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Abstract
Community development corporations (CDC) are a cornerstone of neighborhood improvement in legacy cities. Yet they face challenges that threaten their financial sustainability, challenges that grew exponentially with the Great Recession. This article examines the impact of the Great Recession on the revenue and survival of CDC in Baltimore, Maryland; Cleveland, Ohio; and Detroit, Michigan. An analysis of financial data from the National Center for Charitable Statistics from 2004 to 2011 highlights issues of industry contraction, revenue concentration and loss, and CDC survival. Interviews and examination of multiple secondary sources of information on CDC activity and support networks in each city further our understanding of the financial results. We find that the CDC industry in all three cities was severely impacted by the Great Recession and that the CDC support networks in each city had a significant intervening effect on the ability of CDC to adapt to the fiscal and service pressures created by the recession. We discuss the implications of the shared trends and the city-specific dynamics for the role of CDC in neighborhood improvement in legacy cities.
Acknowledgment
The authors wish to acknowledge the contributions of Jacob Gottfried and John Vasiloff who, as graduate research assistants at the University of Michigan and University of Michigan–Dearborn, greatly assisted in gathering and tabulating the finance and interview data used in this study.
Notes
1. No one definition of CDC has been embraced by researchers, a point we address in the Methods section.
2. We use the term improvement to cover the range of strategies undertaken to reduce negative conditions in city neighborhoods. Such strategies may focus on redevelopment, revitalization, stabilization, or even reconfiguring neighborhoods to serve new purposes in accordance with depopulation or other critical dynamics. Some alterations of the physical attributes of the neighborhood (e.g., housing, infrastructure, open space, etc.) are typically components of improvement strategies, but interventions targeting economic and social variables can also be present.
3. This included Indiana, Connecticut, Delaware, District of Columbia, Illinois, Indiana, Maryland, Massachusetts, Michigan, Missouri, Minnesota, New York, Ohio, Pennsylvania, Rhode Island, Wisconsin.
4. The gross receipts threshold was $25,000 before 2010. Some organizations that fall below the $50,000 threshold choose to file 990s. Religious organizations and congregations are exempt from filing requirements.
5. We randomly selected 10% of organizations included in our final download and compared the downloaded data with actual 990s to ensure the data were correct.
6. GuideStar is a web-based repository for nonprofit 990 forms and compilations of financial data based upon those forms. It enables users to search for, and download, 990s for any nonprofit organization that files these forms. We accessed the system using the university’s subscription.
7. As a complement to the quantitative analysis for this study, we conducted interviews with representatives (mainly executive directors) from 14 CDC—five in Baltimore, five in Cleveland, and four in Detroit—whose capacity and status varied. We confine most of our discussion in this article to the quantitative findings, but the interviews informed our coding of organizations.
8. Organizational websites included both current websites and historical websites (for some organizations) accessed, via the Internet Archive: Wayback Machine.
9. Prior research includes more than 70 interviews with representatives from CDC, government, foundation, banks, and community development intermediary representatives in the study cities, as well as other data collection and analyses.
10. Specific codes included Housing Development, Construction, & Management (L20); Income & Subsidized Rental Housing (L21); Senior Citizens Housing & Retirement Communities (L22); Independent Housing for People with Disabilities (L24); Housing Rehabilitation (L25); Home Improvement & Repairs (L81); Housing Expense Reduction Support (L82); Community & Neighborhood Development (S20); Housing Search Assistance (L30); Temporary Housing (L40); Housing Support (L80); Housing & Shelter NEC (L99); Community Coalitions (S21); and Community Improvement & Capacity Building NEC (S99).
11. To ensure that we were not including organizations that were mainly financing entities, an organization included in this category had to either conduct one of the other CDC activities or play the role of connecting individuals with the financing provided by another entity (e.g., the city government, banks, etc.).
12. We initially included organizations that provided emergency shelter, temporary shelter, transitional housing, or housing exclusively for individuals with mental disabilities but conducted no other CDC activities. Although projects developed or managed by these organizations can be part of a broad community revitalization effort, we chose to exclude these organizations from the analysis since their primary emphasis is human services and individuals, rather than housing and community stabilization or revitalization. We also excluded nonprofit organizations created solely for the purpose of owning specific housing projects, which are often paper organizations and do not conduct ongoing activities other than operation of the facility. Where those organizations are subsidiaries of a CDC any direct effect on the CDC’s finances should be reflected in the CDC’s 990.
13. Whether the CDC was coded as providing the service occasionally or not at all in other years depended on whether there was evidence that the CDC was attempting to provide the service in those years.
14. Throughout this article, figures reported related to revenue exclude organizations that were operating but did not submit a 990 for the year to which the average applies. By city, the number of organizations that fell into this category for 2004, 2008, and 2011 are Baltimore (3, 2, 1), Cleveland (2, 0, 0), and Detroit (3, 3, 1). For many of the subcategories (e.g., type of activity) reported, the number omitted is smaller. Based upon our knowledge of these organizations’ activities and the funding data available in years near the missing data, their omission makes averages slightly larger than they would otherwise be. However, the effect is not significant. We have noted any exceptions.
15. We use the term home improvement to include repair, rehabilitation, and construction. We acknowledge the variation in the demands and impact of these different activities, but the data did not enable a finer distinction consistently.
16. CDC survival rates reported in this article include all organizations for which there was evidence of CDC activity in a given year, even if the 990 for the specific year was not available. In Baltimore, all organizations that stopped conducting CDC activities ceased operations completely. In Cleveland and Detroit, all but two of the organizations did so. However, one of the Cleveland CDC that did not cease operations completely merged with another CDC. At least two of the Cleveland CDC that ceased operations saw their activities taken over by a neighboring CDC. To enhance readability, we refer to all of these organizations as ceasing operations or not surviving. Within specific types of activities, the number of organizations that stopped providing the activity but were still operating was slightly higher. These differences are noted where appropriate.
17. The data also enabled limited analysis of how the type of revenue affected housing CDC survival or revenue trends. Specifically, we examined whether or not dependence on outside contributions, versus program revenue, made a difference. No difference was evident.
18. Unless otherwise noted, the figures cited for specific types of service in this article include any CDC providing the type of service listed. Many CDC fall into more than one category because they provided more than one type of service.
19. The modest differences for some activities in Detroit are likely attributable to the small number of organizations that began services after 2004 rather than to true differences in underlying dynamics.
20. We do not equate CDC survival with CDC success. Nor do we assume that all CDC that survive are significantly contributing to neighborhood improvement. However, survival and financial resources are important high-level indicators of capacity of individual CDC and the overall CDC industry in a given city.
21. Home improvement or purchase financing is the exception, since no CDC did this occasionally.
22. The overwhelming majority of the revenue gain for this CDC came from the U.S. Department of Labor, U.S. Department of Treasury, and local foundations to support workforce and entrepreneurial development. This activity became such a significant portion of the CDC’s work that it eventually created a new nonprofit corporation to handle this work.
23. Directly comparable, reliable data on foreclosures for each city were not readily available. This conclusion is based on data for residential sheriffs’ deeds in Cleveland, percentage of residential properties under foreclosure in Baltimore, and the percentage of first-lien loans under foreclosure in Detroit.
24. These programs account for the majority of federal housing and community development grant funding available to support the work of CDC during the time of the study. CDC in some cities partnered with public housing agencies to implement programs supported by HOPE VI funding, which financed the revitalization and replacement of severely distressed public housing. However, CDC were not primary targets for this funding, and estimating the allocation of HOPE VI dollars that supported CDC was not feasible.
25. The $26 million in NSP2 funding for Baltimore was actually awarded to Healthy Neighborhoods, Inc. (HNI), a nonprofit intermediary established to aid community development efforts in targeted neighborhoods. HNI worked in cooperation with the city government, which endorsed HNI’s application.
26. Foundation funding data were compiled using the professional version of the Foundation Directory online. For each city, data were pulled for foundations were based in the home state of the city and authorized funding for recipients in the study city to support community and economic development, community beautification, community improvement, community development finance, or community organizing from 2005–2011.