The Community Development Financial Institutions Fund largely flies under the radar compared to other federal housing programs. But this Treasury Department initiative has granted more than $200 million this year, with nearly half of that going to affordable housing.
CDFIs are community development financial institutions that provide money for housing, as well as small business loans, technical assistance and other efforts to generate economic growth. The recipients are loan funds, credit unions, depositories, and even a couple of venture funds. The mandate of these specialized financial institutions, which have to qualify for the CDFI designation, is to lend or provide financial services to low-income populations. Since the program's inception 20 years ago, more than $1.5 billion in CDFI money has been awarded.
The biggest pot of CDFI money, called financial assistance and technical assistance awards, totaled $160 million this year. A maximum grant of $2 million was awarded to more than 150 institutions, of which 46% went to affordable housing projects.
Some of the CDFIs that received $2 million in funding include Corporation for Supportive Housing in New York City; Community First Fund, of Lancaster, Pa.; Community Loan Fund of New Jersey, in New Brunswick; and CoVantage Credit Union, in Antigo, Wis.
Another category is Bank Enterprise Awards, which are given to depository institutions. This year, $18 million went to 69 firms. BEA money goes to financial institutions that serve Census tracts where at least 30% of the population lives at or below the national poverty level and where the unemployment rate is at least 1.5 times the national average. Here, 34% of award money went to fund affordable housing in fiscal 2012, the last year studied.
Some of the banks getting money include Regions Bank of Birmingham, Ala.; Signature Bank, in Chicago and New York, and Bank2, in Oklahoma City. The maximum awards in this category were $355,000.
A category where the CDFI Fund makes a special impact is American Indian CDFIs. It has a special Native component that this year made more than $12 million in awards to 33 Native CDFIs. In this category, five of 20 financial assistance awards went to affordable housing efforts.
Since program inception in 2001, this Native component of the CDFI Fund has made more than $100 million in grants, a very significant amount of money for areas that can be among the most underserved in the nation. The Fund notes that in 2001, there were just 9 Native CDFIs. Now, there are 70.
The top award in this category was $750,000. An example of a Native CDFI is The Lakota Funds, based in Kyle, S.D., which received $600,000 this year. In fact, the Lakota Funds is actually the first-ever Native CDFI. It was started on the Pine Ridge reservation of the Oglala Lakota tribe as a microlender in an attempt to reproduce the success of microlenders like the Grameen Bank of Bangladesh.
In existence for two decades, the fund has loaned $3.5 million to 600 residents on the reservation, with a maximum loan of $200,000. The number of private businesses on the reservation has gone from two to 328 in that time, it says.
The CDFI Fund also administers a tax credit program called New Markets. This is an interesting approach since there already is a tax credit program on the multifamily side, the Low Income Housing Tax Credit. Like the CDFI program, the NMTC finances more than just housing.
It’s not a small amount of credit either. Since starting in 2000, the program has made more than $40 billion in credits in 836 awards, mainly for housing and business lending. The awards go to specialized institutions that qualify not as CDFIs, but a different designation, Community Development Entities, or CDEs, and are sold to investors who can use the tax credits, in effect making equity contributions to the projects. Debt can also be offered.
Among the largest recipients of NMTC funds is U.S. Bank's St. Louis-based community development entity, USBCDE, which has been awarded six grants totaling $600 million since 2006 for projects including below-market equity and debt products to real estate projects and operating businesses that serve low-income communities.