Community Development

Community Development Crowdfunding: The Need for Better Data

Rodrigo Davies
MIT Center for Civic Media

Amanda Sheldon Roberts
Federal Reserve Board of Governors

In the past half-decade, crowdfunding has emerged as a popular way to raise money online for a wide range of projects, from films and video games to technology and clothing. It has grown both due to its success as a fundraising mechanism and its ability to build demand and engagement among audiences.

Social causes also have the potential to benefit from crowdfunding. The community development field in particular might be uniquely positioned to benefit because crowdfunding has the potential to create fresh pathways to community-led development and to bring an infusion of new capital into an industry that has seen repeated cuts in government funding in recent years. In addition to being a fundraising mechanism, community development crowdfunding can serve as a way for members of a community to express their preferences, and the intensity of these preferences, as measured by dollars donated to a project. 

Despite these possibilities, the idea of using crowdfunding for community development remains largely unexplored and the field is small and scattered. In our recently published working paper Understanding the Crowd, Following the Community: The Need for Better Data in Community Development Crowdfunding, we argue that the lack of reliable and comprehensive data is a key limit on the field’s expansion. Why focus on data? Without it, there is no way to know who is contributing to crowdfunding projects or what their motivations are. There is also no way to conduct large-scale analysis of community development crowdfunding activity and outcomes, which discourages the involvement of established impact-driven organizations. Better data can help the field in a few keys ways: it can provide transparency and help enhance the credibility of crowdfunding; it can inform user expectations and decisions by donors and campaign organizers; and it can allow researchers to measure the impact of community development crowdfunding. 

Our paper thus makes the case that in order for community development crowdfunding to reach its potential scale, and to involve the full range of potential stakeholders, better standards of data reporting and collection need to be established. Our paper proposes a draft crowdfunding data model to enable community development professionals and the crowdfunding industry to more thoroughly analyze the field, begin to measure the impact of crowdfunding and better understand its potential future pathways. We offer these ideas not as prescriptions, but rather as stimuli for further debate among crowdfunding platforms, community development professionals, and other stakeholders.

Download the working paper (pdf, 368.13 kb)

Stemming the Tide of Displacement: The Highlight Reel

By Naomi Cytron, Senior Research Associate, Community Development
Federal Reserve Bank of San Francisco

An unsolved challenge–particularly in fast growing places like the Bay Area–is ensuring that economic growth, investment in new transit and infrastructure, and changing residential preferences do not lead to displacement of low-income households. Can data and research help shed light on pathways to more equitable and sustainable metropolitan areas? Bay Area researchers and practitioners believe so, and on August 26, 2015, they came together at a convening held at the Federal Reserve Bank of San Francisco to consider the ways that data and research can help identify both neighborhoods at risk of displacement pressures and opportunities for program and policy intervention.

In case you missed it, here are some key points shared by speakers:

  • Getting some clarity around definitions is important to this conversation. UC Berkeley’s Urban Displacement Project uses these definitions:

    Gentrification: The transformation of historically disinvested urban neighborhoods of the working-class and communities of color into higher income residential and/or commercial uses with associated racial and ethnic turnover.

    Displacement: When households are forced to move or are prevented from moving into a neighborhood that was previously accessible to them due to conditions which are beyond their ability to control or prevent (e.g., rent increases).

  • In the Bay Area, we see that:
    • Neighborhood change is inherently linked to shifts in the regional housing and job market.
    • Stable neighborhoods have strong housing policies, community organizing, and tenant protections.
    • Gentrification and displacement can be accelerated by even just the planning for transportation and infrastructure investments.
  • Detailed local data allows for identification of places–and even properties–at risk of displacement. It also allows for code enforcement and tenant organizing activities that can enable preservation of affordable units at risk of conversion to market rate.
  • Using tools like commercial linkage fees, housing impact fees, and community benefits zoning, private development can be a source of revenue for building new affordable housing.  But to be successful, a balance must be struck between maximizing public benefit and maintaining financial feasibility.
  • Good data and research can help debunk myths, validate community experience, and put pressure on decision-makers. But data alone isn’t always enough to move what are inherently political processes; community empowerment and organizing are also needed to push political actors to shift policy and practice.
  • When data is embedded in storytelling about real people in real places, it can be more powerful than numbers alone in helping policymakers and societal members at large understand the costs and risks of displacement.
  • We need to engage a wide range of stakeholders–including community members, advocates, the public sector, landlords and developers, and business leaders–in developing and making use of the data sources that can point to viable solutions to the challenges that face our cities and regions.

Watch the full discussion on our YouTube channel.

Download the agenda and speaker bios (pdf, 178 kb)

Top 10 Things You Should Know about Place-Based Initiatives

David Erickson, Director, Center for Community Development Investments
Federal Reserve Bank of San Francisco

I recently joined Carol Naughton, President of Purpose Built Communities, on stage to discuss the latest thinking and research about how place-based initiatives can help achieve better outcomes. Here are the top 10 things you need to know:

  1. Your ZIP code is more important than genetic code for your health
  2. Your body is the sum record of your challenges and opportunities
  3. Opportunity is arrayed over space/neighborhoods
  4. We all win when we all win
  5. Five elements are essential to successful community-improving interventions
  6. Data is key part 1: It’s a dashboard to allow for better management of community interventions
  7. Data is key part 2: Better data helps us tell our story and monetize savings from ups interventions
  8. Plan for Success: Community improvements do not help everyone equally
  9. Community quarterbacks are social entrepreneurs

We left number one up to the audience to discuss, since discussion – and collaboration – is really the top thing you need to know. When more sectors share knowledge and work together to address place-based problems, our outcomes will carry greater impact.

Watch the full discussion on YouTube.

CDFIs as Economic Shock Absorbers

Nancy O. Andrews, President & Chief Executive Officer
Low Income Investment Fund

Dan Rinzler, Manager, Special Projects and Initiatives
Low Income Investment Fund

The Great Recession sent shock waves through the world economy. One by one, more than a dozen flagship financial institutions collapsed, accepted forced mergers or submitted themselves to the safety of federal oversight. The Federal Reserve Bank of Dallas estimates that the United States lost anywhere from $6 trillion to $14 trillion in the crash, equivalent to $50,000 to $120,000 for every U.S. household1. Few lenders emerged unscathed, and the economic consequences for their investors and borrowers were often catastrophic.

The damage was especially great in low-income and minority communities, resulting in worsening neighborhood inequality2 and racial segregation3. Unemployment rates in these communities hit levels higher than at any time since the Great Depression.

While profit-motivated lenders hunkered down and withdrew from these places, one type of lender defied this trend. Community development financial institution (CDFI) loan funds lent into this storm, acting as economic shock absorbers for these communities in the worst of the downturn. And remarkably, a new analysis reveals how their patience and commitment enabled them to dramatically outperform regulated commercial banks during the recession.

CDFIs operate in the most challenging conditions our economy offers: they work in the poorest, most depressed places—considered risky by all standards. They are unregulated, mission-oriented nonprofit enterprises providing unconventional capital to small community-based organizations. What could explain their success during the most economically stressful period in a generation?

As described in a new working paper published through the Federal Reserve Bank of San Francisco, CDFIs offer an unusual blend of flexible and “patient” capital, rigorous risk management, and commitment to the projects in their communities and the sustainability of their borrowers. As economic shock absorbers in distressed communities, their long-term perspective and social commitment enabled them to create a virtuous cycle of community improvement and social return, even in the toughest economic conditions.

The challenges that the Low Income Investment Fund (LIIF) faced during the Great Recession, as profiled in the working paper, were typical of CDFIs at this time. Even the strongest borrowers faced difficulty repaying loans. However, instead of foreclosing on properties, as banks would do, LIIF and other CDFIs exercised patience, agreeing to loan extensions and softening terms so that community organizations could ride out the economic cycle. This approach allowed community organizations to survive—ultimately strengthening the communities they serve. And, perhaps counter-intuitively, it meant that CDFIs suffered lower losses than other financial institutions.

Sure, LIIF’s revenue from loans went down during this time as we conferred interest holidays or concessionary terms. But we also didn’t experience capital losses. After time and adjustment, the community projects we supported righted themselves and weathered the storm, leaving them—and us—whole. During this period, LIIF’s charge-off rate for construction and development loans originated from 2006 to 2009 was a minuscule 0.21 percent, compared to 2.51 percent for regulated commercial banks of comparable size. By and large, the 500 CDFI loan funds certified by the U.S. Treasury found similar success during the recession and emerged stronger than ever. A major shot in the arm for CDFIs came from quick equity infusions by the U.S. Treasury’s CDFI Fund grant program, which helped our balance sheets remain strong even as other liquidity drained out of the system.

Despite their track record, CDFIs today face a tough road in finding the patient, flexible investor capital needed to play this economic shock absorber role. Regulated banks are shortening the term of capital and raising the price. Even worse, they are decreasing flexibility, requiring that CDFIs pledge not only their balance sheets, but individual loans as well. Foundations now at times require that CDFIs subordinate to them, despite their vastly superior financial strength. Finally, the U.S. Treasury’s CDFI Fund—one of the last remaining sources of flexible capital—seems always to be under challenge. Without access to patient, flexible and reasonably priced capital, CDFIs can’t be nimble and patient as they were during the Great Recession.

Learn more in Weathering the Great Recession: A CDFI Case Study in Patient Capital.


1. Atkinson, et al. “How Bad Was It? The Costs and Consequences of the 2007-2009 Financial Crisis.” Federal Reserve Bank of Dallas. July 2013.

2. Ann Owens and Robert J. Sampson, “Community Well-Being and the Great Recession.” The Russell Sage Foundation and the Stanford Center on Poverty and Inequality. May 2013.

3. Hall, et al. “Neighborhood Foreclosures, Racial/Ethnic Transitions, and Residential Segregation.” American Sociological Review. April 2015.

Consumer Complaints against Banks: A Look at the Numbers

William Dowling, Research Associate, Community Development
Federal Reserve Bank of San Francisco

Consumer input has long been an important part of the free market system. It allows businesses to change and adapt products and services based on what individuals want and need at the time. If the speakers on your new laptop break a few weeks after you bought it, you might go online and leave a negative review of the laptop. Ideally, this would cause the manufacturer to look into the issue and ensure that future laptops don’t have the same problem. If the Italian restaurant you went to last week had terrible service, you might give the place a poor rating. Hopefully, this would cause the restaurant to retrain its server staff so that future customers would have better experiences.

Consumer input is just as important to banks as it is to other types of businesses. Financial institutions want to ensure that their customers are treated with fairness and respect and government regulators want to ensure the same thing. With this in mind, the federal bank regulators set up a consumer help center where individuals can file complaints against banks if they feel that they have been mistreated in any way. These complaints will be officially investigated by a federal regulator, and the appropriate action will be taken. While most regulators don’t make data on complaints publicly available, the Consumer Financial Protection Bureau (CFPB), in an effort to promote transparency and accountability, published its consumer complaint database in 2012. In 2015, the CFPB added a feature where consumers could share the details of their complaints with others. This database provides information on certain consumer complaints against the nation’s largest financial institutions. Let’s take a look at some of the numbers.

As seen below, consumer complaints increased in a relatively consistent manner from late 2011 (the earliest data released by the CFPB) to the later part of 2015. The CFPB received the most complaints in July 2015, when 15,900 grievances were filed. 

Monthly Consumer Complaints
December 2011-September 2015

Monthly Consumer Complaints: 
December 2011-September 2015

Since December 2011, 464,476 total complaints have been filed to the CFPB. The products identified most often in the complaints are outlined in the chart below.

Type of Product Identified in Complaint
December 2011- September 2015

Type of Product Identified in Complaint: December 2011- September 2015

Issues with mortgages were identified most often, comprising 35 percent of total complaints, with issues over debt collection and credit reporting following, comprising 18 percent and 15 percent of total complaints, respectively. The “other” category mostly represents complaints that have to do with student or consumer loans. When a complaint is submitted to the CFPB, the agency forwards it to the financial institution identified in the complaint. After the financial institution receives the complaint, it has 15 days to respond to the CFPB and the person who filed the complaint. Institutions are expected to close all but the most complicated complaints within 60 days. The individual who filed the complaint will be able to view the institution’s response to his or her complaint and give the CFPB feedback on that response.

While the number of complaints submitted to the CFPB is high, 98 percent of complaints received a timely response. Of these responses, 78 percent were not disputed by the consumer, while 22 percent were.1 As use of this database becomes more widespread, it will be interesting to see whether other federal regulators follow the CFPB’s model of publicizing complaints. The consumer complaint system is by no means perfect, but it is a promising step forward in building trusting relationships between consumers, banks, and regulators. 


1. 337,000, or 78 percent, of consumers did not dispute the financial institution’s response, while 95,000, or 22 percent, did. 31,700 consumers of consumer who submitted a complaint did not provide an answer to this question, and these consumers were not factored into the percentages.

What’s Next for U.S. Community Investing?

Noelle Baldini
Federal Reserve Bank of Philadelphia

Amanda Sheldon Roberts
Federal Reserve Board of Governors

The field of impact investing is growing in both size and sophistication, and it is important to consider how this activity might add value to the field of U.S. community development. Abundant opportunities exist for investors to channel their investments abroad through entities such as sophisticated microfinance institutions or fair trade groups. Additionally, many environmentally-focused funds have strong track records of performance and are easily accessible to a wide array of investors. But as impact investing activities increase, why is more of this mission-oriented capital not flowing to low-income cities and communities in the United States? Although domestic community investment has been around for decades, it is increasingly apparent that the necessary infrastructure to channel capital from traditional capital markets to community development organizations is lacking.

On October 2, the Federal Reserve Banks of New York and Philadelphia and the Federal Reserve Board of Governors convened a group of stakeholders in New York to hear insights from a new report by the Global Impact Investing Network (GIIN) and the Carsey School of Public Policy at the University of New Hampshire. The report, “Scaling U.S. Community Investing: The Investor-Product Interface,” provides a comprehensive overview of the existing U.S. Community Investing (USCI) landscape, including the types of intermediary organizations raising investments, the range of available investment products and the types of investors active in the space. The report also offers recommendations on how to scale the field.

Several key themes from the report were discussed by attendees at the event:

  • While mismatch between investor demands and product realities is a fundamental barrier to scaling USCI, investors show appetite for a substantial range of USCI products.
  • One of the greatest weaknesses of USCI products appears to be their lack of liquidity, causing many investors—and in turn product managers—to focus on short-term products.
  • Many of the most sophisticated USCI funds tend to be constrained by their balance sheets and need equity to continue to scale investment. In turn, liquidity limitations have greatly increased the challenge to raising equity.
  • The USCI field has struggled to benchmark investment performance on risk and return, although some leading practitioners have been able to obtain investment ratings.
  • Individual investors are a potential game-changer in the space, but reaching them involves solving unique challenges.

One organization that has been able to overcome some of those unique challenges is the Calvert Foundation. Justin Conway, Vice President of Investment Partnerships, spoke about the organization’s Community Investment Note, a fixed income security designed as an intermediary product to channel investment capital from traditional capital markets to sophisticated community development practitioners working in low-income communities throughout the country. Investors can invest as little as $20 through an online platform or can electronically purchase more sizable investments that are held within managed portfolios similar to more traditional fixed-income products. Justin discussed the challenges of accessing mainstream capital markets, including regulatory hurdles such as securities registration requirements, risk-management, capitalization requirements, access to distribution channels, and compliance issues. Liz Sessler, Vice President of Client Engagement at ImpactUS, introduced a new platform, which will launch in early 2016. ImpactUS will provide another form of intermediation to channel more capital from traditional sources to practitioners working on the ground in communities.

The GIIN USCI report contains two major recommendations which were explored through breakout conversations at the October 2nd meeting.

Further initiatives to develop investment platforms. The first conversation sought to answer the question, “How can we encourage more standardization of USCI investment products/platforms to reduce inefficiencies in the capital raising process?” Though Calvert Foundation’s note and the forthcoming platform from ImpactUS are promising examples of overcoming some of the inefficiencies presented, the group discussed additional barriers and opportunities. For example, with limited liquidity in the USCI market, most investors are short-term oriented. Community development efforts need patient, flexible capital, but most investors do not have an appetite for providing this type of capital. The group explored whether a mechanism to create a secondary market could lead to the attraction of much needed longer-term capital in the USCI space. Ratings were also discussed. While Aeris (formerly CARS) is currently the industry standard, with a deep understanding of the unique nature of Community Development Financial Institutions (CDFIs), some participants felt that mainstream investors will prefer more traditional ratings such as S&P, which recently rated three CDFIs. Ratings could be one way to overcome the need for more standardization of CDFI financials and provide performance track-records that would allow for benchmarking.

A coordinated marketing and investor engagement effort. The second conversation sought to answer, “How can we promote comprehensive efforts for marketing, communications and investor engagement for USCI?” This conversation acknowledged that even with strong, accessible products, platforms, and intermediation, the USCI field would still be lacking the investor and financial advisor education necessary to drive more capital to domestic community development. Strategies to engage investors and advisors would need very different approaches, and the group felt that focusing on investors would be more effective since this would be a “pull” rather than a “push” strategy that would play to the values of the individual investor. As more wealth is being transferred to women and millennials, demand for impact investing products is projected to increase, which means that it will be important to make these new investors aware of USCI opportunities.

The conversations at this event just scratched the surface of the issues, challenges, and opportunities currently facing the USCI industry. In order to further the conversation, and invite increased participation, a national webinar will be held November 19, 2015, to continue exploring strategies for scaling USCI. Join us for Bringing Community Investing to Scale to learn about the growing field of U.S. Community Investing (USCI) and discuss key recommendations. Learn more and register at the Federal Reserve’s Connecting Communities® website.

We Need to Prove Impact Investing Makes a Difference

William Burckart, Visiting Scholar
Federal Reserve Bank of San Francisco

Originally posted by “The Chronicle of Philanthropy” on July 29, 2015

“I’d heard Egypt was doing really well according to all the metrics that we pay attention to at the World Bank,” said Aleem Walji of the World Bank Institute at a Federal Reserve conference in 2011.

“Investment was up, returns were good, we were investing in all the right sectors, or so we thought.”

Then the Arab Spring happened. Clearly, the World Bank’s metrics had not captured the deep frustration of Egyptian youth, who were cut out of the supposedly expanding economy there.

Around the same time, the Latin American Youth Center, a Washington charity, was running a parenting program that included a few new sessions on preventing domestic violence. According to most measures, the center was successful: It was serving more than 4,000 individuals each year.

But when Isaac Castillo, who was then the center’s director of learning and evaluation, reviewed participants’ tests before and after the classes, he realized something had gone terribly wrong. The domestic-violence sessions were changing participants’ attitudes in the wrong direction: More young parents were leaving the program believing that domestic violence was an acceptable expression of love.

These two very different cases highlight the importance of looking beyond the usual metrics — whether they are return on investments or numbers of program participants — to prevent disastrous outcomes. While human beings are complicated, messy, and unpredictable, metrics and systems that are supposed to measure and manage impact are often not dynamic enough to reflect all that human complexity.

Yet investors, grant makers, and nonprofit organizations need to have some way to assess, manage, and communicate their real impact. This can be especially difficult when the two worlds of investing and philanthropy get mixed together as an impact investment, which is meant to achieve a measurable social or environmental impact alongside a financial return.

In a new report I wrote for the Money Management Institute titled “Bringing Impact Investing Down to Earth: Insights for Making Sense, Managing Outcomes, and Meeting Client Demand,” we argue that it’s time for people interested in impact investing to adopt the ideas nonprofits are using to track progress.

Many of the venture philanthropists who started making grants in the 1990s and early 2000s understood the limitations of simple measures like the number of houses built. They focused instead on what they wanted to achieve, such as helping low-income people achieve the financial stability they needed to stay in those houses for a long time.

Such investors wanted a way of measuring every social program to determine whether it was meeting long-term goals the program was created to address.

This kind of focus on outcomes is what helped the Latin American Youth Center realize that its sessions on domestic violence had backfired. “In a very real sense, our program caused harm to our participants, despite the best of intentions,” Mr. Castillo wrote in the book Leap of Reason.

The nonprofit was able to respond quickly to the problem not only because it had a system in place to track performance but also because everyone at the organization — from the board to the direct service providers — understood the value of collecting and reviewing data about the programs and participants every week.

The changes the youth center made worked, including splitting the classes into separate rooms for men and women so that each could feel more comfortable expressing their feelings.

Impact investments need to be similarly assessed to ensure they are making the social or environmental impact they promise. Making and managing investments that aim to build communities or preserve the environment while still generating a financial return presents a complicated proposition for the financial-services industry. The industry is measuring the financial behavior of an investment while also dipping its toes into the realm of the nonprofit world, where outcomes-centered measurement is still a difficult calculus that’s never fully solved.

There are some tools to help impact investors measure the nonfinancial performance of their investments and even compare investments by the social good they achieve. Among them are sustainability-reporting guidelines like the Global Reporting Initiative; impact and sustainability metrics like the Impact Reporting and Investment Standards; and the Sustainability Accounting Standards Board.

There are also ratings and analytical tools like the Global Impact Investing Rating System, B Impact Assessments, B Analytics, and B Corporation certification. But these systems still don’t take into account things like place, organizational performance, or type and timing of capital deployed. Instead, they still focus on numbers, devoid of context.

Neglecting this context leaves the door open for fund managers to slap a few vague metrics on an investment fund just to market it as an impact investment.

For example, an impact fund manager was criticized for a 2014 deal to finance a South African textile importer. Critics said the investment could actually have a negative impact on the local textile industry; that it might not be a good thing for locals, who often purchase clothing on debt; and that there would be a negative environmental impact since importing cheap goods from Asia would result in a larger carbon footprint than producing textiles locally with the ready supply of labor in South Africa. We must learn how to capture the right data to ensure that funds calling themselves “impact investments” are legitimate.

It’s not only good practice for impact investors to measure real outcomes the way nonprofits do — or try to — it’s also an effective and efficient way to solve social problems. Take the Bill & Melinda Gates Foundation, which came under fire in 2007 when the Los Angeles Times exposed that some of the investments the foundation was making on behalf of its endowment were actually causing the very afflictions the foundation had set out to combat as part of its grant making.

Among the concerns: The foundation was funding vaccinations to prevent illnesses affecting people in the Niger Delta while its endowment was invested in companies like Royal Dutch Shell and Exxon Mobil, which were largely responsible for the pollution that was covering the delta and causing poor health in the first place. The foundation has since made moves to align its charitable mission with its endowment investing, something all foundations should consider.

Impact investing has the potential to make an indifferent economy more humane, but only if we come up with a way to measure investments so that we understand their effects on the people, the environments, and the communities they touch.

To move toward that goal, nonprofits and foundations must be open to partnerships with the financial-services industry to share their knowledge and strategies for outcomes measurement. The financial services industry, in turn, must be open to using the tools and firms that nonprofits rely on to evaluate their programs and communicate outcomes.

Impact investing can be a deeply rooted force for social progress. Now all of us can help prove it.

William Burckart is a consultant on impact-investing analytics and strategy. He serves on the Global Advisory Council of Cornerstone Capital Group and is a visiting scholar at the Federal Reserve Bank of San Francisco.

Why the Fed Cares about Reentry of Ex-Offenders: Leveraging AB 109

Lena Robinson, Regional Manager, Community Development
Federal Reserve Bank of San Francisco

In 2011, Governor Jerry Brown of California signed the Public Safety Realignment Act (AB109) – (a.k.a. “realignment”) designed to reduce overcrowding in California’s 33 state prisons and provide alternative forms of supervision for low-level offenders. The legislation places greater responsibility on county governments to supervise this population and provides discretionary funding to these counties for implementation. The average budget allocation for realignment for the entire state has been roughly $6.25 billion annually. Since the first year of the realignment process, approximately 80,000 inmates have been released to complete their sentence under community supervision and begin the process of reintegration. One important question is what level of resources and conditions will these former inmates be returning to?

Realignment is the Mandate, Reentry is the First Step, Reintegration is the Goal

The successful reintegration of formerly incarcerated men and women is one of the most significant challenges facing not only California, but the entire country. It is an issue that disproportionately impacts the most socially and economically disadvantaged communities, often contributing to a cycle of poverty and incarceration in future generations. A 2003 report from the Bureau of Justice Statistics notes that inmates from homes without two parents or with an incarcerated parent were less likely to have completed high school, and 47 percent of inmates had at some point lived in public housing or received welfare.

Successful reintegration largely depends on a person’s ability to gain access to housing, employment, transportation and other services that have been shown to minimize the risks that may lead to committing another criminal offense or violating probation. The tragedy is that many of those being released to community supervision are returning to communities that do not have adequate resources for successful reentry. For the lucky ones, reunification with family or supportive networks with the resources to provide a safety net will offer a smoother transition.

The discretionary funding provided to counties under AB109 presents a tremendous opportunity to invest in reentry services that can rebuild the lives of men and women who desperately want a shot at success. Certainly not every dollar can be used for reentry services as there will always be a need for jail facilities and law enforcement. The challenge is finding the right balance for public safety and human capital rehabilitation. This is the challenge that criminal justice is grappling with in 58 counties, where some are further along in their efforts than others.

Realignment is a Community Development Opportunity

The landscape of programs and organizations that can facilitate successful reintegration varies by county. Many of the community development program providers that are engaged with improving opportunities for low-income people are now stretching to extend these services to formerly incarcerated individuals. Housing and employment are the two areas where collective investments and support from public, private and philanthropic partners are needed the most. These investments will not only benefit individuals, but also their families and the communities to which they return.

The correlation between incarceration, poverty and place are too strong to overlook. Race, zip code and educational attainment are the three strongest predictors of a person’s financial and social stability. These three factors are also the strongest predictors of who will spend time behind bars and who will not. An investment in reentry services is a way to address a system that disproportionately impacts certain racial groups and communities.

President Obama’s recent visit to El Reno prison, his commutations of excessively long prison sentences, and the frequent incidents of the disparate exposure of African Americans to law enforcement have intensified the spotlight on the criminal justice system and on mass incarceration and its long term detrimental consequences.

A Holistic Strategy: Place, People, Programs

The complexity of crime, punishment, and social disadvantage is impervious to fast fixes and simple solutions. Social Impact Bonds (SIBs) are increasingly being promoted as a way to attract large capital investments to reduce recidivism. One of the challenges of these “pay for success” structures is that they typically address only one point of intervention that falls within a convergence of multiple issues. For example, the Goldman Sachs Riker Island SIB focused primarily on cognitive behavior therapy–evidenced based–when the challenge of rehabilitation is so much more complicated.

Successful reintegration of formerly incarcerated men and women is not one size fits all. Every person and community is unique which complicates the challenge of developing programs and addressing the multiple issues that this population faces. The notion that an individual can thrive and avoid recidivism in an economically fragile and socially impacted neighborhood is naïve. Social and public investments in reentry services must be made at a level commensurate with the challenge and coordinated to create communities where the formerly incarcerated have a shot at success.

Reentry Solutions for Success is a conference with and for formerly incarcerated people; it is a conference about investable opportunities that will allow men and women, many of whom are mothers and fathers, to live healthier and more productive lives. We invite you to participate in this conference to find new opportunities for investments, funding, research and partnerships.

Setting Our Sights on Systems Change

Don Schwarz, Robert Wood Johnson Foundation

Last year, the Robert Wood Johnson Foundation (RWJF) Commission to Build a Healthier America called for a broad range of sectors—including community development, public health, health care, education, transportation, urban planning, business, and others—to work together to create healthier communities. The Commission’s call for this level of collaboration was groundbreaking, and its recommendations are critical to achieving RWJF’s central aim: to build a Culture of Health that enables all of us to live longer, healthier, and more productive lives.

We’re exploring the question, how can we best stimulate the big, broad-scale changes and “seismic shift” to integrate health-improving strategies into communities urged by the Commission?

We’re not alone in asking. A growing number of community revitalization initiatives have been launched by some of the nation’s most innovative funders, with two general schools of thought on the way forward: long-term, placed-based “replication” models and “systems change” approaches to creating impact on a broad scale. To learn more, download the new working paper Pathways to System Change: The Design of Multisite, Cross-Sector Initiatives.

Replication and System Change Chart: Benefits and Challenges

The first approach is to fund a specific project, program, or set of services to address a complex problem in a single neighborhood or community through locally tailored activities. Often, such an initiative is intended to test whether resources deployed in a single place is effective in addressing specific challenges. If successful in one place, the intention is to achieve scale through repeated, locally relevant implementation, usually with long-term support. In contrast, systems change focuses on creating policy shifts and changing how public and private dollars flow into communities to promote more equitable outcomes. In other words, a “systems change” approach to helping ex-offenders re-enter society could include changing education, employment, and housing policies that pose obstacles rather creating a program for a small subset of ex-offenders, testing it and copying it elsewhere through replication. Both types of approaches are meaningful, and all funders should carefully consider the advantages and challenges of each. 

To be better informed about how we should spend our grant dollars, RWJF set out to learn from the successes and missteps of initiatives that have pursued cross-sector strategies through both of these approaches. With the Federal Reserve Bank of San Francisco, we hosted a roundtable of experts on the development of multi-site community change initiatives. And we commissioned new research from Mt. Auburn Associates that is being released this week. In looking at that research—along with our own history of support for better policy-making, planning, practice reform, improved knowledge and data resources, and human capital development—we’ve recognized the opportunity that a systems change approach offers a quiet revolution in our work in scaling up community improvements.

What does systems change look like on the ground? In the late 1990s, the city of Philadelphia—where I later served as Health Commissioner and Deputy Mayor for Health and Opportunity—had the second lowest number of supermarkets per capita among major cities in the nation. To tackle the challenge, city, state, and private sector leaders created the Fresh Food Financing Initiative, bringing together the supermarket industry, public health officials, and economic development professionals. Public agencies agreed to provide supportive services (policing, public transport) and financial incentives (through tax concessions or construction subsidies) to assist the private sector in undertaking what would otherwise be rejected as too risky or not profitable. In fewer than 10 years, the Initiative created 70 supermarkets in 27 Pennsylvania counties, increasing access to fresh food, creating jobs, and attracting additional development in low-income neighborhoods by changing the incentives for the supermarket industry. The model demonstrated sustainable business models for grocery stores in distressed communities and has since been implemented nationwide as the federal Healthy Food Financing Initiative. 

This is just one example of systems change. Several others are featured in the new Mt. Auburn Associates report. We see it as a valuable resource for philanthropy—and especially state and local funders—along with public-sector agencies, community development practitioners, financial institutions, and other funders that are seeking to improve communities and the lives of their residents.

Download the new working paper Pathways to System Change: The Design of Multisite, Cross-Sector Initiatives.

Donald Schwarz is a director leading the Robert Wood Johnson Foundation’s efforts to catalyze public demand for healthier people and the places in which they live, learn, work, and play. He oversees the RWJF effort to identify, support, and spread the word about individual and community actions that promote lifelong health for all Americans. Previously, Schwarz served as Deputy Mayor for Health and Opportunity and Health Commissioner for the City of Philadelphia.

How Can Native American Veterans Gain Access to a Benefit They Earned?

Craig Nolte, Regional Manager, Community Development
Federal Reserve Bank of San Francisco

A federal program exists to provide more homeownership opportunities for Native Americans veterans on Indian reservations, yet less than one in six of the over 570 federally-recognized tribes have accessed the program.  This is a program that Native American Veterans have earned but relatively few are able to enjoy the benefit.

The U.S. Department of Veterans Affairs offers a Native American Direct Loan (NADL) program for eligible tribal members whose tribe has signed a Memorandum of Understanding (MOU) with the agency.  The program offers several advantages over conventional and other government lending programs, making the program attractive to tribal members who are Veterans. 

Many tribal members living on Indian reservations continue to lack access to mortgage loans, which may contribute to the comparatively low homeownership rate of 54% on Indian reservations versus the 65% national average.  Homes on Indian reservations are also three times as likely to be overcrowded, and 11 times as likely to have insufficient plumbing, as homes situated off reservations, according to the U.S. Census Bureau.

While the VA’s Home Loan Guaranty benefit is available to all Veterans, the NADL Program is a homeownership option designed specifically for Native American Veterans living on trust land. The program does not require a down payment or private mortgage insurance, has a low fixed interest rate, low closing costs, and borrowing limits  up to $417,000 in most areas, and can be used more than once during a Veteran’s lifetime.  A tribal member may use the program to purchase, build, or improve a home located on Federal trust land.  They may also refinance a direct loan already made under this program to lower their interest rate. 

Native Americans served in the military before they were granted US citizenship in 1924.  Between 1917 and 1918 approximately 10,000 Native Americans enlisted into the military to serve in World War I.  Today, approximately 20,000 Native Americans, Alaska Natives and Pacific Islanders serve in the military, and while the Native American/Alaska Native population represents less than one percent of the population of the United States, they make up about 1.6 percent of the armed forces.  Many tribes have a much higher enlistment percentage.

This Spring, the Federal Reserve Bank of San Francisco and its agency partners met with tribal council members and tribal staff throughout the Northwest to discuss common challenges to homeownership on Indian reservations.  Participants at the meetings compared different loan programs, including the NADL program, and discussed other ways to increase access to homeownership on Indian reservations.

How can Native American Veterans gain access to the NADL program?

  • Help ensure that tribes, as sovereign governments, have sufficient information to discuss any challenges to entering into an MOU with the VA to allow their eligible Veteran tribal members access to the program.
  • Heighten awareness of the program to tribal members through homeownership workshops, Veteran activities, tribal newsletters and other local media.
  • Maintain information on the NADL program at appropriate tribal government departments.

Craig Nolte is a regional manager in the Federal Reserve Bank of San Francisco’s Community Development Department. He leads community and economic development initiatives primarily in Washington, Oregon, Idaho, Alaska, Hawaii, Guam and the Pacific Islands. He also serves a national point-of-contact for the Federal Reserve System regarding the needs of Native Communities, including Native Americans, Alaska Natives, Native Hawaiians and Chamarros, and is engaged in national efforts to assist those communities.