One in a series explaining key terms and concepts of Pennsylvania government. Today’s topic: Community Development Corporations (CDCs).
Seeking a better understanding of Pennsylvania’s issues and proposed solutions? Sometimes, complicated jargon and concepts can get in the way. That’s why we started Explainers, a series that tries to lay out key facts, clarify concepts and demystify jargon. Today’s topic: Community development corporations (CDCs).
What is a Community Development Corporation?
Community development corporations (CDCs) are 501(c)(3) non-profit organizations that are created to support and revitalize communities, especially those that are impoverished or struggling. CDCs often deal with the development of affordable housing. They can also be involved in a wide range of community services that meet local needs such as education, job training, healthcare, commercial development, and other social programs.
While CDCs may work closely with a representative from the local government, they are not a government entity.
As non-profits, CDCs are tax-exempt and may receive funding from private and public sources.
CDCs run the gamut from large, well-established organizations like New Community Corporation in Newark, NJ (which owns and manages 2,000 units of housing and employs more than 500 people) to community groups that meet in a church basement. Large or small, CDCs have in common an involvement in development work. They generally have a staff and some degree of incorporation.
It’s important to note that CDCs are self-identified. That is, there is no specific tax ID or certification that distinguishes a CDC from other non-profits. There are state and local associations that work specifically with CDCs (such as the Philadelphia Association of Community Development Corporations), but there has been no national association directly representing CDCs since the National Congress for Community Economic Development (NCCED) dissolved in 2006. The National Alliance of Community Economic Development Association (NACEDA) represents state and regional associations but does not directly represent CDCs.
CDCs in numbers
The NCCED estimated that in 2006, there were around 4,600 CDCs nationally. There has not been a more recent count. Some experts guess the number is lower due to the decline of available public and private sector resources caused by the economic recession, although it’s worth noting that the demand for CDCs services has increased (also because of the recession).
Two of the larger CDC associations in Pa. are the Philadelphia Association of Community Development Corporations (PACDC) and the Pittsburgh Community Reinvestment Group (PCRG).
PACDC put out a report at the end of 2012 estimating Philadelphia CDCs contributed $5.1 billion to Pennsylvania’s economy (and $3.3 billion to Philly’s economy) over the past 20 years. This includes 37,100 jobs statewide and 11,600 in the city.
According to the report, the majority (72 percent) of Philadelphia CDC investment has gone to home construction and rehabilitation, with 21percent to small business construction and rehabilitation and seven percent to streetscape/vacant lot greening projects.
A brief history of CDCs
Robert F. Kennedy played a big role in setting up the first CDC through the Special Impact Program, an amendment to the Economic Opportunity Act of 1964, allowing the federal funding of community development projects in poor urban areas. Kennedy created an action plan for community development, which led to the formation of the Bedford Stuyvesant Restoration Corporation, considered the first CDC in the country.
Historically, many CDCs grew out of the Civil Rights movement to fight against redlining and divestment issues in cities. Many had a community organizing/activism background.
While traditionally CDCs were location-based, there are organizations that target specific demographics (for example, the Women’s Revitalization Project in Philadelphia serves low-income women and their families). And CDCs now typically focus on development rather than activism.
How do CDCs work?
CDCs follow a bottom-up approach; they are set up and run by community members or local groups like churches and civic associations. In fact, a key feature of CDCs is the inclusion of community representatives in their governing/advisory boards. While it’s difficult to enforce because CDCs act independently, the rule of thumb is at least one third of the board is comprised of local residents.
As non-profit institutions, CDCs are tax-exempt and may receive unlimited donations and grants from private and public sources. A significant portion of funding comes from local government and through state and federal grants, such as the U.S. Department of Housing and Urban Development‘s Community Development Block Grant. CDCs can also receive funding from philanthropic foundations like the Ford Foundation and the Surdna Foundation.
CDCs may also apply for funding through intermediary organizations (like the Local Initiative Support Corporation and NeighborWorks America nationally and local organizations like Pittsburgh’s Neighborhood Allies) that receive government resources and then allocate funding to community groups.
In Pennsylvania, CDCs can get support from local business partnerships through a statewide tax credit called the Neighborhood Assistance Program, administered by the Pennsylvania Department of Community and Economic Development (DCED). CDCs can also apply for funding for affordable housing projects through the Pennsylvania Housing Finance Agency (PHFA), which administers the federal low-income housing tax credit program and PA State Housing Trust Fund (PHARE), among other programs. (This funding is not limited to non-profits or CDCs).
There are also city-level funding opportunities for CDCs. For example, Philadelphia has its own CDC grants and tax credit programs and its own housing trust fund. The City of Pittsburgh’s Community Development Administration Division allocates city resources through its Advisory Commission on Community Based Organizations (ACCBO).
One criticism of CDCs is that they are too dependent on government and foundational funding streams. Although CDCs are meant to meet the specific needs of a local community, a large amount of available funding might be tailored to specific types of projects (like affordable housing). Because of this, CDCs may be compelled to focus efforts based on what funds are available, rather than responding primarily to community demand.
Some CDCs are finding ways to diversify their funding streams. For example, Bickerdike Redvelopment Corporation (Chicago) has its own rental properties and a for-profit construction company, which generate income.
What are some examples of CDCs in Pennsylvania?
East Liberty Development, Inc. targets the East Liberty community in Pittsburgh. The group focuses on neighborhood planning, advocacy, facilitation, and investment. It controls more than $80 million in neighborhood assets.
Asociación Puertorriqueños en Marcha for Everyone (APM) is a Latino-based CDC serving the Philadelphia area. APM focuses on wide range of social services such as healthcare, day care, affordable housing health, and substance abuse treatment for adults. PACDC recently awarded the organization its Blue Ribbon Award for Large CDCs for its Paseo Verde project in Eastern North Philadelphia.
The Neighborhood Housing Services of the Lehigh Valley offers services like financial assistance to first-time homebuyers as well as housing and financial workshops for low- to moderate-income individuals and families. The organization also owns and rents out affordable housing units.
Where can I find more information?
National Alliance of Community Economic Development Associations’ 2010 report on Community Economic Development
Did this article answer all your questions about Community Development Corporations? If not, you can reach Kate Lao Shaffner via email at email@example.com or through social media @klaoshaffner. Have a topic on which you’d like us to do an Explainer? Let us know in the comment section below, or on Twitter @PaCrossroads.