News

Unsung Heroes: The Success of Nonprofit Counseling Agencies in Combating Foreclosures

June 7th, 2010 by Don Bianchi

This is a true story. Actually, it is two stories about the foreclosure crisis, both true.

We’re familiar with the first story. In Massachusetts and across the country, the foreclosure crisis continues to decimate families, and communities. The response from loan servicers has ranged from marginally improved at best, to anywhere from woefully inadequate to counter-productive at worst. The programs initiated by the federal government have been too little and too late and too reliant on the voluntary participation of lenders.

According to data provided by the Warren Group to the Boston Globe, the number of homeowners in Massachusetts who lost their properties to foreclosure in April, 2010 (1,372) is 80% more than the number from April of 2009 (764), and the number of foreclosure petitions (the first step in the foreclosure process) jumped 21% compared to April of 2009. Furthermore, lenders are getting more efficient at foreclosure, reducing the time it takes to complete a foreclosure from 9.2 months in October, 2008 to 4.6 months in November 2009.

But there is another story, hidden under the grim headlines of the first story. Nonprofit counseling agencies across the Commonwealth are helping prevent foreclosure, and when necessary they are helping people transition to new housing so they can land on their feet.

During calendar year 2009, according to data collected by MACDC through its GOALs Survey, MACDC Members counseled 5,200 households at risk of foreclosure. The same members reported that, by the end of calendar year 2009, 31% (1,590 households) had achieved a positive outcome (averting foreclosure) by the end of the year. Since it can take many months for these situations to be resolved many of these 5,200 households will eventually achieve a positive outcome in 2010. Furthermore, the percentage of families in Massachusetts achieving successful outcomes within the same year increased from 24% in 2008 to 31% in 2009.

Some of this success is likely attributable to the Obama Administration’s Home Affordable Modification Program (HAMP) that was introduced in early 2009. Despite significant problems with HAMP in moving borrowers from temporary to permanent loan modifications, by February, 2010, over 4,000 Massachusetts families had received permanent loan modifications under the program.

The positive impact of foreclosure prevention counseling is further demonstrated by data on the National Foreclosure Mitigation Counseling Program (NFMC). The most recent findings from an Urban Institute analysis of NFMC showed that homeowners who sought counseling after a foreclosure filing were 1.6 times more likely to get out of foreclosure, and avoid a foreclosure sale, than homeowners not assisted by counseling.

The experience of MACDC members bears out the positive impact of this counseling. Juan Bonilla, the Director of Homeownership Programs at Lawrence Community Works (LCW), tells a story of an elderly man who was not aware until days before his home was to be foreclosed that there was assistance available. With LCW’s help he got the auction postponed and later submitted the documents necessary for a loan modification, which LCW expects to be successful. There was a woman whose lender gave her a trial modification, and at its completion insisted she enter another trial period at a higher interest rate and payment, because the lender mistakenly calculated that her income had increased 25%. Because of the intervention and the persistence of the LCW counselors, both homeowners remain in their homes. Since 2007, LCW has provided foreclosure prevention assistance to approximately 400 families in the region, and 59% of these families have achieved positive outcomes.

At the Neighborhood of Affordable Housing (NOAH) in East Boston, Counselor Smita Das tells the story of a single mother of two young children. After losing her job, she was unable to pay the two mortgages on her triple-decker. With NOAH’s helped she received a trail modification under the HAMP program, and then a permanent modification that lowered the combined monthly payment on her mortgages from $4,500 to just over $2,800.

Michele Morris of Valley CDC in Northampton highlights an important reason for counselors’ success in helping homeowners in crisis: the ability to develop a positive working relationship with the loan servicer’s staff. Homeowners may typically vent their frustration by treating the loan servicer’s staff as an adversary, which is not conducive to getting the family’s loan prioritized and getting the complex servicing errors untangled.

The moral of this story is clear. With all the challenges associated with loan modifications and foreclosure prevention counseling, it remains the fastest and most cost effective method of assisting families facing foreclosure, preserving family wealth, avoiding displacement, and stabilizing neighborhoods. Our frustration and anger about the on-going foreclosure crisis should not obscure the important success that nonprofit organizations are having day after day, one family at a time. We need to dramatically increase support for counseling, not throw in the towel in despair.

Commenting Closed

Philadelphia Conference Explores Future of Community Development

May 20th, 2010 by Joe Kriesberg

Last week I had the opportunity to speak on a panel at a conference hosted by the Federal Reserve Bank of Philadelphia on the future of Community Development. The panel was the closing plenary session for the conference entitled Rethink. Recover. Rebuild: Reinventing Older Communities. It was broad conversation that gave me an opportunity to reflect upon and share some of the lessons and experiences we have had as part of the Community Development Innovation Forum here in Massachusetts. My fellow panelists were Kimberly Allen from the Wachovia Regional Foundation, John Bendel of the Federal Home Loan Bank of Pittsburgh who leads its community investment program, and their Blueprint Communities program, and Raphael Bostic who is the Assistant Secretary at HUD responsible for Research and Policy.

The discussion touched on many themes, but the one that seemed to resonate the most was the importance of working comprehensively and across silos. This was very reminiscent of the discussion a few weeks earlier at the launch of the Institute for Comprehensive Community Development. Both Kimberly and John are focusing their grantmaking on efforts to undertake comprehensive, multi-issue, multi-stakeholder placed based change efforts. At the same time, HUD is working aggressively to break down silos between federal agencies and federal programs. Asst. Secretary Bostic said that HUD is in regular meetings with officials from transportation, education, health care and other agencies looking for ways to align their strategies and work on collaborative approaches like Sustainable Communities and Choice Neighborhoods.

The panel also engaged in an interesting dialogue about how we can determine “what works” so they we focus resources on those programs. While everyone certainly agreed that we want to fund “what works” there was some disagreement about how capable we are at really knowing what works given the complex set of relationships and networks that impact outcomes. How do we make decisions given this uncertainty? How do we make sure that we use data appropriately? And how do we decide what works when different stakeholders have different goals and priorities?

Fortunately, after participating in these policy and theoretical discussions at the conference Rick Sauer, from the Philadelphia Association of CDCs took me to visit one of his member organizations, the Hispanic Association of Contractors & Enterprises. HACE Executive Director Bill Salas Jr. showed us the neighborhood and the incredible work that his CDC has done implementing precisely the type of comprehensive approach that we discussed on the panel in the morning. HACE builds and manages family and senior housing, operates an innovative Main Streets program that includes an emphasis on cultural economic development and tourism, a wonderful partnership with a health care agency that serves the residents of their senior housing (HACE custom built a facility for the health care agency on the same site) and youth programming. The agency is led by a board of directors comprised largely of local, Hispanic residents working together to improve their community.

While my site visit did not answer all the questions raised at the conference, I left Philadelphia reaffirmed in my belief that resident-led, effectively managed, community based development is certainly among the things that really does “work.” Hopefully, as the federal government and other funders renew their commitment to place-based and comprehensive work they will also renew their commitment to building and supporting the local organizations that actually get the job done.

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Asian CDC Launches Participatory Chinatown as a New Community Tool

May 17th, 2010 by Pete Kane

Earlier this month, Asian Community Development Corporation (ACDC) and the Metropolitan Area Planning Council (MAPC) showcased a groundbreaking tool for civic engagement. Developing a very realistic 3D environment mimicking Chinatown in Boston, Participatory Chinatown gives community members opportunities to learn about the possibilities and tradeoffs the neighborhood may face in the coming years. MACDC member ACDC, in collaboration with MAPC, has provided its community with a new way to learn about their neighborhood while at the same time interact with a possible future for that area. Provided in both English and Cantonese, the program has been crafted to meet the needs of the local residents. Youth from the neighborhood volunteer at the events as well to help other residents learn how to use the 3D space and feel more comfortable.

ACDC and MAPC have hosted a number of interactive sessions for the public. I attended their event on May 5th which was focused on educating practitioners about the tool. Broken down into two sessions, we are able to see Chinatown in two different lights. The first session focuses on playing a fully-storied character in order to achieve the character's desired goal. Each character is looking to fulfill a need within one of three categories: work, housing, social. My character, Hong Yee, was a recent immigrant with a family looking for suitable, low-income housing. By playing the character within the 3D world of the current Chinatown, you as the player are provided a view into what Chinatown is like today. Where can you find a job, where are the different types of housing located, what locations provide adequate social interaction? Through interactions both with hotspots in the world as well as with other characters, I was given hints as to where to find housing and what that type of housing could provide my family. At the end of this session, the player is asked to evaluate the options they have been presented and choose the three best options for their character. Which three jobs do you feel your character can be successful at, what housing options provide you with your needs, where can you socialize and thereby grow within your community? These choices come with tradeoffs, providing the user a view into the issues facing those currently living and working in Chinatown. There is also the chance you may end up with none of your choices - a direct reflection on the current needs of the area. As my character had a fixed budget and needed at least two bedrooms, my options were slim. In the end, I did not find housing as the wait list for my choices were too long.

The second session allows the user to examine some potential development scenarios. The three scenarios - housing-oriented, jobs-oriented, and mixed-use - were developed by MAPC and ACDC for the area of Chinatown south of the Turnpike. Participants are presented with a number of topics that deal with planning and development such as business, open space, parking and identity. Based on the three topics you feel are most important to consider when redeveloping this area, you are presented with one of the three scenarios. I selected “walkability,” “connectivity,” and “identity” as the most important factors which resulted in the mixed-use future scenario. As a user, you are invited to enter a 3D world again - this time it is the scenario that was selected. You then walk around the world to see what a future for the area might look like under this type of development. While walking around, you are asked to provide comments related to the earlier topic areas as well as to provide other comments. These comments are viewable by everyone and will be utilized in the visioning process for the Chinatown master plan.

The Participatory Chinatown team traveled to Washington, D.C., in May as part of National Lab Day to showcase the potential of this tool to senior White House Staff. This meeting will help to bring this virtual concept to the national stage, showcasing the possibility to many other community development organizations as a means to engage their communities. It will be exciting to see what information, concerns and ideas come out of this new innovation that MACDC's member ACDC has developed.

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Let's Stimulate Demand Driven Community Development

May 7th, 2010 by Joe Kriesberg

In recent months, there has been a great deal of buzz about the Obama Administration’s new placed based initiatives such as Sustainable Communities, Promise Neighborhoods and Choice Neighborhoods. This federal leadership is indeed very exciting and certainly long overdue.  They will create opportunities for taking a more comprehensive and integrated approach to community development, something practitioners have been seeking for years.

However, the overwhelming majority of federal funds still flow through highly categorical programs and even these new initiatives put the focus on Federal priorities. This perpetuates a supply-side approach to community change where policy makers, funders and non profits focus on what we can supply to low-income people: housing, jobs, and services. In this context, nonprofits become the “delivery system” for supplying the things that governments and foundations have decided are needed in local communities.

The risk is that we focus so much on what we can supply to neighborhoods that we will neglect the equally important work of building local capacity to exert demand on the larger private and public systems. 

Busting the silos

It will be hard to achieve comprehensive change with just a delivery system and supply-side model, because such a model inevitably pushes non-profits to specialize in specific areas while perpetuating silos within government agencies and foundations. The model is also inherently top-down because the key decisions are made by the suppliers, not the consumers, and the nonprofit agencies are seen largely as conduits through which resources pass, rather than vehicles through which local residents come together to solve problems. In a supply model, local neighborhoods are left to wait and hope that the delivery system will deliver something to them.

If we want to implement integrated programs at the local level – when the larger system is structured in silos that deliver specific services and programs – we’ll have to strengthen the demand side of the equation. In a demand-driven system, neighborhoods identify their needs and then exert demand on larger systems to bring in the needed resources. In this model, neighborhoods act like regular consumers in the marketplace, obtaining the services and programs they need to create the type of neighborhood they want. This allows for genuinely comprehensive and integrated work because at the neighborhood level the scale and complexity is manageable in a way that it is not on a statewide or national level. It also ensures a bottom-up approach since the local actors are determining what is needed and obtaining it.

Demand capacity is not a new idea. David Erickson of the Federal Reserve Bank of San Francisco talks about it in his new book, The Housing Policy Revolution: Networks and Neighborhoods. Bill Traynor, the executive director of Lawrence Community Works and a leading thinker in our field, has promoted this model for years. Traynor calls for “a much higher level of neighbor to neighbor engagement and of service to a larger good at the local level. The essence of these initiatives should be to re-awaken, re-activate and re-engage the American People in shaping their own quality of life and to that end, the mission of place-making.”

So what does local “demand capacity” look like? I see three key elements.

  • Neighborhood residents need one or more organizations through which they can work together to improve their community. These organizations must be truly rooted in their community, accountable to and led by residents. Individuals working alone or in ad hoc groups will not be able to build the power they need to spark change, nor have the wherewithal to steward new community assets over the long term.
  • These local organizations must have diverse networks and relationships both within and outside the neighborhood: with other actors at the city, regional, state and federal level, and extending into the private, governmental, philanthropic and non-profit sectors.
  • Local organizations must have the financial capacity to initiate their own ideas and sustain them over time without being completely dependent on outside sources of funding. 

Supportive policies

Building demand capacity has policy implications. First, our desire for scale and efficiency should not result in a purely supply-side delivery system – public and private funders need to direct their resources to community-based organizations as well, because they can operate high-quality programs in the context of comprehensive neighborhood strategies. Second, funders and policy makers need to allow community-based organizations to earn sufficient profits from their activities that they can build financial capacity over time. Third, local organizations need to develop business models that allow them to work comprehensively. And finally, funding streams are needed to directly support community-based organizations in their role of linking and integrating different programs and services at the neighborhood level.

We need to build demand capacity across the country – not just in a few sites lucky enough to receive substantial foundation support for a few years, but in thousands of places. This will require embedding capacity-building into everything we are doing and developing sustainable business models for community-based groups.

If we do this right, then 10 or 20 years from now, neighborhood residents will not have to wait and hope that someone delivers change to them. They will have the power to demand change and make it happen.

Commenting Closed

National Institute Will Advance Community Building

April 28th, 2010 by Joe Kriesberg

Article written by Joe Kriesberg and Bob Van Meter, Executive Director, Boston LISC

On April 20th, we were able to participate in an important event for community development.  A new Institute for Comprehensive Community Development was formally launched with a day long conference in Washington D.C. where community developers, policy makers from the Obama administration and foundation and intermediary staff met to talk about the state of comprehensive community development work and the direction forward. 

 The Institute was created by LISC to be a center for training of comprehensive community development practitioners, and to be a nexus for policy makers, researchers and practitioners to share ideas, best practice, and communicate more broadly about the work of comprehensive community development.  The leadership of the institute draws heavily upon the experience developed by Chicago LISC over the last dozen years as it has worked in partnership with the MacArthur Foundation and local community based organizations to do comprehensive community development in fourteen Chicago neighborhoods.  That successful experience was critical to LISC’s decision at the national level to adopt comprehensive community development as a national strategic direction and encourage each LISC program site to move in this direction.  The Institute is already providing training to LISC staff around the country. Marcus Haymon and Bob Van Meter were able to spend two days in Chicago in March in the Institute’s first intensive training session.

The March training was about the nitty gritty of comprehensive work but Tuesday’s “Inauguration” of the Institute was the view from 25,000 feet.  The alignment of the vision of comprehensive community development with the vision of the Obama administration was a strong theme of the day’s events.  Three White House officials spoke at the event, Adolfo Carrion, Jr. Director of the new White House Office of Urban Policy, Derek Douglas, Special Assistant to the President, White House Domestic Policy Council and Valerie Jarrett, Senior Advisor and Assistant to the President.  All of them spoke of the administration’s interest and support for comprehensive approaches to the challenges facing communities.  The work of three interagency working groups of the domestic policy council was described, including one focused on neighborhood revitalization that includes staff from the Department of Housing and Urban Development, the Education Department and the Department of Health and Human Services and the Department of Justice.  The two other working groups are focused on “Sustainable Communities” and “Regional Innovation”.

Derek Douglas described the approach of the working group on neighborhood revitalization as having several characteristics that include; 1) reinforce broad goals rather than being prescriptive about programs, 2) to emphasize the partnership of federal agencies, 3) to be evidence based.    Douglas said that there is already discussion between agencies about joint funding and joint review of applications by agency staff.    Valerie Jarrett spoke about the possibility that future federal funding decisions for core programs would include some priority for communities which are pursuing comprehensive strategies. 

Xavier de Souza Briggs, Associate Director for General Government Programs at the Office of Management and Budget and Erica Poethig, Deputy Assistant Secretary for Policy Development at HUD participated in an afternoon symposium on mapping the way forward.  Briggs, who was most recently on the faculty at the Department of Urban Studies and Planning at MIT (and spoke at the 2006 MACDC Convention), emphasized what an important factor residential mobility is in thinking about communities and how one measures the impact or benefit of place-based comprehensive strategy.

The symposium included a number of community development practitioners as well as administration officials and others.  Hippolito (Paul) Roldan of the Hispanic Housing Development Corporation made an impassioned plea for the importance of addressing public safety as a precondition for all other community development work.  He emphasized the scourge that gang violence is in some of the communities he works in and the importance of addressing violence.  Xav Briggs responded to Roldan arguing that sometimes liberal policy makers have emphasized violence prevention to the detriment of violence deterrence and that we must do both as we think most community developers would agree and pursue as a practical strategy.   

 Both Amy Liu of the Brookings Institution and Ron Phillips of Coastal Enterprises reminded the audience that community development is not just about cities.  Poverty is a suburban and rural phenomenon  and poor people living in suburbs, according to Liu, underutilize the largest income support programs perhaps in part because of access to those programs is less in suburban locations.

Bob Weissbourd, a Chicago based consultant (and speaker at one of our Community Development Innovation Forum events in 2009), reminded everyone that neighborhoods are impacted by the market and that community development needs to be about influencing the market but that much of the change that occurs both for good or ill in communities is determined by forces beyond our direct control.

Both Julia Stasch of the MacArthur Foundation, speaking in the morning and Ann Kubisch of the Aspen Institute speaking in the afternoon spoke about the importance of the broker role.  Kubisch said that a number of comprehensive approaches in the past had been successful in creating neighborhood level consensus or coalitions but that there had been less success in building linkages to power.  In Kubisch’s view that is an important role, that of convener, broker, aligner, often, but not always, played by a CDC.   Stasch spoke about the importance of the “glue” that keeps comprehensive efforts together.  Stasch also suggested that the Institute should work to create new metrics that measure the strength of the “platform” (platform is the LISC term for the coalition of local players who work together to advance neighborhood change) and whether they increase the resilience of the community.

Another theme running through much of the day’s events was the relation between regional strategies for growth and sustainability and the importance of strong neighborhoods and neighborhood revitalization. Stasch remarked that those involved in both regional efforts and comprehensive neighborhood efforts often acknowledge the importance of each other’s concerns but that real engagement between those ideas and approaches is lacking.  She suggested that the Institute should be a nexus of that engagement.

Xav Briggs and others spoke about the need for evidence to support allocation of public resources to support efforts but the evidence is difficult to come by given residential mobility, the strength of market forces, and the complexity of factors affecting both the people in communities and the communities.

In our view, there should have been a bit more discussion about the importance of creating strong community based organizations that can make demands on the public sector and corporations on behalf of the low income communities.  One of the central questions that has to be answered about comprehensive development strategies is how do you pay for the community organizing work, the glue, that does not fit easily into a programmatic box. 

Moving forward, both Boston LISC and MACDC expect to be active participants in this national discussion. Joe Kriesberg will be serving on the Institute’s new National Advisory Board and Bob Van Meter will be participating in Institute activities through his role at LISC. More importantly, Boston LISC will be rolling out its version of comprehensive community development later this year with a new “Resilient Communities” program in two local neighborhoods. MACDC is working with the Smart Growth Alliance to develop a new “Great Neighborhoods” program to promote local smart growth efforts that advance similar goals. Both of these new programs are focused on local neighborhoods, but are tightly linked to broader regional efforts to implement Metro Future, the regional plan for Greater Boston that was developed by MAPC.

The convergence of these local, regional, and national initiatives provides us with a game changing opportunity to advance our long-held vision for comprehensive community development that can transform both neighborhoods and the lives of the people who live in them.

Commenting Closed

Lobby Day 2010

April 14th, 2010 by Allison Staton

Photo by Lolita Parker Jr.

There is something inspiring about bringing people to the State House.  As a professional lobbyist I can, at times, take for granted the grand and inspiring dome sitting atop Beacon Hill.  I can find the process of watching bills or the annual budget go through the legislative process to be frustrating.

Yet on Tuesday, April 6th the stunning Hall of Flags filled with people, posters, PowerPoint displays on laptops, brochures and good food.    CDCs from around Massachusetts were represented by board members, staff, community leaders, and more than a dozen youth leaders.  Over 200 people from 38 member organizations came to meet with at least 38 legislators and aides to talk about the importance of ongoing foreclosure relief, fully supporting small business technical assistance and the role of CDCs in neighborhoods and regions throughout the Commonwealth. We also made a strong push for funding summer jobs for youth, with Makeila Layne, Dorchester Bay Youth Force from Dorchester Youth Force speaking to the crowd about the importance of those programs.

I heard people marvel at how beautiful the building is and I reminded them it is their building, they pay for it and the salaries of those working in it.  People talked about how welcoming their Senator or Representatives were.  Leaders brought their communities into the State House and the State House welcomed them.

Photo by Lolita Parker Jr.

Senator Harriette Chandler of Worcester, who was introduced by North High School Sophomore Jasmine Garcia, spoke of the importance of CDCs in her district and the pride she had in sponsoring bills that strengthen resources for CDCs.  Representative Linda Dorcena Forry of Boston spoke of how CDCs build up communities including her own.  EOHHS Secretary Greg Bialecki announced that he was doubling the Small Business Technical Assistant grants for CDCs and other non-profits so their funding was secure through the end of FY11.

And yet, as the lap tops were put away, the tables broken down, and the Great Hall of Flags became a large empty space I was reminded of the power that comes from bringing community leaders into the State House to make their case. My job will be a little bit easier now as I continue to lobby on a daily basis, but more importantly, I am convinced that our event will help build momentum for passing the legislation and budget items that our members and our communities need.

Be sure to enjoy MACDC’s first ever Lobby Day video.  It was compiled and edited by MACDC’s own Jay Rosa using video shot by various folks and the photographs of Lolita Parker, Jr.

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Innovation in Action

April 9th, 2010 by Joe Kriesberg

The other day I read about a new report by New York State Comptroller Thomas DiNapoli (with the help of the New York Council of Nonprofits) that found that 87 percent of nonprofit contracts with state government (of more than $50,000) were not approved prior to the nonprofits’ beginning their work. On average, new contracts were approved nine months after the contract start dates and renewals were five months late on average.  New York State is essentially relying on nonprofit organizations being so committed to their mission that they will risk their financial health to continue providing services without contracts. Indeed the entire system appears to depend on this commitment. 

The only thing about this report that might surprise CDC and non-profit leaders is the fact that a state agency finally documented the problem.  All mission-driven organizations confront this challenge all the time – how to balance money with mission. We must often complete substantial work on a project or program before receiving a fee or reimbursement and those payments rarely cover the full cost of delivering the service. Cash flow becomes a chronic challenge and organizations are unable to build up a health reserve fund. The resulting impact on fiscal health can be severe as the Non Profit Finance Fund recently documented in a report on CDC Fiscal Health that was completed as part of the Community Development Innovation Forum.  

Reversing these trends is a primary goal of the Community Development Innovation Forum. We have recently re-activated a group of stakeholders to develop recommendations for how the real estate development finance system can be reformed to better enable non-profit developers to achieve their missions in a financially sustainable manner. 

In the meantime, I have some very good news to report about a recent policy decision that moves us in the right direction. On April 6, at MACDC’s annual Lobby Day, Massachusetts Secretary of Housing and Economic Development Greg Bialecki, announced that he would forward commit $600,000 in FY 2011 funding for the small business technical assistance program so that he could double the size of recent grants to CDCs and other nonprofits and extend the term of their contracts by 6 months. By providing greater funding certainty and stability, the state will strengthen its organizational partners, promote longer term planning, enhance professional and program development and help leverage more private and federal money – without costing the state any extra money. 

 The Secretary’s announcement was in response to problems this program has had in past years when uncertainty about the state budget would cause substantial delays in the RFP and subsequent funding decisions. Groups sometimes had to wait several months into the fiscal year before learning whether they were going to be funded again and at what level.

 Secretary Bialecki’s creative solution was made possible by a generous commitment from Mass Development to provide $600,000 in funding to the program in FY 2010 and now FY 2011. Since these funds are not contingent on legislative approval of the state budget in June, the Secretary had the flexibility to think outside the box and create a solution that will benefit the state, the grantees and most importantly the small businesses that this program seeks to support. Now that is the type of Innovation that is worth celebrating!

Commenting Closed

CDC Fiscal Health - where are we, where are we going?

March 1st, 2010 by Joe Kriesberg

Last Friday, at an event hosted by the Boston Foundation, the Community Development Innovation Forum released a new study by the Non Profit Finance Fund that looked at the fiscal health of the CDC sector.

Bill Pinakiewicz from NFF, highlighted the key findings of the study, including:

* Taken as a group, the twenty-six organizations represented in the study have become financially more vulnerable from 2003 thru 2008.  That means that the financial challenges facing community development corporations predate the 2008 recession.

* Unlike private real estate companies, CDC financial performance was not demonstrably better during the hot real estate market in the middle of the decade due to program limits on rents and profits, leaving little cushion when the market collapsed in 2008.

* The study did not find a significant difference among small, medium and large CDCs in terms of recent financial performance.

* CDCs were impacted by multiple factors – homeownership projects that came on line as the market collapsed, rental developments that were stalled or yielded inadequate fees, existing portfolios that generate little to no net cash flow to the CDC, cuts in government, foundation and corporate funding, and rising costs. The study period also covers the first five years following the elimination of the state’s CEED program, which had provided flexible funding to CDCs for more than 20 years.

* While all of the participating CDCs provided audits that fully comply with GAAP there is clearly a wide variation in financial reporting practices across the field that make it difficult to aggregate and compare data among CDCs.

We then heard from a panel including Geeta Pradham from the Boston Foundation, Jeanne Pinado from Madison Park DC, Phil Giffee from NOAH and Paul Juraschek the CFO at JPNDC.  The panelists pointed out that not all CDCs are struggling financially and that the true financial health of a CDC can sometimes be hard to discern from consolidated financial statements that include real estate properties and the core organization. The panelists described some of the tough decisions that CDCs have had to make to deal with the financial stress, including shutting down programs and laying off staff. They also noted that small changes in the real estate finance system with respect to developer fees, cash flow distribution and other rules could significantly improve CDC fiscal health and stability. There was also broad agreement that more consistency in financial reporting and more opportunities for CFOs and Executive Directors to learn from each other would be valuable.

MACDC, LISC and other partners in the Innovation Forum intend to follow up the study by renewing our efforts to improve the real estate finance system, to begin implementing Strength Matters in Massachusetts, to expand peer learning opportunities among CDCs, to support collaborations, mergers, and other ways to improve operating efficiency, and to continue researching trends to determine whether we are making progress in the coming years.

The structural flaws in the way that real estate is financed make it difficult for mission driven organizations to succeed, and this report underscores that point. Real estate development is a high risk economic activity and the affordable housing financing system makes it difficult for that risk to be adequately rewarded for mission driven organizations while not shielding them from the negative consequences of failure. It is also clear that the way all non profits are financed creates inherent challenges, including government contracts with little overhead, private philanthropy that is highly restricted and a lack of unrestricted operating funds that allow nonprofits to invest in organizational infrastructure, capacity building, research and development, and innovation. 

To me, a core problem is that too many funders are looking to simply buy services from nonprofit organizations at the lowest possible price and too many nonprofits play into this game at their own financial peril. Instead, we need more funders to think not just about the immediate program or project, but how their investment in that program or project will help the organization achieve lasting, sustainable community impact over the long term.

Commenting Closed

Making Connections – In Israel

February 18th, 2010 by Joe Kriesberg
Joe with activists in Yaffo

Last month I had the opportunity to travel to Israel as part of the Jewish Community Relations Council’s Learning Exchange Program. The program was for non profit leaders in Boston and included a tour of Israel and then a three day seminar with nonprofit leaders from Boston’s sister city of Haifa. The program gave us an opportunity to learn about Israel, with a particular focus on how non-profit social justice and community service organizations are working to build a stronger civil society in that country. Our peers in Haifa will be visiting us in Boston in May as part of the program.

The trip was fascinating and eye opening as we had the opportunity to meet with a diverse group of people, including Palestinians activists in East Jerusalem, Government officials from the Foreign Ministry, leaders of nonprofit organizations, representatives from mainline Jewish Organizations, educators, and Arab leaders from inside Israel. As a Jew, a life-long Zionist, and someone who has visited Israel many times as a tourist and to see family, it was an entirely new experience to travel with a group of mostly non-Jews and to meet such a cross section of Israeli society. I alternatively felt sadness and joy, defensiveness and pride, confusion and insight, frustration and hope.  And sometimes, I felt all of those things at the same time!

Perhaps the most interesting aspect for me was to meet with community development advocates in Haifa and Tel Aviv. In Haifa, I met with leaders in the Hadar neighborhood, a diverse, historic and struggling neighborhood in the heart of the city. Hadar used to be the economic center of Haifa, but much of the middle class has left. The neighborhood is now home to a mix of long time Israel residents (called Veterans), recent Jewish immigrants from the former Soviet Union and Ethiopia, Arabs and migrant workers from Asia. Many of the buildings are in disrepair and there is a need to attract more families to the area. The neighborhood has many of the same qualities of diverse neighborhoods in Massachusetts, but it also struggles with finding ways for a diverse population to live together with respect and peace.

I also toured Yaffo neighborhood of Tel Aviv. Yaffo used to be an independent city until 1948 when Israel won its independence. Before 1948, Yaffo was home to 100,000 Arabs, but after the war only about 4,000 remained as the rest fled to other towns in Israel, Jordon, Egypt Lebanon, and elsewhere.  Those who remained were allowed to live as tenants in buildings that were now owned by the Israel government. However, those tenant rights do not extend to the 3rd generation and now, 60 years later, many of these families no longer have the legal right to remain. Market forces are also driving out many families as Yaffo sits directly on the Mediterranean Sea and new homes can cost several million dollars each. A group of Jewish and Arab residents, lawyers and planners are fighting to prevent displacement and widespread gentrification and to retain the Arab culture and history of the City.

Community Development work is hard in Massachusetts but the challenges in Israel are even harder as they exist within a broader conflict and tension. While Arabs are full legal citizens, they attend separate schools, and often feel apart from the Israeli culture and society. On many occasions, we heard Arab people say that they want their history and story heard and recognized, even if it can’t be changed.

There are no CDCs in Hadar, Yaffo or anywhere in Israel.  Local community groups provide many of the services that CDCs provide here in Boston, but non-profit organizations are not yet in the housing and redevelopment business and there is a growing desire to create community-led institutions that can lead positive development, build affordable housing, renovate dilapidated properties, preserve tenancies, and help some tenants become homeowners.

Activists in Hadar, Yaffo and elsewhere are looking to the United States for lessons.  A team of 15 Israeli activists, lawyers, scholars and government officials visited Boston last week to learn more about the community development system here in Massachusetts.  They met with several MACDC members and allies to learn about our system and to begin thinking about how to develop their own in Israel. Judging from the discussions we had, I think we helped inspire them to move forward with building a non-profit affordable housing and community development sector.

As for the broader conflict, I won’t try to say anything profound or insightful. I don’t think 12 days in Israel qualify me to offer anything new to what has been said by others more knowledgeable. However, on a personal level I left feeling optimistic because I had the great privilege to meet many brave people – Jews, Arabs and Palestinians -- who yearn for peace, who want to live together with dignity and justice for all, and who are dedicating their lives to creating a new reality for their children.

If you want to see some of my pictures and learn more, join me for a brown bag lunch at the MACDC office, 15 Court Sq. on Wednesday, March 3 at 12:00pm.

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Welcome to my new blog!

January 21st, 2010 by Joe Kriesberg

After a couple of years of cajoling and encouragement from friends and colleagues, and a few months of my own contemplation and procrastination I have decided to venture into the blogosphere. My hope is to offer some ideas, information, and insights that will be of interest to community developers and their partners in Massachusetts and perhaps around the country. I welcome your feedback and comments as I hope this blog becomes a vehicle for sparking conversation and debate about key issues in our field.

Right now I am reading a very interesting book called Start Up Nation: The Story of Israel’s Economic Miracle by Dan Senor and Saul Singer. I started reading the book because I am in Israel for the rest of January with a Jewish Community Relations Council (JCRC) delegation of non-profit leaders. We will be meeting with our counterparts in Boston’s sister city of Haifa and around the country, including some affordable housing advocates. I’ll be writing more about that later.

But right now I am really enjoying this book. While it is providing me with good context for my trip, it also has very relevant lessons for the work we are doing in Massachusetts with our Community Development Innovation Forum. You see, it turns out that Israel is the world’s leader in innovation and entrepreneurial activity – especially in the high-tech, biotech and smart energy fields.  The authors explore the cultural and environmental factors that support so much innovation. According to the authors, it flows from such factors as a lack of hierarchy, a willingness to challenge conventional wisdom, a propensity to argue, debate, question and challenge authority, and an ability to see failure as learning step toward success rather than a reason to quit. In short,  it requires “chutzpah!”  Innovation has also been spurred by necessity (lack of natural resources, constant threats, economic and political isolation in the region) immigration, universal military service, and a strong commitment to education.   Entrepreneurialism is produced “when people can cross boundaries, turn societal norms upside down, and agitate in a free market economy … to catalyze radical ideas.”  The biggest obstacle to such innovation it turns out is “order. A bit of mayhem is not only healthy, but critical.”

Of course, there must be some balance. Israeli entrepreneurs benefit from “stable institutions and the rule of law,”  but also from Israel’s “nonhierarchical culture where everyone in business belongs to overlapping networks produced by small communities, common army service, geographic proximity and informality.”

When we are at our best, I think the community development field shares many of these attributes and characteristics. But I do worry that sometimes  we are afraid to challenge conventional wisdom, our own customs and practices, or powerful authorities, including funders and government officials. There may be a tendency to think that all of us should do the same thing or pursue the same solutions. We are often quick to judge and criticize those who try things differently. Too often we are afraid to acknowledge something has failed and when we do see failure we may see that as a permanent taint rather than a learning opportunity. In our desire for scale, efficiency, and an orderly delivery system, will we stifle the very innovation we need to achieve our ambitious goals?

My own sense is that we are all going to have to get more comfortable with disruption, confusion, disagreement, failure, and a bit of chaos if we are serious about creating a culture of innovation in our field. 

What do you think? Do you want to argue with me about that? Either way, post your comment!

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