The Changing Model of CDCs

Staying relevant in a changing economy will push CDCs to place importance on green initiatives, sustainability, and out-of-the box funding methods.

Community-based economic development as practiced by community development corporations (CDCs) has worked well over the past 50 years. Through it, thousands of communities have moved from poverty to enough prosperity to prevent them from falling into total economic depression.

But the bar of expectations has been raised. The recent recession, changes in the financial sector, and changes in the funding community have all resulted in a clear message to the CDC sector that change needs to occur. Because funders are requiring greater impact for their investments in nonprofits, the members of the CDC sector need to be more performance driven in producing units of houses, job development, building individual and family wealth, and local economic impact. The good news is funders and investors still see the CDC sector as viable players in improving economically challenged communities. But the CDC model needs to change rapidly and only those organizations that adapt quickly, almost with lightning speed, will survive.

To survive, we should prioritize and implement two changes:

    1. Realize that impact is now our product to “sell” to our customers (funders and participants), as opposed to services.
    2. Find income in different places.

 

Impact

Without a powerful and measurable impact, our “customers” will not buy our “products” any longer. Simply offering “services” will not be enough for participants or funders.

We cannot get by with a full menu any longer — we must focus on fewer programs with more emphasis on the ones that we keep. We must do what we are experts in doing. Chasing funding is transparent to everyone. If you are still doing that, you will be exposed as irrelevant.

One member of the South Carolina Association of CDCs, Homes of Hope, has launched an innovative program — LoCAL Housing — that is an example of powerful impact. LoCAL stands for long-term, compact, affordable, and LEED-certified. This new program solves three of the most difficult problems that CDCs face in South Carolina with one innovative idea. The three problems are:

    1. How can we provide homes for poverty-level families that aren’t just affordable, but are also energy efficient? (Mostly, poverty level families have limited options in South Carolina: Public housing, which sometimes is energy efficient, but often not; single-wide older mobile homes, which are never energy efficient; and dilapidated rental homes, which are never energy efficient.)
    2. How can we provide homes for poverty-level families that appreciate in value, thus building wealth opportunities?
    3. How can we provide marketable job skills to men overcoming addictions (or for purposes of this article — other special needs people) that empower them to find better jobs upon graduation? Homes of Hope and most similar programs typically employ men like this in rehab, which mostly qualifies them only for entry-level employment, placing them at risk for lay-offs.

 

LoCAL Housing is a new compact, highly energy-efficient home affordable to very low income families. It provides a new product for families that addresses the first two problems, while the construction process addresses the third. LoCAL Housing provides LEED Green Associate status to the men in our program, and gives on-the-job experience in innovative green building skills. LoCAL is the first in a series of products coming on line in South Carolina to position CDCs as the expert provider of energy-efficient residential building products to grow a green economy in the state.

Income

We must also find needed revenue in different places, especially using a business model. Homes of Hope, for example, is building market-rate housing alongside our affordable housing to achieve better neighborhood health and to allow us to self-subsidize the affordable housing. All stakeholders embrace this model for affordable housing development because this model creates stable communities for prosperity.

For CDCs that don’t build housing, starting micro-businesses of other types may work. For CDCs that lack the capacity to do either, mergers with larger capacity CDCs is likely the only solution.

In South Carolina, the CDC sector is pursuing additional paths to economic prosperity. Our efforts to lead the green economy are being met with support from a variety of stakeholders. Our effort to partner with the CDFI sector to grow a micro-enterprise network is attracting the attention of funding partners. And our collaborative work with a broad coalition to support economic development in rural South Carolina has attracted partners we have never worked with before. It is a new day in South Carolina and in the CDC sector. We can build on our past models to create a new path to prosperity.

1 COMMENT

  1. Comprehensive! Great, now we need others that work for differing problems – how bout the aged? How bout the extremely impoverished (especially when residents of wealthy communities)? Locality development seems to be an organizing model that fits all situations. Can CDCs return to that strategy, simultaneous community and people development? Housing, which has become the main expertise can remain in the mix, but as per the above program, not the whole…

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