a community economic development primer

(This post is meant to resemble my primer on relational community organizing; I plan to write others on community service, practical deliberation work, etc.)

Many thousands of not-for-profit institutions are involved in various forms of economic development in the communities where they are located. For example, some use federal Community Development Block Grants and other funds to develop low-income housing. Sometimes they can plow the proceeds from their investments into further development. They solicit public participation in their decisions, both as a matter of ethical commitment and in order to comply with funders’ rules. Hence these institutions belong in the fields of community organizing and public deliberation; but their emphasis on managing tangible assets makes them different. They contribute to civic renewal by promoting democratic deliberation, magnifying the voice of poor people, building civic skills–and creating assets that are subject to democratic control because they cannot be moved.

In 2005, there were 4,600 community development corporations (CDCs) in the United States, employing nearly 200,000 people, building about 86,000 residential units annually, and managing commercial property and spawning other enterprises.

The concept of a CDC is not defined in federal law, and in practice, CDC’s resemble other non-profit organizations that have similar missions. For example, a community development bank specializes in lending rather than developing property, but those two roles overlap. Like CDC’s, community development financial institutions (such as banks and credit unions) are widespread and influential, holding more than $25 billion in assets in 2007.

Churches may also build, lease, finance, or sell homes and other buildings for the good of their communities. Sometimes they create spinoffs formally known as CDCs, but often they handle the financing directly. A famous example is the Greater Allen African Methodist Episcopal Cathedral in Queens, New York, which manages assets worth over $100 million, including rental properties, businesses, and a school.

Meanwhile, community land trusts tend to purchase open space for preservation, but some urban land trusts operate much like CDCs, and some CDCs buy land to preserve or create open space. Community organizing groups such as the Industrial Areas Foundation have created CDCs; and some CDCs have affiliated with community organizing networks.

In the city where I write this post, the Somerville Community Corporation is a not-for-profit real estate developer that invests its profits in new development, a provider of adult education, an emergency lender to low-income renters, a community organizing group affiliated with the Industrial Areas Foundation, a convener of public deliberations about matters like planning and municipal budgeting, and a lobby on behalf of employment, transportation, and welfare programs. This combination of functions is typical, and as a result the Somerville Community Corporation could be listed under several categories of civic work–as could the Allen Cathedral or the Industrial Areas Foundation itself.

Regardless of their precise status, all these institutions are anchored legally in their physical communities. They manage assets that have market value and they use business techniques (such as charging fees for services and lending money with interest), but they are not permitted to move. Their structure honors the civic virtue of loyalty and gives them a practical need to employ “voice” rather than “exit” to address problems. How they exercise “voice” varies, but extremely common are public meetings, boards that represent local residents, and public events designed to solicit public input. Meanwhile, all these organizations express—at least in theory—an ethic of trusteeship and public service. That ethic is usually codified in the organization’s nonprofit status and by-laws, but there is no reason that a for-profit business cannot serve the same purposes if it is anchored in a community and accountable to residents.

CDC’s have roots in Lyndon Johnson’s War on Poverty, and specifically the thousands of Community Action Agencies (CAA’s) that were created under federal law and asked to oversee local federal welfare programs, including Head Start, Legal Services, and public housing. The Economic Opportunity Act of 1964 had required that all new federal welfare programs be “developed, conducted, and administered with the maximum feasible participation of the residents of the areas and the members of the groups served.” CAA’s arose to meet that need.

They still exist; more than one thousand belong to the Community Action Partnership, and many of those are also classified as CDC’s. But the typical mechanisms for encouraging the participation of residents have evolved. In the 1960s, it was common to hold public elections for board members. This was problematic because the United States was already covered by a smooth tessellation of local governments with their own elected leaders. Adding a new layer with different boundaries caused constant jurisdictional conflicts and struggles for power. CAAs were supposed to avoid patronage and corruption, but often turnout was poor, and elections offered opportunities for corruption. Today it is much more common for a community-based development organization to be structured as a private, not-for-profit corporation that has a board with fiduciary obligations to the public. Some or all members may be elected, but some may be representatives of local institutions, including municipal governments. Foundations and governments also exercise considerable power by deciding what to fund. CDC’s and kindred organizations do not claim the kind of democratic mandate that comes from public elections, but they do welcome and promote participation.

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