Is bigger always better? Among community development practitioners, it often appears to be the case these days. Many nonprofit housing corporations founded in the late 1960s and early 1970s, with large staffs and numerous programs, eventually lost their major funding sources and either contracted or went out of business. In the past decade, some community development organizations and their supporters have again begun to consider increasing their size as a means to achieve greater impact. But in an era of shrinking resources, the question of whether size matters demands close scrutiny in a field where “going to scale” has become a commonplace goal and is generally taken for granted as beneficial.
In the CDC world, “going to scale” typically means increasing the number of affordable housing units the organization produces and generating economic growth for more people in a larger geographic area. The goal is to house more people, achieve greater programmatic and administrative efficiencies, and to become more financially self-sufficient. The assumption is that by getting larger, organizations will be better able to accomplish these objectives.
In fact, there is no foolproof, cookie-cutter approach to building an effective, large-scale CDC (the term we are using throughout to refer to all nonprofit housing corporations). The number of large CDCs that have collapsed in the past decade — Eastside Community Investment in Indianapolis; Asian Neighborhood Design in San Francisco; National Temple CDC in Philadelphia; People’s Housing in Chicago; Whittier CDC in Minneapolis — is indicative of the challenges in building and running them successfully.
Large and small community development groups can both play essential roles in the production of affordable housing by playing to their strengths. According to Stacey Stewart, senior vice president of the Office of Community and Charitable Giving at Fannie Mae, “Getting to scale and operating a small nonprofit housing group are not mutually exclusive. Quite the contrary: if handled right, these two operating philosophies can support each other in ways that make both more effective.”
Stewart believes that an organization going to scale and operating across multiple states simply cannot have the kind of neighborhood-by-neighborhood, on-the-street knowledge of where need is the greatest and of what’s working and what’s not. A neighborhood community development organization does have that local knowledge. When the two enter a smart partnership, local knowledge can inform scale development, and scale development can put more housing units in production than the small nonprofit could ever hope for.
Because the community economic development environment has changed dramatically in the past 40 years since the founding of Brooklyn’s Bedford-Stuyvesant Restoration Corporation and other prototypical community development corporations, an understanding of these changes is critical to crafting effective and sustainable 21st-century CDCs.
The major environmental changes include:
- The growth of new funding sources and resource bases. The early CDCs, including Bed-Stuy Restoration, were heavily dependent upon direct federal funding sources, notably the Office of Economic Opportunity (OEO). The early CDCs received millions of dollars of project-based funding. Many of these funding sources were eliminated over time, and a number of the early CDCs that relied too heavily on project funding disappeared. Today’s CDC funding bases are more diversified, and most public funding sources at HUD (Community Development Block Grants and HOME Investment Partnership Program), HHS (Community Economic Development Fund), and the Department of Labor’s Jobs Training Partnership Act tend to provide smaller grants and are very competitive.
- Public-sector funding of CDCs has been cyclical over time, and resources at the federal level are currently flat to declining. CDCs have shifted their real-estate funding strategies to local and state resources and to the Low-Income Housing Tax Credit and New Market Tax Credit program.
- Growing competition in low-income communities. The number of CDCs has grown exponentially in the past 20 years, from 1,500 to more than 4,600, according to a 2005 census conducted by the National Congress for Community Economic Development. Moreover, private developers have increased their interest in low-income communities, resulting in significant competition for real-estate development projects. CDCs should be proud of the role that they have played in launching the revitalization process of their communities: They have built and renovated more than 1.25 million units of affordable housing throughout the United States since the late 1960s. Their success in physical revitalization has encouraged other nonprofits as well as private developers to undertake development projects. Neighborhoods in strong economic markets are becoming gentrified, forcing the existing CDCs to develop new strategies and tools to help low- and moderate-income constituents cope with these market forces.
- Growth of regional economic markets. During the past 40 years, there has been a major shift in resources from inner cities and rural communities to suburban and regional centers. Jobs have been lost in low-income communities, forcing residents to pursue employment and housing opportunities in suburban and regional centers. CDCs are starting to follow their constituents and develop affordable-housing and economic and community resources outside their traditional neighborhood or community. Savvy CDC leaders have started looking beyond their municipalities, paying attention to political and economic forces at the county, region, and state level to influence policy and access resources.