The community development sector emerged in the 1960s from the civil rights movement, as part of a host of national efforts to address racism, poverty and economic injustice. During this time, the nation began to face up to some of the explicitly racist policies embedded in federal programs such as Federal Housing Administration home mortgage insurance, which excluded African Americans from homeownership; banks that prohibited investments and loans in poor and minority neighborhoods through redlining; and zoning laws and urban planning that increased racial segregation and devastated communities of color.
Local activism drew attention to these injustices. Community organizing and community development responded by insisting that investment go directly into low income and segregated neighborhoods. Over the next 50 years, the sector created housing, jobs, schools and community facilities serving millions of Americans and created new policies and capital tools that have changed the way we invest in distressed neighborhoods nationwide.
Despite these accomplishments, many of the same problems that the sector was created to address remain unsolved. LIIF spoke with Daniel A. Nissenbaum, LIIF’s current CEO, and Nancy O. Andrews, LIIF’s former President & CEO, about the industry’s evolution. They discussed how the field is facing up to hard questions about justice and inequity. They also reflected on how leaders are moving to change our organizations and the systems that allocate power and resources to further economic equality and racial and gender equity.
The community development sector is deeply engaged in conversations about racial and gender equity in our work. You both have been working in this space for the majority of your careers. How do you view the evolution of the sector at this moment?
Nancy O. Andrews: I watched the sector emerge from the 1960s civil rights movement, when I was a community organizer focusing on housing and tenants’ rights in Salt Lake City. Our focus was on empowering people within neighborhoods to advocate for what they needed and include the community’s voice all the way up to Washington, D.C., as decisions were made about policies and federal resources that affected neighborhoods.
Later, with leadership from the Ford Foundation’s investment in the first community development corporations, we took on the challenge of literally rebuilding neighborhoods. We focused on building affordable housing as a lynchpin investment to reverse economic decline in communities. We also focused on jobs, job training and economic development. But housing was such a core issue, and a consuming development challenge, that we were forced to focus on the technical aspects of our work of building and financing dilapidated properties. Over time, that focus distracted us from the activist roots that inspired our work in the first place.
So, the movement began to pursue two paths – civil rights activism and community rebuilding. We saw this work as deeply connected, but we also needed to specialize to get the job done. Because we believe the two threads of work were inextricably linked, we assumed that community investing would lead to increased economic justice for all Americans, and that it would also lead to racial and gender justice. In practice, this has proven more difficult that we first imagined.
Daniel A. Nissenbaum: That knitting back together is the struggle that all CDFI leaders are facing now. In many ways, we thought the rising tide of investments would address all challenges, but today we see the racial gap is stark and enduring: today, today, white Americans have seven times the wealth of black Americans, receive $23 billion more each year in K-12 funding than equally populated districts with majority people of color and live four years longer with fewer chronic health conditions. These differences factor significantly into generational opportunity and upward mobility.
I was in banking for 28 years before coming to LIIF, much of that in community development banking. The motivations at large institutions were driven by the Community Reinvestment Act (CRA), which targeted investment in low-and moderate-income neighborhoods. Income and geography were the key tests, which were conflated with intentions to address issues around racial disparities. We did see our work helping people of color, but in these institutions, racial equity wasn’t the core of the work – outside of mortgage lending. From the inside, many of our community banking colleagues worked to change the conversation to make the case for why community development was a necessary investment that was the right thing to do – and good for the institution more broadly.
Now, sitting on the CDFI side of the table, I see changes taking place more rapidly. Over the last few years, there’s been a lot of succession in the industry – of which I’ve been a part. Nancy and other founders are passing the baton. It’s a moment of both inflection and reflection. LIIF is a billion-dollar institution, which is very large, but we’re taking on issues like the affordable housing crisis, severe income inequality and growing health disparities. It’s difficult to have an impact on these seemingly intractable issues, driven by larger macroeconomic factors, which is why focusing on the systems that underpin these problems is crucial for making progress. We can’t do that without naming racial and gender inequity explicitly, which is why Nancy’s writing in previous articles and now her new Urban Institute white paper is so important. If the incentives in the systems we work with do not name these as targets, we have to.
Andrews: Right, and how do we translate the vision into action and build an enabling environment at the national, state and local levels? Our industry created the CRA to address redlining and segregation. We went on to create the Low Income Housing Tax Credit, the CDFI Fund, the New Markets Tax Credit and the Capital Magnet Fund along with numerous other progressive changes at the state and local level. We marshalled billions of dollars of new investment into poor and minority communities. And, despite all these successes, we’ve also watched as our cities have struggled once again with the problems of poverty, racism and economic injustice. This is a sobering time for us. It gives us an opportunity to reflect anew on our work and how we can more deeply include a focus on racial and economic injustice.
At our core, we are social activists who have always thought outside the box. We intrinsically know how to reimagine our work. In the last couple of decades, we’ve broadened the vision of community development to include investing in human capital – in K-12 education, early care and education (ECE) and mobility. These ideas were encapsulated in the Investing in What Works book, which LIIF and the Federal Reserve published in 2013. Now, we need reimagine our field, with racial and gender justice at the core of our work.
Nissenbaum: From a systems perspective, it’s interesting to think about CRA and the Home Mortgage Disclosure Act (HMDA), which were created at the same time. HMDA has really been about gathering and publishing data on a number of dimensions, including race. CRA, however, has income and geography requirements, and so in many people’s view it is detached from racial equity. It does not proactively support racial and gender equity because the primary focus is volume, and banks are incented to look solely at designated census tracts that fall below income thresholds. Ultimately, capital will flow to the path of least resistance, so this really is a systems question about how we incentivize investment in ways that further racial justice. This is why the current debate around the newly proposed regulations for CRA is so terribly important – it quite literally will reverse any effort toward more intentionality toward racial equity.
As CDFIs, we need to think about where we have the most impact and the most leverage, given our size relative to the market. One thing for LIIF, and for many of our peers as you describe in your white paper, is that we’re starting many of our racial equity conversations by looking inside, at our team, board and management to create an environment and internal policies and practices that support racial and gender equity. It is so important to have alignment and “buy in” internally in order to make progress.
What are some of the different ways that CDFIs are approaching racial and gender equity work? Are there any examples that are particularly exciting?
Andrews: Economic injustice and poverty are issues that are most deeply visited upon people of color. There’s a similar issue for women – most poor households are headed by women with children. So, there’s a deep and abiding connection between poverty, injustice, race and gender. I believe the conversation about systemic solutions must go beyond race and also include gender. At the same time, within an organization, we must be inclusive of all identities and embrace all types of diversity. In programmatic work, like LIIF’s, I believe we must focus on what affects economic justice, and that means addressing racial and gender inequity directly.
Nissenbaum: Yes, I’ve found that message resonates. While we often want to jump right to changing what we do, we’ve found that it’s critical to examine how we work. We’ve engaged our staff and Board to set goals and ask ourselves difficult questions around what equity means for the organization. This is influencing how we look at hiring and staffing policies and processes across a broad array of issues and identities, including race. We are also bringing this perspective into how we shape our new strategic plan, which will guide the organization for the next three to five years.
In terms of our core lending and programmatic work, we are learning a lot and finding some high leverage points around rethinking the role of capital in advancing racial and gender equity. For example, LIIF’s work to invest and build capacity in the early education field is almost entirely comprised of women of color-owned small businesses, so it is very responsive to the issue you raise around the intersection of race and gender. As you know, LIIF has been a national leader there, and we plan to increase our focus on that work. The Strong, Prosperous, And Resilient Communities Challenge (SPARCC) is another example, where we have more flexibility in the type of capital we can provide, but we’re still being pushed on whether we have the products that are responsive to what communities really need. Our traditional products can only go so far, but if we’re going to really advance this work, we’re finding we need more flexible, longer term, equity-like capital. We have to ask ourselves, our peers and our investors and funders how we can innovate to support more community voice and asset control.
Andrews: Those examples are exciting. In the research for my recent paper I heard about a number of promising paths, some of which I know LIIF is involved in, including:
- Housing developers making more efforts to build mixed-income housing in poor neighborhoods as well as affordable housing in high opportunity neighborhoods. Most of our national policy and resources for affordable housing is concentrated on building low cost housing in low income neighborhoods. But we’ve learned that this can have the unintended consequence of intensifying racial segregation. So, the early work of numerous nonprofit developers to focus on mixed income development or high opportunity neighborhoods is an important way to introduce segregation-busting strategies into our work.
- Another example is an effort to use Low Income Housing Tax Credits (LIHTCs) to build mixed-income housing in high performing school districts. A key challenge here is that these districts frequently do not qualify for CRA credit. That’s why broader policy reform is so important, and where leaders like you and others can use their influence and their voice to begin changing the conversation.
Nissenbaum: The enabling environment is so important, but we’re at a really difficult time in our efforts to align capital with impact. The current CRA proposal is an existential threat to any chance to increase targeted investments in high impact community development programs. Opportunity Zones, one of the largest new federal programs, promises to bring lots of capital to distressed neighborhoods, but has no targeting at all to need, and certainly doesn’t focus on community outcomes based on either race or income. Beyond those examples, as we push for change, we also need to make sure we are mindful of unintentional adverse effects, like the question of whether programs like LIHTC concentrates poverty. We have to defend scarce resources, like LIHTC, and we have to continue to interrogate these programs to make sure we are doing our best work.
I’m excited about the idea of engaging housing authorities as partners as we did in with the Tacoma Housing Authority in Washington state. This project involved $14.5 million in New Markets Tax Credits from LIIF alongside investments from others to bring the Eastside Community Center to life for youth and families in an economically challenged neighborhood. Unlike some of the other groups we invest in, housing authorities control all the levers: they own land and housing, have section 8 vouchers, can issue bonds, can fund other groups and sit at the table with other agencies. They can be very powerful partners.
What systems-level change would you make that you think would make the most significant difference in advancing racial and gender equity?
Andrews: I would amend the CRA and federal programs like LIHTC and New Markets Tax Credits (NMTCs) program to include a segregation-busting lens that encourages mixed-income housing in poor communities and affordable housing in high opportunity neighborhoods. Our sector has come out stronger after facing adversity time and again, so I firmly believe we’ll figure out how to channel our energy and ideas to tackle these challenges.
Nissenbaum: Yes, I agree. Our focus must be on changing the incentives in our systems, like CRA and LIHTC. We’ve seen philanthropy and local organizations changing the way they allocate funds to support mobility and investments in high opportunity neighborhoods. As you know, we issued our first S&P rated bond funding, which provides LIIF with funds that aren’t geographically earmarked. Seeking ways to make that kind of capital more available could make a big difference for the sector.
Additionally, we need to look at leadership and decision makers. We have to be upfront that our industry has been led by white leaders investing in communities of color. That’s starting to change but how we’re supporting leaders of color in our sector needs to keep evolving. At LIIF, we are also thinking about how we can be more intentional about who we are investing in. Do they reflect the community in which they work? How is community voice represented in our investments? Are we helping to build wealth for communities of color? Those are the kinds of things that could affect our business model, which is complex, but get to the heart of questions about agency and power.
We’re clear that just getting and deploying more capital is not enough to advance racial equity. Out of SPARCC’s work we’re seeing political power develop, which is among the most exciting outcomes. For example, members of the Chicago site deeply influenced the city’s new administration around putting issues of racial equity at the center of the local conversations about transit and development. It is really raising the question for LIIF, which is primarily a capital organization, about what we do outside of or in addition to capital deployment. Meaning, what can we do as an organization to not just provide capital, but also to support real capacity building, and to help ensure that innovative capital and development models are raised up in order to influence policy – particularly at the state and local level, given the failure of federal policy to respond to community issues.
Andrews: I think you’ve put your finger on one of the most important issues. As CDFIs became professionalized, we began to think the craft was the answer, that capital by itself was the most powerful lever. Capital is only part of the answer. It’s a tool in service to a bigger goal. In the past, CDFIs have often believed our impact was measured by our deployment numbers. We must remind people just because we’ve exercised the tool well doesn’t mean we’ve changed lives. We are a partner in this broad field building work.
Nissenbaum: Yes, and I don’t think we know exactly what that looks like and how to measure it. If the goal is to create more housing units via LIHTC, well, we know how to do that. If the goal is racial equity – what does that look like and what will that mean for the role of CDFIs in this broader effort? I’m excited about the ways CDFI can partner more consistently with other groups to get to this intentionality.
Andrews: I think those are the right questions, and we need a field-wide conversation to address them. We need to collectively answer those questions. I think together, we could identify some of the most important channels and strategies for changing the enabling environment to address not just poverty, but racial and gender injustice. We’ve done this so many times before, there’s no reason on earth we can’t do it again.