When LIIF introduced its new strategic plan, “Mobilizing Capital to Build Communities of Opportunity, Equity and Well-Being” last year we set a bold goal of mobilizing $5 billion in capital over the next decade to advance racial equity. The plan recognized that LIIF must more intentionally use its primary engine for change – its lending platform – to center racial equity and truly move the needle on opportunity for everyone.
Structural racism is built into the systems in which LIIF operates. Decades of redlining have led to deep inequities, including the persistent racial wealth gap. Indeed, Black and Latino families had less than 13% and 20% of the median wealth of White families in 2019, respectively. These disparities continue to show up as our nation grapples with the social and economic fallout from the COVID-19 pandemic. Black and Latino households were twice as likely as White households to report having lost all their savings during the pandemic. Understanding that these disparities were caused by economic and housing systems designed to exclude Black and Latino communities, we must be intentional in our inclusion of these communities and design new products and programs to meet needs identified by the community members themselves.
This year, LIIF began a long-term process of transforming how we lend in order to advance racial justice: as an initial step, we worked closely with Black affordable housing developers to design and launch the Black Developer Capital Initiative (BDCI). We are now laying the groundwork to examine our underwriting criteria to understand biases that can perpetuate long-standing racial inequities, like relying solely on personal wealth and balance sheet strength. In addition, LIIF has accelerated community-led housing strategies and significantly expanded our work to support the long-term success of children, working parents and entrepreneurs of color through our early care and education (ECE) grant-making and advocacy.
Pursuing Solutions: Access to Capital
This year, LIIF developed and launched the more than $95 million Black Developer Capital Initiative (BDCI), a joint effort with National Affordable Housing Trust (NAHT), a LIIF-affiliated Low Income Housing Tax Credit (LIHTC) syndicator, to support the growth of Black-led for-profit and nonprofit affordable housing developers. Developed by LIIF and NAHT staff, the initiative was deeply informed by engagement with Black affordable housing developers and designed to address longstanding inequities in access to capital.
LIIF created a BDCI line of credit product that closes a market gap identified by LIIF’s borrowers, and NAHT launched a BDCI LIHTC equity fund to ensure Black affordable housing developers have equitable access to LIHTC equity. The underwriting for LIIF’s BDCI line of credit focuses on a developer’s experience instead of solely their balance sheet or wealth. In contrast, financial institutions’ reliance on balance sheet strength and personal wealth as measures of capacity to successfully complete development projects often unfairly assesses Black affordable housing developers as “higher risk,” limiting their access to capital and constraining their growth and influence on their local economies.
To learn more about the impact of BDCI, hear from borrowers Wendy Daniels and Gina Merritt. LIIF will continue to develop the products and resources available under BDCI to demonstrate the power and potential of bringing a racial equity lens to capital deployment.
Pursuing Solutions: Local & National Approaches to Housing
LIIF has sought to center community voice in its lending and policy advocacy efforts to address the ongoing housing crisis and stabilize communities in the wake of the COVID-19 pandemic. This is particularly significant for Black and Latino households, which are at significantly higher risk for housing instability resulting from both evictions and foreclosures than White households.
One example of this work is LIIF’s serving as capital partner to Lift to Rise, which has organized a place-based, community-led planning effort to increase the supply of affordable housing and early care and education services in the Coachella Valley in California, with the goal of deploying $100 million over the next decade. The Coachella Valley is home to a diverse community of local residents, the majority of whom are Latino and face an affordable housing crisis too long overshadowed by the wealthy second home residents. This year, LIIF has worked with Lift to Rise to raise and deploy capital, closing four loans to support the development of affordable housing for farm workers, people who are homeless or at risk of homelessness and seniors, as well as an early care and education facility and medical clinics.
Despite ambitious local efforts like Lift to Rise, our nation’s housing crisis only seems to increase over time as policy fixes fail to meet the level of need. This year, we joined SAHF, NAHT and many other housing stakeholders to advocate for policy changes that would preserve affordable homes financed using LIHTC. Clarifying nonprofits’ Right of First Refusal for properties they have developed and fixing the Qualified Contracts provision would both strengthen the LIHTC program and ensure thousands of rent-restricted homes remain affordable to households with the lowest incomes.
LIIF, SAHF and NAHT also joined more than 100 partners nationwide to advocate for a new Community Restoration and Revitalization Fund (CRRF). This proposed federal funding source would administer resources directly to local community partners to support projects that integrate affordable housing and civic infrastructure. Our nation’s policies must do more to both strengthen our existing affordable housing tools and create innovative new resources that intentionally advance holistic and community-led projects.
Pursuing Solutions: Triple Halo Effect of Early Care and Education
Expanding the availability, quality and equity of early care and education (ECE) in the U.S. is one of LIIF’s core goals in its strategic plan. ECE has a triple halo effect by educating children, providing stability and opportunity for parents, and creating economic opportunities and jobs for ECE providers. The COVID-19 pandemic underscored the critical role ECE plays in the nation’s economy, as well as how vital it is to families’ and children’s social well-being. LIIF also views ECE as key to advancing racial equity. The vast majority of ECE providers with whom LIIF works are women of color who own small businesses, and high-quality ECE is also critical to addressing racial disparities in educational outcomes for children.
During the pandemic, LIIF worked hard to marshal resources and lift up the stories of ECE providers. Since mid-2020, LIIF has raised more than $40 million to provide grants and technical assistance to more than 2,200 ECE providers. These funds have primarily been allocated to home-based providers, almost all women of color, to enable them to keep their businesses open and provide quality care for families.
In recognition of this, LIIF has grown our advocacy efforts to support a robust policy platform to ensure the country’s ECE policies meet the needs of providers and families. For example, LIIF has led efforts within the National Children’s Facilities Network to advocate for the public and legislators to recognize child care as infrastructure. Our California team also led the Build Up California initiative, which helped to secure $250 million in the recent state budget to support ECE facilities. LIIF will continue to build on these efforts to bolster the ECE sector to benefit providers, children, families and the economy.
Progress and Accountability
As LIIF continues to evolve the way we work, we are also seeking ways to hold ourselves accountable on how we measure impact, value risk and engage with communities and borrowers. LIIF staff is dedicated to developing the tools we need to assess how our lending practices are moving toward our goals and is creating an Impact, Risk and Profitability framework to measure our impact while ensuring we successfully manage risk and that our lending is sustainable over the long-term. Our team, led by Eliisa Frazier, director of racial equity and impact lending, is refining an impact measurement tool that will allow LIIF to identify a project’s potential for transformational change as well as its potential to advance racial equity so that we can identify and pursue high-impact projects. As we apply the this framework to our lending, we will be able to measure progress toward our $5 billion commitment to racial equity in community development.
Our strategic plan is pushing LIIF to be more ambitious than we ever have before. We charged ourselves with deploying higher levels of capital, while also reimagining our businesses practices, engaging more deeply with communities and pushing for broader, more impactful policies. This first year has been a balance of laying strong foundations and putting ideas into action. As we continue to advance these efforts, we have also identified some areas that we believe will come into sharper focus in the months to come, including new affordable housing preservation and expansion strategies and further examining bias and structural racism embedded in standard credit processes.
I am proud of the tremendous work and commitment of LIIF’s Board, staff and partners. I look forward to continuing to share our progress, learnings and challenges as we pursue our mission of creating equity, opportunity and well-being for all.