How Community Development Financing Can Help Support Healthier Neighborhoods

Project grantees try new approaches to prioritize local well-being and health equity

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How Community Development Financing Can Help Support Healthier Neighborhoods
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Community development efforts generally involve a range of initiatives that affect a neighborhood’s economic, physical, and social environments. They can include building affordable housing, financing small-business development, supporting community organizing, and improving street and neighborhood infrastructure.

More than 4,600 community development corporations and about 800 community development financial institutions (CDFIs) invest more than $200 billion annually nationwide. CDFIs provide affordable lending to rural, minority, and other underserved groups. Still, despite the potential impact on residents’ well-being, most project developers do not routinely consider how their investments could affect people’s health or health equity—the guiding principle that disparities in health outcomes caused by factors such as race, income, or geography should be addressed and prevented. But taking such factors into account provides opportunities for all to be as healthy as possible.

With funding from the Health Impact Project, a collaboration of the Robert Wood Johnson Foundation and The Pew Charitable Trusts, three initiatives by local and national entities are seeking to tackle this challenge and encourage community development financing decisions to advance health and equity.

Ensuring that investments reflect community concerns

Forward Community Investments (FCI), a Wisconsin-based CDFI, lends money to nonprofits and cooperatives to support projects and programs that expand affordable housing, economic development, and human services. Leaders project that FCI has assisted more than 679,000 low-income individuals since its founding in 1994.

In a partnership with the Mobilizing Action Toward Community Health project, FCI used Health Impact Project funding to revise two tools that guide lending decisions: One helps to determine whether a potential loan aligns with FCI’s mission and goals, and the other examines the anticipated benefits and impact of a possible loan.

The revisions aim to help FCI ensure that its investments reflect community priorities, consider local health needs and the underlying factors that shape people’s health, and provide more equitable access to housing, jobs, and education. The process led FCI’s leaders to consider how to better measure the long-term impact of their work, expand community awareness of social determinants of health, and strengthen regional networks to address systemic causes of inequity.

A checklist to help with funding decisions

The Local Initiatives Support Corp. (LISC), a national nonprofit CDFI based in Washington, D.C., with 35 local offices, works with community-based partners to make health-promoting neighborhood investments in resources such as housing and businesses. With funding support from the Health Impact Project, LISC developed a checklist system to better focus multifamily affordable housing loans on health and health equity and tested the changes with loans made through its office in Toledo, Ohio.

Staff members use the checklist to score loan applications for developing apartment buildings with features thought to promote health, such as energy efficiency, lighting in public spaces, and nearby sidewalks and trails. The features are assigned numerical values that can be totaled to recommend a certain loan type or interest rate. The process also helps to provide developers with recommendations for additional features.

LISC staff members continue to refine the checklist, with the goal of moving it to an online platform. That would help the lending staff employ this approach in conversations with developers. Using grant funds from the U.S. Department of Housing and Urban Development, LISC expanded pilot testing to nine additional sites across the U.S. in late 2020.

Other mechanisms to link health to community development

Other initiatives also allow public and private entities to invest in communities. The federal low-income housing tax credit program, for example, provides real estate investors with a dollar-for-dollar reduction in their federal tax liability in exchange for financing affordable rental housing. To do this, state housing finance agencies must first develop what is known as a qualified allocation plan (QAP), which sets requirements such as household income for residents, allowable construction costs, and rent levels. That allows the state to receive housing tax credits from the Internal Revenue Service and then award those credits to local developers of qualified housing projects.

States can include conditions as part of their QAP, such as targeting specific geographic locations and environmentally friendly features that leaders may want to encourage. Such credits help fund the construction or rehabilitation of about 110,000 affordable rental units each year nationwide, according to the Tax Policy Center. That amounts to more than 2 million units since the program’s inception in the early 1990s.

Finally, in 2015, the Health Impact Project worked with Enterprise Community Partners, a D.C.-based national nonprofit focused on increasing access to affordable housing, to incorporate health impact assessment-inspired elements into the criteria for its Green Communities certification. The certification formalizes and encourages green practices in construction and renovation and is available for environmentally friendly affordable housing units. This initiative encourages partnerships between developers and public health experts to prioritize community health needs. By following criteria set in an official Health Action Plan jointly created by the organizations, developers receive points toward certification, which is required by 27 states and D.C. to receive public funds or tax credits for affordable housing developments.

In 2020, the Health Impact Project and Enterprise expanded this effort by publishing two resources for affordable housing stakeholders and their public health partners: The first outlines steps and resources to help affordable housing developers implement the Health Action Plan. The second helps these groups determine whether a state’s QAP prioritizes health factors and also helps them incorporate the plan into the QAP process.

These projects highlight approaches that community developers can use to advance health and equity outcomes in their work. By using available evidence and engaging with stakeholders, the community development industry can build on a history of strengthening neighborhoods across the U.S. and ensure that all residents can be as healthy as possible.

Ruth Lindberg is a manager and Emily Bever is a senior associate with The Pew Charitable Trusts’ Health Impact Project.