“Happy Birthday.” © Oliver Brough

Within the field of community development, LISC (Local Initiatives Support Corporation) is a very large intermediary. With offices in 35 urban centers and a rural operation that spans 45 states and 2,200 communities, “LISC is in more places than any other community development organization,” touts its website.

Founded by the Ford Foundation in 1979, LISC estimates that it has invested $20 billion in four decades, including $1.5 billion in 2018. LISC once focused nearly exclusively on affordable housing; it estimates it helped finance 400,500 units of housing in its first 40 years. Today, its focus is much broader, but it is still a major affordable housing supporter, financing an estimated 20,085 units in 2018.

As Mike Kingsella, who directs the nonprofit Up for Growth, explains, LISC forms part of a network of organizations that emerged in the late 1970s and early 1980s, including Enterprise Community Partners, the National Housing Trust, NeighborWorks America, and the Housing Partnership Network, that “led the effort to direct capital markets toward community-oriented investments, including affordable housing.”

Kingsella observes that these groups were responsible for “an increased flow of private capital and public funding into disinvested communities, the creation of public-private partnerships to build housing (rather than direct public investment into public housing), and efforts to combat the long-standing impacts of redlining and racial segregation.”

And yet, despite production success, affordable housing, absent other forms of community economic development, has failed to keep pace with accelerating demand. The federal low-income housing tax credit, which LISC and others have heavily used, helped finance an estimated 2.3 million units of affordable housing in 30 years. But that pace, about 77,000 units a year, pales in comparison to the 366,100 units of housing that the federal government directly financed back in 1970.

In response, LISC (among others) have diversified to meet broader community needs, with LISC calling its altered orientation a comprehensive approach. Review LISC’s work today and you’ll see its fingertips in workforce development, addressing the social determinants of health and supporting youth sports and recreation facilities, to name just a few areas.

Annie Donovan, LISC’s chief operating officer, came to LISC less than a year ago. But while new to LISC, she is hardly new to community development, having worked for about four years at the Catholic Campaign for Human Development; about 20 years at Capital Impact Partners, a leading national community development financial institution (CDFI); a year-long stint in the Obama White House; and four years as director of the CDFI Fund.

Donovan joins LISC at a time when the national intermediary has become increasingly aware of the limitations that accompany its (not inconsiderable) successes. LISC, as Kingsella notes, made its name by creating quasi-markets to boost community development in low-income communities and communities of color. But, as Donovan points out, “Markets have their limitations. Market-based solutions are kind of what got us to where we are now. It’s not just about markets. Markets fail in some places.”

Donovan observes that you can’t simply rely on “market-based solutions when markets are part of the problem.” What can you do in these circumstances? Donovan contends that what is required is a “combination of policy and advocacy and capacity building at the local level” along with market interventions. “It is by combining these things that you can have an impact.”

Addressing Resident Displacement

One growing challenge is resident displacement, an issue top of mind in San Francisco, where Donovan has been interim director of LISC’s Bay Area office.

“Place is just a really tricky thing,” Donovan notes, “Developing place for whom? The lesson for community development over the last 15 years is that economic momentum has been created, but we are pushing out the people we care about. You can’t solve the issues by just developing a place. The tools have not sufficient.”

“When you’re purely market-driven,” Donovan adds, “then you’re not taking into consideration folks who are not starting from a place of advantage. In a competitive situation, you’re going to have winners and losers. How do we account for this as a society? How do we make sure we are creating an inclusive economic place?”

One strategy that LISC has been adopting is to partner with churches. For example, in Berkeley, California, the McGee Baptist Church is 101 years old. “The church had a property they owned—it was a rental that sat vacant for 20 years.” Now LISC’s Bay Area office is a partner in the redevelopment, which will lead to eight units of affordable housing that will be managed by the Bay Area Community Land Trust.

As Donovan points out, partnerships with faith-based organizations can be complicated:

A lot of them own land and they own land in communities that are gentrifying. They are trying to hold on. They are trying to hold on to their membership too. There is a desperate need for affordable housing. It is not only a preservation of housing strategy. It is also a preservation of culture. The McGee Baptist church is a 101-year-old church. It’s got meal programs, job readiness, it is a place of refuge for people at the lower end of the [economic] spectrum.

To activate that potential of faith-based organizations, however, is not easy. “We are doing technical assistance with Alameda County, where the county is trying to support faith-based organizations to develop affordable housing on land that they own.” The idea, Donovan emphasizes, is not to make churches developers, but to build their capacity to partner with developers, while building their capacity to look out after their own interests.

For example, with McGee, Donovan points out, “the land trust brought in the development expertise and will property-manage it.” The church, however, benefits not just by helping families afford housing, but from housing income. “That’s a win-win.” But getting there requires building trust in a Black community that has learned to be cautious—with good reason. To avoid repeating the sins of the past, LISC and the county train the church on how to deal with the development side and the legal side, and make sure the church’s interests are represented.

In terms of policy, Bay Area LISC is also partnering with cities to establish the right of tenants to jointly purchase apartment buildings from landlords when they want to sell.

“Berkeley is trying to push it and Oakland and East Palo Alto. They are trying to create systemic solutions to displacement. One way to do that is to create ownership opportunities. If you can put together the resources, you can empower people and create some stability and stave off some of the displacement,” Donovan notes.

“That’s part of the comprehensive approach,” Donovan adds. “Not just financing, but policy solutions that create systems change in the long run.”

A Reset on Race

Within the nonprofit sector, community economy development has often led on racial equity. Last fall, NPQ noted that many community economic development organizations have recently hired CEOs of color. LISC, which hired Maurice Jones as its CEO in 2016, is among them. Yet Donovan acknowledges that in the field, “we are all waking up to the fact that we haven’t done enough and there is not enough progress. And I think that requires self-examination for all of us to consider how we can go deeper.” Donovan notes that Jones “likes to say is that it took intention to get where we are today. And it will take intention to get us out.”

Part of the challenge is that superficially “race neutral” processes so often have a disparate racial impact. Donovan gives the New Markets Tax Credit program, which she used to oversee as director of the CDFI Fund, as an example. Donovan explains, “The GAO [US Government Accountability Office] did a study on this. Groups that were led by people of color and Native groups don’t do as well in the competition. Why is that? The competition is race neutral supposedly. But the competition requires a track record…and to be competitive, you have to be operating at a certain scale. So, there aren’t any onramps. If you don’t have the onramps, how can people of color compete?”

To be race neutral, Donovan observes, “requires you to ignore our history completely.…We haven’t created a level playing field, and we need to own that.”

Progress on Social Determinants of Health?

As is the case with Enterprise Community Partners, LISC also has dedicated more energy to addressing the intersection of housing and health care. “We are bringing in investments from a number of health institutions,” Donovan notes. “We are seeing our work being part of addressing the social determinants of health.”

To date, Donovan acknowledges there has been more talk than action, but that is changing, she says. To date, LISC has developed partnerships with Kaiser in California, Sentara Health in Virginia, and ProMedica in Toledo, Ohio.

“The health systems are coming to the table and they are looking for solutions that address the social determinants of health,” Donovan explains.

What’s Next?

If you take even a quick look at LISC’s funders, it is evident that LISC’s approach involves an inside game. Others, like CDFI pioneer Cliff Rosenthal, call for more directly challenging bank funding. Donovan sees value in the role played by such critics, but LISC’s role, she observes, is to be a bridge and hopefully extract resources to benefit communities.

Donovan adds that policy and advocacy are tools LISC can use to expand the box within which not just LISC, but community developers in general, can operate. “We’re going to try to do more of that, more capacity building, more support for advocacy. That is how you create systems change,” Donovan contends. In the Bay Area, Donovan points out that LISC has helped create a $500 million fund that supports community development, but also advocacy (such as the push to increase tenants’ rights to buy landlord property when it comes up for sale). These efforts, which have already resulted in the passage of the Community Opportunity to Purchase Act in San Francisco, could lead to expanded affordable housing options, including member-owned housing cooperatives.

In San Francisco, Donovan observes, “The homeless encampments are becoming so big that it is in your face. This is where unfettered capitalism takes us. It is not a pretty picture. Inequality is not good for any of us.” The market, Donovan says, “can’t solve this on its own.” She adds, “There is a set of rules that govern markets; they are not the invisible hand. We have all sorts of policies that support the winners winning big.” This, she contends, must change.

Meanwhile, on the community development side, LISC is also reconsidering how it measures the impact of its work. As Jones, LISC’s CEO, said in an interview with the business advisory firm Next Street a couple of years ago, the traditional way that LISC has thought about its impact is by “counting units that have been constructed or rehabbed, counting square footage, etc. But our success also has to be measured in terms of how much impact we’ve had on individuals who are trying to build or improve their credit scores, improve net incomes, get employment in living wage jobs, or invest in businesses that are creating sustainable jobs.”

“And then there’s the overall impact on a particular neighborhood, looking at things like life expectancy in specific zip codes. These are the kinds of metrics we need to measure ourselves by. We do it better on the real estate side right now—we need to up our game on the people and neighborhood side.”