Community Development: Between a Rock and a Hard Place?

One of the major questions for the affordable housing world in the next couple of years will be how well its various segments come together.

Miriam Axel-Lute

June 18, 2024

I’ve had the privilege of being the editor of Shelterforce for 14 years, and I also worked there in the late 1990s, with a period of time in between in local news and working within the community development world. For those not familiar with Shelterforce, we’re a nearly 50-year-old national nonprofit publication founded by tenant organizers who then moved on to also become community developers, and the publication moved with them. Now we cover the entirety of the housing justice, affordable housing, and community development worlds.

But enough about me. I’m here to talk about you. Or to talk about your field—community development. I’m going to do this with a mix of recent research results and my own observations and what I’ve been hearing from practitioners like yourselves.

So let’s start with a few big numbers—

According to the Grounding Values research project by NACEDA [now Community Opportunity Alliance], of which Texas Association of CDCs is a member, there are roughly 6,200 community-based development organizations in the country, accounting for 185,000 units of housing development or rehabilitation every year. That’s four times the total housing starts from the largest 50 affordable housing developers in 2022, according to Affordable Housing Finance. Collectively this field makes a significant impact.

And that’s all the more impressive because while housing development is pretty much all that those top 50 developers do, it’s far from the only thing that community-based development organizations do. Some of your groups don’t even build housing, or not every year. But the Grounding Values research shows that your organizations do an average of nine different things, with an average budget of only $3 million. And it’s more than nine things for those organizations with leaders of color or serving residents with higher proportions of people of color.

Those things include providing social services, offering lending and financial products, community planning, advocacy, commercial and community spaces development, arts programming, community engagement, organizing, and more.

I’m inclined to echo Frank Woodruff, director of Community Opportunity Alliance [formerly NACEDA], who looked at those results and said it’s time to lay this argument about scale to rest. Whatever you think they should be, CDBOs are not scale-based organizations. They are accountability-based organizations, defining impact by accountability to what their communities need and want, rather than grinding out the most units in the most efficient way. This is not, by the way, an argument that it’s a problem when CDCs do larger developments, or that they can’t address problems at a meaningful scale. Just that they tend to come to their understanding of impact from a different direction.

Now, I have to make a side note on the whole “9 things, $3 million” part: A prominent funder of ours once told someone else, after listing a bunch of things we’d accomplished, “and they do all that on a shoestring!” It caused for us a weird mix of pride and frustration—and I expect you have a similar reaction. Doing things on a shoestring should not be the expectation, even if you’re good at it. It leads to burnout, and to skipping between priorities as funding winds change direction.

And in fact, those were some of the findings that emerged from a different research project by Community Opportunity Alliance, this one in collaboration with ThirdSpace Action Lab, called Storied Communities, Community Stories, which consists of interviews with residents in four communities about the CBDO that serves their area. Interviews included both resident leaders who’d been involved with their CBDO in some capacity and also residents of those communities who weren’t connected in—those residents were engaged by local artists. Both resident leaders and less-involved residents were overall quite positive about their CBDOs, and appreciative of the work that they did. But they made two repeated observations—that programs would shift in response to funding availability, and staff turnover was often high. Both of those things tend to lead to a lack of trust with residents. Residents didn’t blame the CBDOs for these things—they know it’s harder to get funded for advocacy and organizing, for example, than other kinds of work. But they were extremely aware of the consequences.

There are some other trends from the Grounding Values research that stick out to me as important:

Eighty percent of the funds go to 20 percent of the organizations. This is a pretty normal kind of split in any industry, but it doesn’t work as well in a place-based field where those smaller organizations tend to be working in the places with the highest need.

The South has smaller organizations on average, and the fewest organizations relative to the number of people living below the federal poverty level, though the total number of organizations there is highest.

A lot of the time the numbers back up our conventional wisdom. But sometimes they don’t. For example, the proportion of funding per capita of people in poverty is about the same for urban organizations and rural. But there is a type of place that doesn’t get its fair share of resources. Do you know what it was? Smaller cities and MSAs. Many of them are nearly without community development infrastructure or resources at all.

Rates of financial distress were lower than expected—Woodruff says when he asks people to guess the proportion of community development organizations that are in financial distress, they usually say something on the order of 50 percent, while the number the researchers found was more like 20 percent. Now there are two caveats there—first is that there are many ways to define financial distress, and the second is that while the census covered the years 2019 to 2021, the financial number crunching from the 990 tax forms didn’t have access to any data since 2018, and we know a lot has changed since then. The field has weathered the pandemic a lot better than many of us initially feared, largely due to infusions of public recovery funds—but for many organizations the long-term effects of the crisis in terms of dwindling public funds, unpaid rent, and buildings needing expensive repairs are catching up to them, on top of new challenges like rising insurance costs.

Also on the unexpected front—and important to know when you’re taking in some of these findings—by Grounding Values’s definition of a CBDO, about a third served a neighborhood or a city, a third served a county or an MSA, and fully a third served a state or multiple states. This was, I’ll admit, surprising to me—while I know there are great nonprofit housing developers with large footprints out there, I have trouble wrapping my brain around a multistate organization that is truly community based without an elaborate democratic system of smaller chapters feeding decisions and input up to the main entity. (If you know of any that operate that way, please let me know; I’d love to learn about them.)

I accept that rural-serving CBDOs are going to have larger service areas on average, by nature of density, but only 14 percent of respondents were rural-only, so presumably those multistate organizations also include many of those who identified themselves as having a mixed urban and rural service area. Without knowing more, I can’t say much about these organizations except to say that it’s important to know that they are in the data we’re getting.

Also, I can pass on a statistically nonrepresentative anecdote from Woodruff, which was that a lot of organizations that were considered in the wide tent of potential CBDOs and sent the survey actually answered “no” to the screener question about being community-based and never took the survey. That means everyone that was included believed they met the definition. The definition was quite broad—have some unspecified portion of your board represent your constituents, limit the participation of public officials on your board, and serve mostly low-income people.

That broad definition was done on purpose, to have a big tent and understand the variety among organizations that identify as community based. That makes a ton of sense for the kind of research they were doing. But there are others who would like to hold the field to a higher standard of community based. Many of those were interviewees in the research Toward an Anti-Racist Paradigm in Community Development, funded by the Robert Wood Johnson Foundation and carried out by ThirdSpace Action Lab. For that report, researchers spoke with over 80 professionals in community development, of all demographics and roles and types of organizations, and teased out a number of assumptions and narratives that are common throughout the field, affecting how we do business, and that are perpetuating existing disparities. Many of the interviewees called on the field to aspire to a stronger definition of community based, including having actual residents (not just people who “represent them”) have a meaningful presence on the board.

So what is the current state of the community development field?

In both the zoning sphere and the homeownership sphere, we’ve had a really good run of a half dozen years of finally talking about the intersection of housing discrimination, segregation, and the racial wealth gap. We got to a place where the understanding that redlining in the past had much to do with current visible patterns of segregation was fairly widely accepted, and we were having a lot of conversations about how if the problem was caused by race-conscious policies, race-conscious remedies are called for. And then the Supreme Court made a narrow, limited ruling about Harvard’s affirmative action program and an energized right wing started going on the attack. All eyes are on the Fearless Fund lawsuit, but before it’s even decided there appears to be a widespread assumption that we’ll need to go back to colorblind proxies and workarounds, some of which work better than others.

But we’re doing this at the same time that research like Grounding Values is pointing out that we still have serious disparities in funding for organizations with leaders of color, with average revenues more than $1 million/year lower, and assets more than $2 million lower on average. They also report a shortage of support for those leaders (that’s support, like mentors or peer cohorts, not training, which implies a skills deficit there’s no evidence of). A vast majority of leaders, white and people of color, mentioned this, but even more leaders of color said so.

Leaders of color within the field are increasingly speaking out, pointing out the ways in which, despite our field’s origin and its values, some of its funding structures and patterns and leadership demographics are still reproducing the structural racism that pervades our society. Toward an Anti-Racist Paradigm in Community Development found that though these narratives are more often expressed by those with more power, like funders, than by those on the ground, they run throughout the field. Here are just a couple of examples:

“Blank Slate Narrative. The level of disinvestment in communities of color make[s] them ideal places to test new ideas (with an attention to outside visionaries rather than resident visionaries). . . . The largest institutions in communities of color are the ones that we should really build our strategies around and leverage, even if they are disproportionately white, affluent institutions, and even if this means less investment or attention for smaller anchors and assets led and developed by people of color.”

Or there’s the “Equating Direct Service and Support Infrastructure Narrative,” whose simplest version is to believe that community development financial institutions are the modern evolution of community development, instead of a very specific subsector of it.

So, again, what is the state of the community development field?

The profile of the field has been raised a bit thanks to the higher profile of housing as an issue in the country—it finally made it onto the national stage, as housing unaffordability has come to affect more and more people. Rent inflation has outpaced currency inflation by 40 percent in the past decade. There’s also the way that the sector stepped up during COVID, and with a bonus: the rapid growth of the CDFI arm of the sector. And the problem with a higher profile is that more people have an opinion about how you should be doing your job. One way to describe the affordable housing world right now is “essential but fractured.” We have more players, but many of the players and the topics are still disconnected from one another.

Where once you and your colleagues—along with some organized affordable housing advocates at the national and state level, and the tax credit syndicators and CRA banking folks—were basically the only folks talking about affordable housing, now the conversation is getting bigger. Now the topic is in the State of the Union address. The Supreme Court is hearing a major homelessness rights case this month. Housing makes headlines in major newspapers. Global financial firms that are making tons of money extracting value from single-family rentals feel the need to state that they are all about supporting affordable housing. Financial firms see potential profit in trying to get hold of LIHTC properties.

There are other new voices in the affordable housing space too. We heard this morning about the movements for zoning reform and YIMBYs (and YIGBYs), who see zoning reform as part of a push to create housing affordability by just building more. Supply-side advocates have joined forces across the political spectrum to fight restrictive zoning rules and permitting processes, stand up to NIMBYs, and try to make density not a dirty word. I think one of the most underrecognized sea changes of the affordable housing world over the past five years or so is the rapidity with which these forces have accomplished what the funders would call a “narrative shift”—from single-family zoning being a third rail no one could touch to us having a serious conversation this morning about moving beyond it. From affordable housing developers often fighting alone against unhappy neighbors to it being a hip thing to go be pro-housing in local planning and zoning meetings. “One of the major problems with housing affordability is lack of supply” has been widely embraced as conventional wisdom, from the Biden administration to major media outlets.

I emphasize this because I think this kind of narrative change has real effects for those working in the sector. It can make it easier to build multifamily as of right when zoning is changed. It can also increase competition for land just after an upzoning happens. And more broadly, it affects the kind of advocacy and programs that philanthropy and government are interested in funding—and not interested in funding.

So, for example, preservation and housing quality get overshadowed by the housing supply conversation. Funders have always had a bit of a bias toward ribbon-cutting and capital projects, and having the conventional wisdom be that we need to boost supply, of all kinds, to bring down costs is only exacerbating that bias. You cannot build supply nearly so well if you’re also losing what you’ve already got to deterioration (or conversion to market rate).

Those who work in places where housing quality rather than housing supply is the primary issue know this all too well, and you have common cause with all managers of older affordable housing, many of whom are not receiving the operating subsidies they need to bring those units back into good shape and maintain them that way. I think that’s something the field doesn’t want to talk about a lot because it sounds like admitting we’re doing a bad job, when really it’s saying that we are being expected to do the impossible.

Also on the housing quality front, low-income homeowners, who have often been sold on homeownership as “the only reliable way of building wealth” often instead discover that buildings depreciate, and only land appreciates (though it doesn’t always), and find themselves struggling to pay for major repairs and maintain healthy living conditions. Older homeowners in St. Louis have an average $13,000 in unmet home repairs. I think it’s imperative for the community development field—which contains organizations that do home repair, weatherization, homeownership counseling, housing management, and rehab—to speak from that point of intersection about how new construction is only one piece of the puzzle.

The low-income housing tax credit remains dominant as a source of funding for affordable housing—something like 80 to 90 percent of units. It bends nearly all funding sources to its standards. It is designed to serve people in a very narrow income band—40 to 60 percent of AMI, but it’s actually serving many people who have much lower incomes. Many of those are relying on vouchers  as well; the rest are just rent burdened. And it’s not nearly enough for the scale of the problem.

When we talk about the state of affordable housing, who owns the housing matters as much as how much of it there is. You believe that on some level or you wouldn’t be doing the work you are doing—you’d just be raising money to support for-profit LIHTC developers. The entrance of global and national and regional firms who rely on algorithms to purchase homes—multifamily, manufactured home communities, and single-family—and set rents has made housing conditions worse for both renters and homebuyers, for the same reason that the financial firms made airplanes worse when they took over from engineers. They don’t see themselves as providing housing as a service, but as extracting value from an asset as quickly as possible, as if housing were a mine.

Another new source of unexpected tension is the tenant movement, which has been resurging for several years now, more in some areas than in others. That is, broadly speaking, an unequivocally good thing. One of the major problems with housing in this country is the lack of tenant protections and the profits that can thus be made by exploiting tenants. Weak tenant protections are one reason the above-mentioned financial firm owners see so much profit potential in buying up homes—it’s relatively easy to remove tenants and jack up rents.

Tenant organizers and community developers ought to be and often are allies, different legs of the same stool. And many CDCs do some tenant protection or support work. However, many community developers are also . . .  landlords. So there can be some tension there, especially when things like rent control are on the table.

Bringing the Pieces Together

I know sometimes community developers can feel between a rock and a hard place with all of these competing demands and other players. But I hope instead you can experience your role as that of a bridge, or connective tissue. That’s what community members want from their community-based organizations, at least according to the Storied Communities, Community Stories research. One of the threads of agreement across all the residents, and all of the sites in the study is that residents appreciated the concrete work that CBDOs did—the services, the development—but that they saw that work in the context of making larger changes to the root causes of the problems they face. They considered the most important work of the CDCs to be supporting residents to advocate for more systemic changes for themselves. “They were grateful for day-to-day work helping residents fight eviction, involving residents in community design, and hosting community meetings, but they displayed particular appreciation for the role CBDOs play in preparing and equipping residents to advocate for themselves and control their own community outcomes,” says the report.

I think one of the major questions for the affordable housing world in the next couple of years will be how well the various segments of what could be called the affordable housing field—the developers, the managers, the organizers, the YIMBYs, the fair housers, the advocates, the mission-driven for-profits, the nonprofits, and the organized residents—come together to paint a realistic picture of what’s going on and advocate for balanced measures that address all of the angles and actually leave us better off. And the subsection of the field that includes or works closely with all of the players, and sees how they come together in the real world, on the ground, in a community, is you all—the community developers. We need your experience and wisdom.

And I think the state of affordable housing in this country is that it needs to listen to its community developers.