Challenges for Nonprofit Housing Organizations Created by the Private Housing Market

ABSTRACT:

Community development corporations (CDCs) and other large nonprofit housing organizations are major producers of housing for low-income households. One of the least recognized and examined set of challenges facing these groups relates to how the workings of the private housing market—both weak and strong market conditions—impact their ability to carry out their mission. After presenting examples of how housing market conditions create challenges for nonprofits, the article explores how organizational strategic planning can help the nonprofit to more explicitly focus on housing market dynamics and plan its activities taking into account these concerns. An analysis of the two major training programs for nonprofit housing organizations that were available during 2007 revealed that out of the 216 different courses offered by NeighborWorks America and the Local Initiatives Support Corporation, only 8% appear to relate closely to housing market dynamics and land-use issues and 3% relate to strategic planning. Initiatives that would assist nonprofits to both recognize the importance of the private housing market and to assist them in developing strategies for confronting market-based challenges are presented.

Notes

1 There are more than 1,252,000 CDC-produced units (National Congress for Community Economic Development, 2005). In addition, about 225,000 units have been produced by members of the Housing Partnership Network that consists of some 87 large nonprofits that operate on a citywide or regional level. Production data of HPN members come from Manuel Muelle, Director of Network Development, Housing Partnership Network. Private email communication, November 5, 2007. Another group of seven nonprofits, each of which operates in multiple states, have joined together in yet another organization, Stewards of Affordable Housing for the Future (SAHF). Together, these seven groups own and operate about 70,000 units. However, most of these units are included in the total of units produced by HPN members and are not counted separately. Estimate of units built by members of SAHF comes from Bill Kelly, President, private email communication, November 5, 2007. Not all large regional housing producers are members of the HPN or SAHF. For example, The Community Builders, based in Boston (but with offices in 10 other cities in the Northeast and Midwest) is neither a CDC nor a member of the HPN or SAHF. Its Web site claims that it is “the largest nonprofit urban housing developer in the United States” with over 21,000 housing units produced and with 7,000 units currently under management, located in 90 developments (Community Builders, 2007). In addition to the approximately 1.5 million units produced by CDCs and the large nonprofit housing producers that have affiliated themselves with an umbrella organization, there are a number of other types of nonprofit housing developers that have contributed to total nonprofit production. Although it is difficult to provide a precise figure, based on various estimates provided by Stone (2006) and Bratt (2007), there are about another 900,000 nonprofit-produced housing units under occupancy; nearly one-half of these units (425,000) are in limited equity cooperatives; another 200,000 are in Section 202 housing for the elderly developments. The remaining nonprofit-developed housing includes neighborhood reinvestment corporation-sponsored mutual housing associations, community land trusts, and other units built through various prior federal and nonfederal programs.

2 Private for-profit developers are also able to access Low-Income Housing Tax Credits as well as rental subsidies when developing affordable housing projects.

3 This was the situation in the Phoenix, Arizona area, for example. For several years prior to a market upswing, there were many vacant rental units and a large number of market rate projects were in default; some private development owners were offering lengthy periods of free rent. Relatively suddenly, however, home prices rocketed upward (about 50% in a year), which made it extremely difficult for Community Services of Arizona, a large regional nonprofit organization, to produce affordable homeownership opportunities (Mayer, 2005a).

4 Such activities include, for example, homeownership counseling, budget and credit counseling, and education/training; these programs are provided by 59%, 54%, and 53%, respectively, of CDCs. “Each of these activities shares a focus on helping low income residents connect to opportunities in the larger economy” (National Congress for Community Economic Development, 2005, p. 17). Further, Mayer and Temkin (2006), in their study of large regional nonprofit housing producers who are members of the Housing Partnership Network, note that most organizations view services to residents and to community members as integral parts of their activities. In particular, many groups provide services that promote homeownership, with prepurchase counseling being the most common form of homeownership assistance offered.

5 Two decades ago, it was suggested that CDCs might encounter the dilemma of how to continue to provide services to their original constituents in the face of neighborhood change and a new organizational membership that could seek a redefinition of its objectives (Bratt, 1989). The situation described in the text is a variation on this scenario. Rather than involving a takeover of the organization’s membership, the nonprofit faces other forms of community resistance.

6 Rohe et al. (2003) further note that strategic planning initiatives should not necessarily be the sole concern of the nonprofit housing organizations; localities should also be responsible for “periodically assess[ing] their needs and the role of local CDCs in addressing those needs” (p. 60). Incorporating a number of diverse groups into a community-oriented strategic planning initiative could aid in understanding how the local housing market is operating and is likely to change over time.

7 The eminent domain power has been bestowed on at least one neighborhood-based nonprofit, the Dudley Street Neighborhood Initiative, in Boston, Massachusetts (Medoff & Sklar, 1994).

8 Launching such a workshop was a recommendation in the report to the Lincoln Institute on which this article is based (Bratt, 2006b).

9 Myerson (2002) offers suggestions about how the Urban Land Institute could also collaborate.