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"Inclusive Communities Financial Institutions: Investing in a More Ambitious Vision for the Future,"

by Elizabeth K. Julian September/October 2015 issue of Poverty & Race

The United States is not a country that has historically distributed its opportunities and resources equitably. There are winners and losers in the “geography of opportunity” (see Xavier deSouza Briggs, The Geography of Opportunity: Race and Housing Choice in Metropolitan America—Brookings Inst. Press, 2005), and the winners and losers can all too often be described in terms of race and place. This essay proposes a more expansive approach to redressing this situation than has historically been employed.

The modern-day community-development movement began to flourish as the Civil Rights Movement began to break down legal barriers to access by minorities to all aspects of full citizenship, including housing and equal provision of community services. The Fair Housing Act was premised upon the constitutional right of minorities to have access to integrated housing. While the dream of “open communities” fueled its passage, white resistance to “housing integration” was pervasive. By 1968, Robert Kennedy was offering “community development” as a counter to Eugene McCarthy’s support for letting minorities move where the good services and healthy communities already existed—that is, where white people lived (see Arthur M. Schlesinger, Jr., Robert Kennedy and Historical Times— Houghton Mifflin, 1978). It was a practical response to the failure to capture the hearts and minds of many whites on the issue of racial justice and responded to the understandable frustration felt by many blacks by creating a more empowering way for people of color to deal with the harms of segregation, one which did not require the receptiveness of white people.

Unfortunately, that last calculation was wrong. While whites have generally been more receptive to the idea of letting poor people of color try to improve “their” neighborhoods than to the idea of “those people” moving into the areas in which most whites live, there was never a long-term institutional commitment to making separate, low-income minority neighborhoods truly equal. Had there been, the United States might be a far different country today. Systematic, effective, and timely removal of the vestiges of racial segregation and discrimination that existed in minority neighborhoods 40 years ago could have addressed the “unequal” part of the segregation equation and paved the way for more effectively addressing the “separate.” Instead, the legacy of segregation has continued to haunt low-income, predominantly minority people, either those whose neighborhoods and communities had always been subjected to a discriminatory provision of services because of their race, or those who saw their “encroachment” into white areas lead to disinvestment by the public and private sectors in the health and welfare of those communities. The “empowered” residents, encouraged to learn to play the game, had in fact been handed a stacked deck.

For the past 35 years, many of the most effective tools of the community development movement have been provided by a financially and emotionally supportive philanthropic community at the highest levels. In addition, government programs and policies have targeted those distressed communities for a variety of resources designed to encourage the residents of those communities to “help themselves.” Of course, implicit in such community-focused initiatives is the requirement that in order to get the benefits of the programs, be they related to homeownership, employment, or financial assistance, people must stay in or return to the distressed communities. Thus, it is axiomatic that programs designed with that geographic focus, while having a positive effect on the neighborhoods and people served, without a broader vision and mission, also can also perpetuate or reinforce existing patterns of racial and economic isolation and segregation.

It is this essay’s position that a more inclusive vision of community and of community development is needed, one that focuses on people as well as place, and one that recognizes that a sustainable community can be more racially and economically integrated than current policies promote.

Why a More Inclusive Vision of Community is Important

We continue to express the aspirational vision that the United States is a nation of equal opportunity, where a person is judged by content of his character, not his zipcode; a nation held together by a commitment to the general welfare and the common good, defined not in racial or economic, but in human terms. U.S. history belies that vision. However, past failures do not mean this vision should be abandoned as the basis for a shared vision of the future. The challenge is to recognize that few, if any, public or private policy initiatives or institutions put their money where their mouth is when it comes to valuing people and communities seeking to make that inclusive vision real in their day-to-day lives, and to change that.

HOPE VI, for all its initial promise, has been rightly criticized for its emphasis on redevelopment opportunities for cities and developers rather than the creation of better opportunities for all the families whose displacement is an unavoidable part of redevelopment. A real commitment to deconcentration of poverty would have ensured that the low-income families for whom those demolished buildings were built are given a true chance not just to return to their neighborhood but also to access better housing opportunities through effective housing mobility programs and the creation of housing opportunities in lower-poverty/higher-opportunity areas. When the history of the HOPE VI program is written, this will be its unforgivable failure.

Going forward, Americans need to embrace and financially encourage public policy initiatives that affirmatively reflect a belief in the value of creating and maintaining open, racially and economically inclusive communities of opportunity where equality is created and sustained through access to good schools, affordable housing, safe neighborhoods, economic opportunity and a healthy environment. The concept of an Inclusive Communities Financial Institutions is such an initiative. It is based on the premise that while traditional financial institutions neither ignore nor abandon higher-opportunity white communities, they and government at all levels do ignore and/or have abandoned any efforts to ensure that low-income, minority people have true equal access to those communities and the benefits they offer.

Inclusive Communities Financial Institutions Initiative

One of the latest in a long list of programs and initiatives devoted to traditional “community development” work is the Community Development Financial Institutions Fund. According to the CDFI Coalition, over 1,000 CDFIs nationally have loaned and invested billions of dollars in economically distressed communities and have leveraged billions more in private-sector investment for development in low-wealth communities.

This essay’s proposed policy initiative would involve the creation of a national network of Inclusive Communities Financial Institutions (ICFIs), modeled after CDFIs but with a broader vision and mission. ICFIs would be community-based financial institutions whose mission it is to foster and support racially and economically inclusive communities of opportunity by ensuring that low-income people of color are not confined to overwhelmingly low-income, predominantly minority communities in order to benefit from such socially conscious investment and partnership. A primary purpose of ICFIs would be to counteract the institutional and market forces that perpetuate racial and economic segregation and to repair the harm that has been caused to the whole community by segregation and discrimination, past and present. ICFIs would be supported by a federal ICFI fund, and investors in certified ICFIs would be eligible to receive the same types of tax credits and other financial incentives that currently are enjoyed by CDFIs.

The concept of an ICFI and a supporting fund represents an evolved view of community development that captures the value of both revitalizing distressed lower-income, predominantly minority communities and of increasing access to higher-opportunity, predominantly white communities. It assumes that true empowerment of low-income people does not limit their options but expands them. It assumes that healthy, thriving communities of opportunity are desirable for all people, and that the standards of what constitutes such a community should not differ depending on which race predominates. And of course, the proposal raises the question of what value, if any, Americans place on having racially and ethnically diverse communities as part of that definition.

How Would It Work?

ICFIs could use the same organizational models that exist in CDFIs, including development banks, credit unions, loan funds, venture capital funds, micro-enterprise loan funds, and community development corporations. These organizations would provide specific types of financial assistance to promote the creation and maintenance of racially and economically inclusive communities. The types of borrowers and capital resources would be essentially the same but with the products and services related to the goal of creating and maintaining racially and economically inclusive communities across the geographic spectrum. An ICFI fund would provide a certification that would allow organizations to apply for financial and technical assistance grants from the fund, as well as give investors tax-related investment benefits.

The Bank Enterprise Award Program would be expanded to include recognition of traditional financial institutions that invest in ICFIs and provide them with the same cash incentives for such investment in efforts to create and maintain racially and economically inclusive communities that are currently provided for investment in CDFIs.

The New Markets Tax Credit Program would be expanded to provide tax credit authority to ICFIs to support their efforts to create and maintain racially and economically inclusive communities.

The fund could target “opportunity zones” (similar to the “hot zones” currently targeted by the CDFI Fund) for targeted investment. “Opportunity zones” would be urban, exurban and rural areas with high, market-driven economic opportunity, low poverty rates, little or no affordable housing, and little or no minority population. Funding could be targeted toward community-based groups and others who seek to create housing opportunities for lower-income and/or minority people in these zones or otherwise promote and foster greater inclusiveness and access to opportunity in these areas.

What Specific Types of Products and Services Would ICFIs Offer?

Housing affordability leads off any discussion about how to create and maintain an inclusive community. Because affordable housing development must rely on creative support from both traditional and non-traditional financial institutions, it would be an obvious high priority for ICFIs. Housing that is all at the top, or all at the bottom, of the affordability spectrum ensures that a community will not be inclusive. Balance, as with many things in life, is the key.

At the top end, high-cost housing means that lower-income people, even if they are working full time, cannot afford to live in that community, either as renters or homeowners. At the low end, a depressed housing market means that the rental market cannot sustain good quality housing over a long period at the rents that can be charged. Those who can afford to purchase a home will not realize the value of their investment in terms of wealth accumulation compared to home–owners in more affluent areas and will have a harder time maintaining and improving their property because of the overall depressed value of the land in the community. Tax bases in low-income areas are too low to provide the revenues necessary to allow the community to grow, improve, and provide the opportunities found in mixed-income areas. High-end communities, which have no income mix to even out the inflation that exclusive high-end property causes, gradually lose their seniors and exclude young families, leaving the downside of higher property values—high property taxes—to be borne by an increasingly struggling middle class. And the legacy of racial discrimination and segregation in all aspects of American life means that those lower-end communities are disproportionately minority and those at the high end are disproportionately white compared to the racial makeup of the broader housing market, exacerbating the racial divide that has for too long characterized the United States. An Inclusive Communities Financial Institution could invest in housing and aid housing consumers in ways to expand housing choice and foster more open and inclusive communities for everyone.

In addition to providing financial products related to the development and maintenance of affordable housing at all income levels and design needs, ICFIs could be a financial resource for a range of products and services designed to assist low-income families to fully and successfully access the benefits of communities high in market-driven opportunity. This opportunity is reflected in the quality of the schools, the safety of the neighborhoods, the quality and diversity of retail services, the availability of adult education and employment opportunities, the quality of the environment, and the availability of diverse social and recreational facilities.

For example, ICFIs could:

1. finance mixed-income development proposals in gentrifying areas designed to prevent displacement of low-income residents while attracting middle- and upper-income residents who value and agree to be a party of a truly inclusive community.

2. finance development of mixed-income rental housing, which includes affordable units that reach very-low- income families located in areas where such housing has historically been excluded.

3. provide low-interest loans, grants, or other financial assistance to low-income families seeking to access housing in higher-cost areas, either through rental or purchase, to assist in combating the “segregation premium” often hidden in the costs of residing in such areas.

4. provide financial assistance to community-based organizations or employers offering employment-related services and opportunities to low-income families seeking such opportunities in more affluent or job-rich communities.

5. provide funds to community-based organizations that work with low-income families that have chosen to locate in lower-poverty/higher-opportunity communities to assist them in getting the full benefit of that choice through counseling, financial assistance and advocacy.

6. provide financial assistance to entrepreneurial, low-income individuals and groups seeking to establish micro-enterprises that address identified gasps in services for low-income residents in more affluent areas, such as affordable daycare services, niche retail services, and education-related support services for both children and adults.

7. provide funds for special information, education, and counseling services to lower-income families seeking to move from renting to homeownership in more racially and economically diverse communities to assist them in maximizing their investments.

8. in more affluent areas, provide funds for parent-outreach initiatives that help low-income parents become active and involved with their child’s school.

9. fund “soft” initiatives aimed at bridging the racial and class divide between people of good will in a community, to help break down the attitudinal barriers that cause people to believe that a racially and economically inclusive community cannot be viable and is not desirable.


The above proposal strives to stay within the footprint of the CDFIs and the ways they operate and are supported at the community and government levels. There are several reasons for this. It is a good model that has a track record of success. The approaches have been found politically attractive and practically successful, relying as they do on private-sector involvement and investment. The difference between CDFIs and ICFIs lies in the nature of the mission, not the details of the program. As with so many things related to race and community, the issue is not how to do it, but how to create the political will.

At this point in the evolution of our notion of community development, we tend to see things as they are more than as they might be. We take racial and economic exclusion as the God-given rights of even moderately affluent communities seeking to grow and prosper. We assume that low-income people can only be empowered if they stay clustered together in low-income communities. We assume that low-income families all prefer to live in “their” communities, just as affluent white people prefer to live in “theirs.” We do not question how communities have come to “belong” to people in racial and income terms, nor do we assume that there is any ability or desire to change the institutional and attitudinal forces that drive those patterns.

It is the premise of this proposal that institutions and attitudes can change. It is the premise of this proposal that there are already a significant, if not overwhelming, number of people of all races and economic levels that would prefer to live in more inclusive communities of opportunity if such communities were available. It is the premise of this proposal that committed support by governmental institutions, political leaders, community-based organizations and philanthropists for communities that grow and prosper as a whole, rather than in exclusive parts, can and will make a difference. And it is the premise of this proposal that we should try—harder.

Elizabeth K. Julian , a PRRAC Board member, is President of the Inclusive Communities Project in Dallas. This article is a followup to Ms. Julian’s article “Mobility Works America,” in the July/August Poverty & Race, which proposed a national housing mobility program on the scale of the NeighborWorks program.

This piece, proposing a new opportunity-based CDFI program, is drawn from a chapter originally published in Public Housing and the Legacy of Segregation, Margery Austin Turner, Susan J. Popkin & Lynette Rawlings, eds. (Urban Institute Press).

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