A new report by Enterprise Community Partners provides an insightful analysis into the financial challenges facing community developers and offers thoughtful recommendations for how to address them at the organizational and system levels. It should be required reading for all community developers and their supporters.

The report, Building Sustainable Organizations for Affordable Housing and Community Development Impact, affirms many of the conclusions and recommendations developed by the Massachusetts Community Development Innovation Forum over the past three years.  Enterprise conducted an in-depth analysis of 10 nonprofit organizations that have faced financial crisis in recent years and examined systemic issues that contribute to financial weakness. The report also identifies the particular strengths and weaknesses facing neighborhood based organizations. Finally, the report offers recommendations for both community development organizations and for funders/lenders.

According to Enterprise, community development organizations should:

• - Strengthen their financial reporting and management,
• - Beware of one-time cash receipts and manage them effectively,
• - Diversity revenue streams, but only by growing strategically into business lines that align with organizational mission and can be profitable in the long-term,
• - Prioritize financial sustainability to ensure that long-term organizational health is not endangered by a single project or program, even one that has high mission impact, and
• - Collaborate to reduce costs, improve quality, and expand impact.

Enterprise offers the following recommendations to funders and lenders:

• - Incentivize long-term ownership and stewardship of affordable housing assets by allowing cash flow to be paid to a project’s sponsor,
• - Set realistic property and asset management fees and structure deals with sufficient cash flow to pay them, and
• - Embrace an early warning system to address problem properties and weak organizations quickly before they grow beyond repair.

Here in Massachusetts we are already taking action to implement many of these recommendations. We are promoting the implementation of the Strength Matters ^TM financial reporting system and providing other training and support to improve financial management. We are offering training for asset management and advocating for increased asset management fees. And we are engaged in an active discussion about how to improve cash flow and reduce reliance on one-time developer fees. And, of course, we are implementing a host of new collaborations. The Enterprise report will hopefully fuel these efforts and secure broader support for making the changes needed to sustain and grow the community development field.

Throughout my years at MACDC, I have been an active participant in a network of CDC associations from around the country. The network – first convened by the National Congress for Community Economic Development and now by the National Alliance of Community Economic Development Associations (NACEDA) – provides an opportunity to learn about programs and policies in other states that might be applicable in Massachusetts. (It’s also a great place to commiserate with the very small group of people who do the same work we do at MACDC!)

The Mel King Institute for Community Building was partially inspired by CED training programs in other states and now MACDC is trying to replicate another successful approach that has been well tested in other states.  For years, state and cities around the country have operated so-called “Neighborhood Assistance Programs” that provide tax credits to encourage corporations and individuals to donate more money to selected community based nonprofit organizations that offer high quality programming.  The programs vary from place to place, with some placing more emphasis on community development and others on human services. The size of the credit can range from 30% to100% and from one year to 10 years. And some programs are more competitive than others. In each case, the programs foster stronger partnerships between the private sector and the non profit sector and they leverage public investment with private contributions.

After studying a number of these programs, in particular Philadelphia, New Jersey and South Carolina, MACDC has proposed legislation to create the Community Development Partnership program here in Massachusetts. (We also looked at Virgina, Indiana, Missouri, Pennsylvania, and Deleware.) Earlier this year, Senator Sal DiDomenico and Representative Linda Dorcena Forry, along with 46 other legislators filed this bill for consideration in the State House. We think the bill takes some of the best elements of the different programs around the country and tailors them to the Massachusetts context. Specifically, the bill would provide a 50% tax credit to corporations and individuals who make a donation to community based organizations that have been carefully vetted through a competitive process administrated by DHCD. To qualify, the community organization must first be certified as a CDC under MGL Chapter 40H to ensure that the group is both genuinely community based and has a core mission of community development. Second, the organization must be selected by DHCD for a tax credit award through a highly competitive process in which each organization submits a thoughtful, long term business plan that outlines their goals, strategies and metrics for success. I encourage you to read the legislation and/or our summary of the bill to learn more.

The key idea behind the bill is that local community members can use this program to develop and implement their own local strategies for creating jobs, growing businesses, building homes and otherwise improving their communities. It will support demand driven community development in a way that we have never been able to do before and will increase the scale and impact of our community development efforts throughout the state.

You will be reading more about this exciting new legislation in future blog posts. You can also learn more about how these programs work and other community development initiatives around the country by joining MACDC at NACEDA’s Annual Summit in Washington, DC from May 23 -25.   Please join us!

The 2010 midterm elections have certainly made many community developers anxious for our communities and our field—and with good reason. The Republican Party’s agenda of draconian spending cuts has the potential to devastate struggling communities and families across the country. We must resist their agenda as strongly as we can.

That said, there may be a few hidden opportunities in the current climate for community developers to seize. At the risk of being Pollyannaish, here are five opportunities that call out for action:

Climate Change: With national climate legislation dead, environmental advocates and funders are looking to create a “Plan B” for stopping climate change. This plan is likely to include advocating for state and local policy changes, as well as changes in local practice. They will also need to broaden their coalition and base of support. This creates a tremendous opportunity to frame community development as a key part of a serious, comprehensive climate change agenda. We know that creating livable, well-designed urban neighborhoods will reduce carbon and other greenhouse gas emissions significantly.

Community developers should not only work to explicitly “green” their agenda by weatherizing their rental properties and developing transit-oriented projects, but should also make the case that community development itself is a climate change strategy. Here in Massachusetts, the largest environmental funder in the state, the Barr Foundation, and the Ford Foundation, have adopted this thinking and are supporting sustainable neighborhood development in a regional context through the Smart Growth Alliance’s Great Neighborhoods program. We can build on this across the country.

Health Care: The debate over our national health care system is far from over, and once again community development could be a nonpartisan solution that becomes widely embraced. There is growing evidence that healthy homes and healthy communities can substantially reduce health disparities and improve health outcomes for everyone. With the health care sector embracing new ideas and innovation, there is the potential for community developers to find new funding sources and new political allies. As one colleague has pointed out to me several times, if community developers could access just a small percentage of the nation’s investment in health care, we would increase community development funding many times over!

Local Solutions: While community developers and Tea Party activists probably do not agree on much, we may be able to find some limited common ground. Community developers support strong federal investments in communities and we support a robust safety net. But we can also be critical of federal programs for their rigid and bureaucratic rules that do not work well at the local level. Perhaps we can find new allies that will support building the capacity of local, nonprofit (and importantly, nongovernmental) organizations that can develop and implement practical solutions that are tailored to the local context. Perhaps CDCs can gain bipartisan support as organizations that reflect a long-honored American tradition of local people working together to solve problems and improve their own communities.

Rental Housing: The collapse of the homeownership industry and mortgage lending has created a new appreciation of the important role that rental housing plays in our country. For too long, tenants and rental housing have been denigrated. Today, policy makers understand that we need a strong and diverse supply of rental housing to meet the needs of our communities and our economy. This long overdue shift in public opinion could pave the way for policy changes that help protect tenants and help us to build and preserve high quality and affordable apartments.

Homeownership: While it may seem contradictory, I also believe that the current political climate provides an excellent opportunity to have a long overdue and important conversation about the role of homeownership in low- and moderate-income communities. While the growing conventional wisdom that low- or moderate-income families cannot and should not own homes is a major threat, it is also an opportunity to tell the story of how these families can and have been successful homeowners.

We need to embark on a major policy and educational campaign to highlight the success of homeownership education, specialized mortgage products and shared equity homeownership models. Such a campaign is essential because we know the new Congress will be enacting major new legislation to transform Fannie Mae and Freddie Mac and the entire mortgage lending industry and we know that the Obama administration is looking to update CRA regulations and roll out the new Consumer Financial Protection Bureau. All of these policy debates and shifts create an opportunity to transform the mortgage industry in a way that better serves our communities.

These opportunities do not come without risks and challenges, and I could have easily written a much longer article about the threats and challenges emerging from the election. But it is vital that community development leaders retain our tenacious optimism as we move forward. It has served us well for over three decades during good times and bad, and we need it now more than ever!