Where the Action Is in Community Development

Although such a diverse cross-section of chapters on community development can be organized in various ways, and many chapters easily fit under several headings, we arranged Reengineering Community Development for the 21st Century in seven parts.

Part 1. Community Development Financial Institutions (CDFIs)

The field of community development finance is evolving rapidly as CDFIs find innovative ways to capture investment opportunities and meet the needs in underserved communities. The six chapters in part 1 offer different perspectives on the changes in the field. Robin Newberger, Michael Berry, Kirsten Moy, and Gregory A. Ratliff, in chapter 2, “Evolving Roles of Mission-Focused and Mainstream Financial Organizations,” take a comprehensive look at the community development finance industry. Building on a state-of-the-industry conference series, they examine how nine CDFIs' relationships with mainstream financial institutions increase the impact of the CDFIs individually and collectively, suggesting that these types of strategic partnerships and creative business models can help bring the industry to greater scale.

In chapter 3, “When Subsidy Becomes Scarce: Rethinking Community Development Finance,” Julia Sass Rubin focuses on two types of CDFIs – community development loan funds and community development venture capital funds – that provide debt and equity capital in higher risk transactions. Rubin observers that changes in once-supportive economic and political environments have caused these institutions to reconsider their underlying business models.

CDFIs are innovative financial institutions. Annie Donovan, in chapter 4, "CDFIs 'Make the Market' for Charter School Facilities Financing,” examines a relatively new investment opportunity for CDFIs: financing facilities for charter schools. Donovan's analysis shows the positive investment potential for charter school financing.

Anna Steiger, Tessa Hebb, and Lisa A. Hagerman, in chapter 5, "The Case for the Community Parmer in Economic Development,” look at issues and best practices in linking investment intermediaries and community partners to channel capital into underserved neighborhoods. Investment intermediaries “intervene between the investor and the community by pooling investments, spreading risk across investors, and pricing the transaction up to the associated risk.” Community partners "draw on their specialized local knowledge to structure deals that ensure social benefits for low- and moderate-income residents.” Effective community development will rely increasingly on these partnerships.

Two chapters look at performance management and accountability issues in community development finance. Dan Immergluck, in chapter 6, “Research Design Issues for Measuring CDFI Performance and Impact,” addresses the methodological issues involved in evaluating CDFIs, including research design, impact measurement, data requirements, validity, and reliability. Although CDFIs pose numerous challenges in conducting evaluations, Immergluck lays out a framework that moves the field considerably in the direction of meaningful evaluation. David Porteous and Saurabh Narain, in chapter 7, "Social Performance Measurement for CDFI Banks," move from the theoretical/conceptual to an actual assessment of the "social performance” of community development banks using a variety of publicly available databases. Like Immergluck, Porteous and Narain review database limitations and offer an agenda for future research.

Part 2. Asset Building

Asset building is one of the newer innovative perspectives in community development undertaken over the last few years. The simple notion behind the concept is that assets, whether individual or community, are both ends and means to community economic development. As such, asset building must be a focus, or for some, the focus, of development initiatives. Joshua Silver, in chapter 8, "Stubborn and Persistent Lending Disparities," documents the extent and nature of disparities in loan pricing based on race and income levels in neighborhoods that arise from discrimination, market failure, and lack of consumer financial knowledge. Inability to obtain loans impedes wealth building and sustainable homeownership necessary for community development. Silver offers recommendations to remove barriers primarily through federal regulatory powers.

In chapter 9, “The Assets Framework: Moving Toward Transformative Transactions,” Hannah Thomas looks at asset building from an institutional perspective in which a CDFI – Coastal Enterprises, Inc. – approaches development not only by financing deals but also by building wealth in communities. Thomas calls attention to the fact that many CDFIs have acted or are tempted to act more like mainstream banks, in the process diminishing their community development focus. Coastal Enterprises offers a model for CDFIs to consider before redirecting their community development missions.

In chapter 10, “Connecting Asset Building and Community Development," William Schweke develops a framework and comprehensive action agenda that promotes the linkage of asset-building strategies for individuals to broader community development approaches. In prominently linking asset building and community development, policymakers and practitioners can develop a whole new perspective on helping individuals and revitalizing communities, one that portends much success for those who engage it.

Rene Bryce-Laporte and Hilary Hunt, in chapter 11, "Innovation in State Government: Pennsylvania's Financial Education Office," provide a case study of how concerned Pennsylvania policymakers created a state-of-the-art financial education program intended to provide people with the skills they need to build assets. The authors show the necessity of building a broad coalition of decision makers and stakeholders in developing a sustainable program that yields great benefits in building communities.

Part 3. Capacity Building and Citizen Engagement

Capacity building in grassroots organizations and for citizens is critical if community development initiatives are to be successful in revitalizing neighborhoods and communities. Without capacity to effectively participate in community development planning and activities, some organizations will be ineffective and citizens will be frustrated as efforts fail. Four chapters look at capacity building in community development through very different lenses. In chapter 12, “Community Capacity Building Through Strategic Philanthropy at the United Way," Yoel Camayd-Freixas, Gerald Karush, Melissa Nemon, and Richard Koenig detail how a local United Way in Manchester, New Hampshire, reengineered itself to engage community development as a core part of its mission, in the process moving away from a traditional community chest model of philanthropy. The authors show how the agency built capacity within its own operations and among its member agencies to realize its new approach.

Jane F. Morgan, in chapter 13, “Building Community Capacity Through Multisector Collaborations," looks at a multisector collaboration between a Local Initiatives Support Corporation in Detroit and numerous organizations involved in community development, education, human services, and a variety of other sectors. The collaborative model, grounded in neighborhood planning and community development corporation approaches, shows how the Detroit Low Income Support

Corporation (LISC) took the lead and created Strategic Investment Areas to target funds in areas of greatest need to great effect.

In chapter 14, “Southern Bancorp's Model for Community Economic Development: The Delta Bridge Project," Ben Steinberg, Ben Goodwin, and Michael Rowett recount the efforts of Southern Bancorp – a community development bank holding company – to revitalize a rural community in the Arkansas Mississippi Delta region. The Delta Bridge Project illustrates how a bank can take the lead in stimulating participation across all sectors of a community, setting the stage for sustainable development.

Chapter 15, "Effective Citizen Engagement: Lessons from Seattle Schools – A Memoir," is a memoir offered by Norman Rice, former mayor of Seattle, and Lynda Petersen, recounting Rice's innovative effort to bring stakeholders – citizens and organizations – of Seattle together to solve the crisis in the city's schools – at the time a major community development issue in neighborhoods and citywide – through a broad-scale citizen engagement project. This exemplary citizen-participation effort helped turn the school system around and provides invaluable insights for others. (See Buss, Redburn and Guo [2006] for a review of citizen participation issues.)

Part 4. Federal Policy

Two federal issues – among many – caught the attention of those working in the community development held. In chapter 16, "Reforming CDBG: An Illusive Quest," Terry F. Buss analyzes reforms – some successful, others not so – in the $4 billion Community Development Block Grant (CDBG) program as it came under continued scrutiny for its performance under the eight years of the George W. Bush administration. (See Redburn, Shea, and Buss [2008] for an overview of perfonnance management and budgeting issues.) F. Stevens Redburn, in chapter 17, “Rethinking Federal Low-Income Housing Policies," provides an in-depth review of why federal policies are so ineffective, then lays out a comprehensive strategy to reengineer low-income housing policy from the federal perspective.

Part 5. Smart Growth and Land Use

During the urban renewal of the 1930s to 1960s and the war on poverty in the 1960s, policymakers and planners concentrated on community development in moribund central business districts and inner-city neighborhoods devastated in part by the rise of suburbs. In recent years, concern has shifted to the suburbs, many of which are in decline in part because of urban sprawl, unplanned growth, and out-migration. Thomas J. Vicino, in chapter 18, “Smart Growth and Community Investment: Confronting Suburban Decline in Baltimore,” looks at suburban decline in the Baltimore metropolitan area and Maryland's efforts to reverse downward trends by promoting “smart growth" policies, now in their tenth year. A central concern that permeates any discussion of smart growth is transportation. Many attribute suburban and urban decline generally to the increasing reliance on the automobile, especially among commuters to work. Much community development effort has focused on public mass transit as the solution. In a very innovative piece, “Positive Cycling: Riding Our Bicycles Down the Path to Community Development Success" (chapter 19), David W. Sears and Colin D. Sears convincingly suggest that communities might better realize smart growth if they pursued bicycle-friendly strategies that could, in their view, reduce reliance on the automobile.

Part 6. Affordable Housing

Affordable housing has always been central to community development, but despite Herculean efforts, it remains a problem for many Americans and communities. Two chapters address the issue of affordable housing in very different ways.

In chapter 20, “Aging-Out and Foster Care: Housing Policy," James O. Bates takes a look at a low-visibility, yet high-import affordable housing issue that has yet to attract much attention: what do youth in foster care do when they "age out" of the system, are unemployed, and have few housing options? Bates draws attention to the magnitude of the problem and offers policy prescriptions to address it.

Land prices and behavior of landowners are critical to many aspects of community development – nonprofits or governments try to amass tracts of land for affordable housing or open space siting, but find it difficult and expensive where land values are high. Edward J. Dodson, in chapter 21, “Would the Adoption of Land Value Taxation Drive Down the Price of Land and Increase Housing Affordability?" draws on the work of late nineteenth-century political economist Henry George to argue that land value taxation is an effective tool to stimulate community development, especially in the realm of affordable housing.

Part 7. Crime and Development

Conventional wisdom in community development has it that crime is a major deterrent to business development and viability and hence a contributor to urban decline. Timothy Bates and Alicia Robb, in chapter 22, “Crime's Impact on the Viability of Young Urban Small Businesses,” decided to test this proposition empirically with Census Bureau surveys of small business owners, finding that although crime certainly provides the context for business in urban areas, scaring away businesses that fear crime, the businesses that remain tend to thrive. This chapter makes a major contribution to this sensitive community development issue.

Brenda Bratton Blom, Kate Titford, and Elisabeth Walden, in chapter 23, “Courts, Equity, and Community Development,” look at the issue of crime in community development through the lens of the criminal justice system, especially the courts. They review the evolution of the criminal justice system from its early roots in England under the Normans to the present-day need to reconsider a system that incarcerates so many offenders to the detriment of themselves and the community.

Aftermath of Eminent Domain

In the appendix, “Redevelopment's Trend Away from Eminent Domain," T. Michael Lengyel argues that with the decline of eminent domain powers precipitated by the backlash of a 2006 Supreme Court decision (see next section), communities will have to rely on incentive-based community development programs, which he summarizes.

Community Development Issues to Watch

Several community development themes could not be addressed in this book, either because they are too new or because they have not yet attracted much attention. Nonetheless, these issues are important in a survey of the field.

New Markets Tax Credit

Although it received surprisingly little attention when launched under the Clinton administration in 2000, the New Markets Tax Credit (NMTC) is arguably the largest community and economic development program in existence today. As of January 2007, the CDFI Fund awarded $12.1 billion of NMTC authority to 179 community development entities (CDE) (GAO 2007a). In 2007, the Fund launched a multiyear evaluation of NMTC. Whether the program is producing the level of benefits intended will spur intense debates about community development in years to come.


The recent influx of 10 to 12 million undocumented or illegal immigrants may eventually, if it has not already, substantially change some traditional aspects of community development (see, e.g., Fernandez 2003). Living below the radar of government scrutiny because of their legal status, immigrants are forced to work off the books in the hidden economy, often for very low wages with no benefits and with considerable discrimination and exploitation. They often live on the margins of society, without a lot of hope for the future. These immigrants present challenges for community development in that they have needs and could access services were they not legally prohibited from doing so. The bottom line: communities could invest a lot of funding and resources into development that may not reach those in need.

Mega Disasters – Natural and Man-made

The September 11, 2001, terrorist attacks on the United States and Hurricane Katrina in 2005 highlighted the need for community development organizations to develop the capacity to revitalize large sectors of communities, many that were economically once viable, after natural and man-made disasters. Eerily, the terrorist attacks and Hurricane Katrina have many things in common: planning for redevelopment was complicated, delayed, apparently ineffective, and largely beyond the capacity of local and state public and private actors to undertake successfully even with substantial federal assistance. Community development experts now have a good idea of the magnitude of the problems they will face in future mega-disasters, but they are much less certain about what to do about it (see CRRR. 2005; GAO 2007b; NAPA 2007).


Microenterprise development was a favorite topic in community development during the late 1990s, but in recent years, it has not received as much attention as other issues in the held. That may change now that the guru of microcredit, Muhammad Yunus and the Grameen Bank he founded, won the 2006 Nobel Peace Prize for leadership on the issue in Bangladesh and internationally (see nobelprize.org/nobel_prizes/peace/laureates/2006/press.html). There is renewed interest in microenterprise development that may catch on in the United States and may provide an opportunity for community development practitioners to learn from the major advances the international microfinance held has achieved in the last decade.

Eminent Domain

Perhaps the most salient land use issue affecting community development in decades was the 2005 U.S. Supreme Court ruling on eminent domain that supported communities whose officials wished to appropriate land from private owners to benefit other private investors. Although the ruling stands, at least twenty-nine states, feeling political pressure from virtually all quarters, have promulgated their own laws and regulations that try to nullify the Court's decision (GAO 2006). Individual communities, even though they have the law on their side, are opting not to pursue eminent domain because of the political backlash. It is unclear how the ruling will affect community and economic development initiatives generally.

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