National Support for Local System Change

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TABLE OF CONTENTS

Introduction and Summary

Section 1: Background and Core NCDI Concepts
The National Community Development Initiative: Role and Core Concepts

Section 2: Research Approach and Methods
Research Approach
Analysis Methods and Data Sources

Section 3: CDC Industries
CDCs Gained Reputations for Improving Neighborhood Quality
CDCs Improved Their Ability to Respond to Neighborhood Problems
What Explains Relative Performance?

Section 4: NCDI Investments in Production Systems
Production Systems and Their Problems
What Happened over the 1990s?
What Resources Did NCDI Supply?
What System-Building Role Did NCDI Play?
Summary of NCDI Effects on Production

Section 5: NCDI Investments in Capacity-Building Systems
Capacity-Building Systems and Their Problems
What Happened over the 1990s?
What Resources Did NCDI Supply?
What Role Did NCDI Play?
Summary of NCDI Effects on Capacity-Building Systems

Section 6: NCDI Influence on Leadership Systems
Leadership Systems and Their Problems
What Happened over the 1990s?
What Role Did NCDI Play?

Section 7: Conclusions about the NCDI Model

References

Appendix A: Methodology

Appendix B: Funding and Production Tables

Introduction and Summary

After years of stagnation and decline, many urban areas rebounded strongly during the 1990s. Across the continent, city jobless rates fell significantly, crime rates declined, and municipal budgets stabilized. The decade brought renewed demand for urban housing and increased commercial and retail interest in city neighborhoods.

The 1990s also saw significant growth in the capacity of the nation's community development corporations (CDCs). These are nonprofit community-controlled development organizations dedicated to neighborhood revitalization. Historically weak because of the difficult financial circumstances under which they worked, CDCs ramped up production, improved their capacity to implement physical revitalization programs, began expanding into areas beyond housing production, and increasingly became the delivery vehicle of choice for neighborhood-based improvements.

As this paper shows, the National Community Development Initiative (NCDI) played an important role in strengthening CDC industries, dramatically so in certain cities. Launched in 1991 by a group of private foundations and financial services corporations, the NCDI collaboration pooled $254 million in financial support from national corporate and nonprofit funders and the U.S. Department of Housing and Urban Development (HUD).¹ Through two national community development intermediaries—the Local Initiatives Support Corporation (LISC) and The Enterprise Foundation—NCDI invested in CDCs and the local institutions that support them. Over the decade, NCDI funding allowed LISC and Enterprise to supply hard-to-obtain interim finance to community development projects, which made it possible for CDCs to ramp up their production levels and to increase the range and complexity of the neighborhood projects they undertook. NCDI funding played a critical role in providing operating support funding for cash-short CDCs, typically channeled through increasingly sophisticated operating support collaboratives, which held groups accountable for results, but also helped them develop sufficient capacity to accomplish them. Finally, NCDI's injection of new, national funding into cities helped local LISC and Enterprise offices draw new resources to community development, helping strengthen and institutionalize support for community development among key players in local communities.

This paper is organized into seven sections.

Section 1 describes how CDCs attempt to improve neighborhoods that have been largely abandoned by traditional businesses and middle-class property owners. CDCs long have drawn support for their work from government, foundations, corporations, religious institutions, and other civic associations. These entities constitute the community development system—the relationships among neighborhood leaders, community development corporations, intermediaries, and citywide institutions that mobilize, allocate, and wield finance, expertise, and political influence for neighborhood improvement purposes. Historically, national and local community development systems have been fragmented. Disconnects among various programs and functions performed by city agencies, lenders, foundations, CDCs, and others compromised CDC ability to secure the resources needed to improve the quality of life of urban neighborhoods.

NCDI aimed to create more integrated, efficient, and effective community development systems in the places where it invested, by pursuing three related approaches:

1. NCDI funders opted to channel their dollars through intermediaries, rather than directly fund local programs. They selected the Local Initiatives Support Corporation (LISC) and The Enterprise Foundation—both with local offices in major cities throughout the country—to operate NCDI. Each local office was given the flexibility to respond to on-the-ground conditions.
2. NCDI provided both grants and loans for development projects and grants for CDC operating support. This combination was key to ramping up CDC production and elevating CDC performance.
3. NCDI funders sought explicitly to engage other players and create a strong and ongoing local community development system.

Section 2 describes the methodology used to assess NCDI. The paper relies on an evaluation of NCDI conducted by a team of community development experts, who visited each NCDI city about every 18 months during the 1990s and submitted detailed field reports. To determine NCDI's effects, the paper's authors identified four components of the local community development system, and examined each in turn:²

• CDC industries: the complement of CDCs within cities.
• Production systems: the set of relationships among people and institutions that mobilize, allocate, and regulate the use of land and capital for neighborhood improvement purposes. Typical activities include development of affordable housing and commercial establishments.
• Capacity-building systems: the set of relationships among people and institutions that mobilize and allocate resources to strengthen CDCs' ability to pursue neighborhood improvement purposes. Activities include provision of operating support, consulting assistance, training and seminars, and upgrades to financial, personnel, and information and asset management systems.
• Leadership systems: the set of relationships among CDCs, intermediaries, and those who command community development resources. Leadership systems mobilize political support and resources for a community development agenda.

Sections 3 through 6 examine what happened to each of the four system components during the 1990s and NCDI's role in those developments:

Section 3: CDC industry. The NCDI field evaluations found nearly unanimous agreement that CDC industries had improved over the 1990s. Local observers credited improvements in production, capacity building, and leadership systems as critical to CDC industry advances.

Section 4: Production systems. CDCs expanded their production outputs, especially affordable housing, but also other developments that allowed them to respond to neighborhood problems more comprehensively. NCDI funding played a key role by filling financing gaps for CDC projects, particularly in the early stages of project development.

Section 5: Capacity-building systems. CDC capacity-building systems registered significant gains—the contribution of NCDI is clearest in this area. NCDI funding played a key role by capitalizing local operating support programs or augmenting their funding. Supported by NCDI funding, over the decade the majority of local programs came to offer multiyear funding to CDCs, establish performance standards as a condition for support, and broker needed technical assistance.

Section 6: Leadership systems. Local collaborations evolved in nearly all 23 NCDI cities to engage leaders from different sectors in support of community development. While NCDI's impact is difficult to quantify, the field research clearly suggests that NCDI helped establish the political legitimacy of CDCs, drew new funders to community development, and encouraged the institutionalization of community development support.

Section 7 explores the strengths and weaknesses of the NCDI model. Relying on LISC and Enterprise as the conduit for NCDI funds is a key strength, providing a framework for ensuring accountability and for implementing effective programs. NCDI's decentralized approach was well suited to the highly idiosyncratic and localized nature of community development. And including HUD in the collaborative was an advantage. HUD funds substantially boosted the grant support available for CDC operations, and it imposed accountability requirements of its own.

A key weakness of the model was the difficulty in defining performance standards that apply equitably across different cities, which made it difficult to hold the local LISC and Enterprise offices accountable for achieving community development targets. A related weakness was dependence on the resources and leadership able to be mobilized from government and the private sector in each city, a function of the decentralized model NCDI adopted. In the most difficult community contexts, the demands placed on LISC and Enterprise local offices to act strategically, exercise leadership, build the capacity of weak industries, and produce units exceed the capabilities of all but the strongest program officers. And while most intermediary staff were imaginative and technically strong, there were exceptions. A stronger emphasis on local performance would help ensure programs are carried out creatively and effectively. Moreover, the NCDI model could be improved by using NCDI funding and the prestige of national funders to encourage new state and local efforts to support community development.

This report is available in its entirety in the Portable Document Format (PDF).

Acknowledgments

The authors thank the many individuals who contributed information, insights, and commentary to the drafting and publication of this report. George Galster, Lang Keyes, Neil Mayer, Robin Redford, Munro Richardson, Ken Temkin, Avis Vidal, and Mark Weinheimer conducted field research used in this report. Kim Marschner and Sandy Padilla helped with the analysis, and Diane Hendricks produced the report. Dozens of Local Initiatives Support Corporation (LISC) and The Enterprise Foundation (Enterprise) staff members throughout the 23 cities contributed time and logistical support to the field data collection effort, as did hundreds of persons from community development corporations, foundations, financial institutions and government agencies. Michael Tang of LISC and Angela Gravely Smith of Enterprise provided important technical support throughout data collection and analysis.

We especially thank Reese Fayde and Mark Weinheimer of Living Cities: The National Community Development Initiative (NCDI) for the quality and thoroughness of their comments on drafts. We acknowledge the helpful commentary of: Carol Berde (McKnight Foundation) chair of the NCDI Learning Committee and the comments of other committee members—John Bare (Knight Foundation), Mark Willis (JP Morgan Chase), Sandy Jibrell (A.E. Casey Foundation), Lyn Whitcomb and Karen Daley (HUD), as well as comments from Michael Rubinger and Mindy Leiterman (LISC), Bart Harvey, Kelly Cartales, and Diana Meyer (Enterprise) and Marge Turner of the Urban Institute.

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