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Thursday, November 13, 2014

Place-based Community Development: How Is It Financed? A Small City Example

As I discussed in my September 2nd Blog Post, the Obama Administration and HUD have placed a heavy emphasis on "place-based" community planning and development as a way to improve low-income communities. This is a strategy to build the capacity of diverse and complimentary local institutions to affect change. The investment focus is on people and place, rather than programs and projects.

As we know, it takes money to make anything like place-based community development happen. So how does that work? My involvement with the North Valley Housing Trust (NVHT) has provided me with a window into the financing aspect. NVHT is based in the City of Chico, California (population 90,000) with a service area of Butte County, California (population 230,000), located about 65 miles north of Sacramento. As such, this effort demonstrates some of the challenges and constraints of financing place-based community development in a small city that is not within a major metro.

Here's some background. Community development financing in California suffered a major blow two years ago when redevelopment agencies were eliminated to address State budget deficits. It could be argued that RDAs took more of a project-oriented approach, rather than place-based. Nonetheless, the impacts on communities across the state have been and will be devastating, especially with regard to the provision of affordable housing. Many cities, such as Chico, relied heavily on RDA funds. At the same time, federal and state housing and community development programs have been severely cut.

NVHT is a local housing trust fund that is attempting to address some of the impacts of recent federal and state budget cuts, while at the same time taking more of a place-based approach. About three years ago, a workgroup composed of representatives from local governments and nonprofits began meeting to develop NVHT's mission, goals and growth strategy. NVHT's purpose is to build a sustainable, locally-controlled fund that is adequately flexible to address the community's greatest housing needs. The workgroup determined that the fund's initial focus should be homelessness.

Three key partnerships provided a solid foundation upon which NVHT could grow: the City of Chico, 3CORE (a local CDFI), and the North Valley Community Foundation (NVCF). The City provided staffing and guidance to get the effort off the ground, as well as a place to convene stakeholders. As a certified Community Development Financial Institution (CDFI), 3CORE leveraged bank relationships and programs such as the State of California COIN network, which offers state tax credits to CDFI investors. As a successful and respected local foundation, NVCF has played the important role of 501c3 fiduciary and grant applicant, and has provided an exposure platform to donors.

Working together, the City, 3CORE and NVCF, along with a broad network of nonprofits, were able to raise $650,000 in COIN investments, and about $20,000 in other contributions. Many of the initial contributions came from participating Workgroup members, since the trust was just establishing itself. Not only were these initial contributions important to get things started, they had the added benefit of deepening Workgroup members' commitment. The COIN Investments and locally-raised funds positioned NVHT to apply for a $500,000 Local Housing Trust Fund Program matching grant from the State of California. On October 28th, NVHT was awarded this grant. NVHT is now moving forward with a strategic outreach plan, and will begin convening its permanent board at the beginning of next year.

The local housing trust fund is truly a place-based initiative. It is only possible through the commitment of local expertise, experience, partnerships and capital. At the same time, it cannot truly thrive without federal, state and/or regional investment. State programs (COIN and the Local Housing Trust Fund Program) were essential to making it happen, and the federal CDFI program may play a role in the future. This is especially the case for smaller cities and rural areas that attract less attention from CRA lenders and large foundations. Funds raised to date are a drop in the bucket compared to the need, but we have demonstrated that local institutions can step up to the plate and deliver, and that they need more tools in order to have greater impact.

Our next step is to more fully involve local businesses, particularly the health care sector, and the community at large. We plan to use the State grant to produce 4-5 units that will help individuals transition out of homelessness. This will be supplemented by supportive services funded through donations. We will also be working with the local housing authority to potentially provide some targeted rental assistance. Our goal is to demonstrate early success in order to earn greater trust from current and future contributors.

This is a fledgling real-world example of how place-based community development can work in a small city. If you want to see examples of implementing a more expansive vision for place-based community development financing, check out the HUD Secretary's Awards for Public-Philanthropic Partnerships. The website shows how some foundations, businesses and financial institutions are stepping up to play a major role in reshaping neighborhoods. Also see this PD&R Edge article for additional background.