Development Support Collaborative assesses each CDC to identify organizational strengths and weaknesses – and also assesses CDCs’ fundraising strategies (on the assumption that CDCs need to develop their own diverse sources to supplement awards from the collaborative). The Indianapolis Neighborhood Housing Partnership has established an intensive training program with the Development Training Institute to make sure all 14 CDCs receiving operating support also address strategic organizational issues. That training includes individual coaching for each CDC, under which an organizational development specialist works with the CDC executive director and board to keep everyone on target and take maximum advantage of the training.

Second, the programs articulate and enforce performance standards. This means that the programs do not automatically fund every CDC or allow their funding to be seen as an entitlement. Several programs have cut funding from organizations that were not able to show progress in meeting standards, and others have held up check distribution until CDCs were able to show progress in key areas.

The assessment of NCDI found encouraging signals that operating support programs were, indeed, having positive effects. All the cities with highly rated CDC operating programs also had higher than expected numbers of capable CDCs. In addition, virtually all of the cities with high ranking CDC support programs had at least a 70 percent change in the number of capable CDCs over the six years studied.

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Components of CDC Capacity

Operating support programs can address the multiple aspects of CDC capacity. While many observers of the field view capacity as merely developing more housing each year, the fact is that more is needed for these organizations to be effective at neighborhood change. In assessing NCDI’s effectiveness, we looked for improvement in the following five measures of capacity:

  • Ability to plan effectively. Strong CDCs have a good handle on community assets and needs and are able to develop a vision for what revitalization activities fit their neighborhood dynamic. Cleveland’s Neighborhood Partnership Program helped its six selected CDCs develop neighborhood plans that would dictate project investments for the next few years. Those plans were more comprehensive and in-depth than the CDCs were able to draft before.
  • Ability to secure resources. Because of where they work and the types of projects they develop, CDCs need a great deal of external support. Recognizing this, DC’s Community Development Support Collaborative funded “fundraising audits” of its eight CDCs. Two of the CDCs learned from these audits that they required full-time fundraising staffs to secure the money they needed. Manna, Inc., hired a staffer who helped raise about $800,000 in 1997 from private sources; about half of this sum was toward a capital campaign for a new CDC office. The CDC also sponsored a Walk-a-Thon, house raising, and has developed promotional materials to “sell” the organization to individual, religious, and philanthropic donors. Marshall Heights Community Development Organization hired its first full-time fundraiser, a former public housing resident leader from the neighborhood, who has successfully raised support for several ongoing CDC projects.
  • Strong internal management and governance. CDCs must be able to manage their resources effectively and account for funds and programs. Their systems must support organizational growth and reflect sound business practices. Boards must understand their roles and reflect the community.
  • Program delivery capacity. A CDCs must develop programs effectively, including the planning, packaging, development, marketing, and ongoing management of their assets.
  • Ability to network with other entities. To carry out their multiple roles, CDCs must be able to find and work well with other organizations. The types of potential partners for CDCs are many and varied. In Indianapolis, three CDCs banded together to form a new entity that could successfully compete for low-income housing tax credit awards for their adjoining neighborhoods. To date they have received two awards, with one project already completed. In Washington, the Development Corporation of Columbia Heights (DCCH) formed a coalition of nonprofit organizations to accept ownership of vacant scattered-site public housing in their neighborhood. DCCH hopes that rehabilitation on the 76 units can begin in a few months.

Lessons of NCDI

Among the lessons NCDI offers for CDCs is that capacity is more than just project development and is best built when it is purposefully addressed over a sustained period. The NCDI example shows the effectiveness of sustained programs with diverse funding. To elicit operating support, CDC leaders should demonstrate gains in planning, fundraising, networking, and management and governance issues and show how they link to the CDC’s ability to deliver product to the community.

The NCDI programs also show that collaboration is important and must be sustained. Building the broad base of funding and technical assistance that CDCs need over the long run means approaching new sources of funding and technical support, and encouraging people to work together. It also may mean encouraging the public sector to work with private funders, an unusual alliance in some cities.

One of the other lessons has been the importance of establishing performance standards for CDCs. The process of establishing standards lets CDCs and funders talk about what is important in the industry, and what barriers exist to further progress. Having enforceable standards encourages a level of accountability that assures a good use of scarce resources.

Despite substantial advances, community development industries remain fragile in many cities. CDC funders and supporters must sustain their commitment to neighborhood development, including backing for core operating support programs. National and local intermediaries also need to continue their critical work in building CDC management capacity. CDCs and their supporters should devote special attention to consolidating the gains in NCDI cities and sharing those gains with other communities.

 

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