Community Development Corporations: Preserving Cultural and Economic Space through COVID-19
Many Community Development Corporations (CDCs) are cultural and economic anchors in their communities. They provide essential affordable housing, local services, community amenities, and below-market-rate commercial space for neighborhood-serving businesses and cultural spaces—often run by women and people of color.
During the COVID-19 pandemic, state and local governments enacted many important health and safety mandates to protect the public, but the resulting economic slowdown led to losses for the vast majority of small businesses. Entrepreneurs who were forced to close or limit operations accrued high debt levels and, in some cases, were unable to pay rent. For CDCs who operate as commercial landlords, diminished rent payments strained their finances and threatens their ability to provide essential community services and supports.
Along with partners at Bay Area LISC and NeighborWorks America, I held a workshop earlier this year to bring together public, private and nonprofit sector stakeholders to discuss these issues and surface solutions. Afterwards, we spoke with representatives from four participating San Francisco Bay Area CDCs: Charise Fong and Emily Busch from the East Bay Asian Local Development Corporation (EBALDC), Erin Patch from The Unity Council (TUC), Cynthia Alvarez from Chinatown Community Development Center (CCDC), and Don Falk and Liz Orlin from Tenderloin Neighborhood Development Corporation (TNDC). They shared the challenges that CDCs and the communities they support are facing in the wake of the economic crisis—issues that are not unique to the Bay Area—and how to better support them as the economy recovers.
What roles do CDCs play in local economies, and what changed during the COVID-19 crisis?
Charise Fong and Emily Busch, EBALDC: Local CDCs are vital to safeguarding and creating the spaces integral to healthy, vibrant, and equitable neighborhoods and cultural business districts, such as the Fruitvale Transit Village, Swan’s Market, and San Francisco and Oakland Chinatowns. CDCs support these neighborhoods by providing affordable commercial and cultural spaces, which are essential to supporting low-income families and entrepreneurs. This especially holds true for neighborhoods with rising rents and property values.
As community anchors, CDCs have been vital to the survival of Black, Indigenous, and People of Color (BIPOC) businesses, especially during COVID. We rolled up our sleeves to provide emergency response programs throughout the pandemic that included:
- meal distributions,
- outreach and support to small businesses,
- emergency rent relief and deferment,
- distributing Personal Protective Equipment (PPE),
- helping businesses re-adapt to shifting COVID guidance,
- and COVID-19 testing and vaccinations.
For many of us, these lines of service were new, particularly providing direct small business assistance. Nonetheless, in a time of crisis, many members of the community and our small business tenants turned to us—the local institutions they knew and trusted. It became clear how critical CDCs are to their survival. So far, our collective efforts and financial support have prevented many business closures. Across the four CDCs featured here, we have seen only a 5% closure rate for our largely BIPOC small business tenants, versus the estimated 34% nationally for BIPOC small businesses.
What are the short- and long-term consequences of COVID-related challenges for CDCs and the communities they support?
Cynthia Alvarez, CCDC: The vast majority of our BIPOC commercial tenants have endured great strains. Many have used multiple resources available to them: savings, loans from friends and family, Paycheck Protection Program loans. And even though the economy is starting to open back up, we aren’t sure what it will mean for our commercial tenants, since the communities in which they operate have been devastated. Overall, the loss in vitality is noticeable in our communities. We are concerned about how long it will take to restabilize the communities we serve, which already have a history of adversity and neglect.
Charise Fong and Emily Busch, EBALDC: The four CDCs represented in this discussion have seen up to a 40% sustained decline in rent collections and are projecting $5 million in total rent losses through the end of 2021—and we anticipate these losses to continue. These steep losses, along with an uptick in COVID-related health and safety expenses (even as people are getting vaccinated) generate a cascade of financial challenges. CDCs have been forced to defer our own loan payments, draw down existing reserves, limit future reserve deposits for needed capital improvements and emergency repairs, and make substantial advances from corporate reserves. This puts CDCs—and the community programming, affordable housing, and cultural place-keeping that we support—in jeopardy.
What should we know about the relationship between the commercial and residential sides of CDC portfolios in thinking about solutions?
Cynthia Alvarez, CCDC: There are important ties between our residential and commercial spaces. In mixed-use affordable housing developments, commercial tenants activate spaces by creating opportunities to generate economic activity, provide services, and create a welcoming environment for families, children, and seniors. Additionally—and perhaps less well understood—the rental revenue from commercial tenants is critical for balancing the operating budget of CDCs with mixed-use developments. This can make the difference in whether an affordable housing development can run effectively or not. When commercial revenue declines so much that a property is running at a loss, CDCs must make difficult decisions on how to deploy limited resources to adequately support residents and maintain properties.
Erin Patch, TUC: In the BIPOC communities we serve, both the commercial and residential portfolios are an important part of the community ecosystem and together create the strength and vibrancy of the community. Our residential tenants are customers for the goods and services provided by our small business community, are employed by our small businesses, or are sometimes small business owners, so commercial and residential tenants depend on each other for success.
What roles can the public and private sectors play in fostering solutions to support nonprofit CDCs?
Don Falk and Liz Orlin, TNDC: State and local governments can make immediate impacts on the financial health of nonprofit, mission-aligned commercial landlords still weathering the effects of COVID-19. State resources must be secured and allocated to offset the revenue loss that we sustained from deferring rent for our small, largely BIPOC, commercial tenants. Legislation is under consideration that would provide a 3-year tax credit to small business landlords that could help mitigate some of our losses, but enhancements are needed. In addition, CDCs could benefit from a fund similar to residential rent relief funds that have been legislatively created. This could stabilize not only the nonprofit landlords of cultural and commercial spaces, but also the commercial tenants of those spaces.
Looking beyond immediate relief efforts, state and local governments can play a meaningful role fostering solutions to the challenges of financing community-serving, ground floor commercial spaces in affordable housing developments. There is a dearth of funding available to support these projects, and given their value to the community, agencies that fund affordable housing could expand their definition of eligible costs to include those deemed commercial, such as interior improvements to leasable space. This would reduce the costs to the developer or commercial tenant.
The lending environment can also better support nonprofit-commercial landlords. Lenders could allocate a share of their loan repayments towards commercial costs, enabling developers to borrow funding that can be directed toward commercial uses.
To better support CDC landlords, what should the community development field focus on as we emerge from the COVID-19 crisis?
Charise Fong and Emily Busch, EBALDC: There is an urgent, unmet need that exists among non-profit CDCs that own and operate cultural and economic space in Bay Area communities. The impact to mission-driven, community serving small business landlords remains an under the radar issue, so policy and related COVID-directed resources have not been targeted toward relief in this sector. We are planning for a post-pandemic economy and exploring new business models that can sustain a recovery, but immediate financial support for CDCs is needed to offset the economic impact of COVID-19 that threatens our short- and long- term organizational operations.
Without a significant intervention, the people and places CDCs support are at risk both now and for years to come – we worry about permanent loss of local BIPOC-owned small businesses, pervasive unemployment, empty storefronts, and deteriorating community assets. But with the right supports, CDCs can emerge from this crisis and continue to do what we have done for decades: create and safeguard the spaces integral to healthy, vibrant, and equitable neighborhoods and be ready to combat the next crisis.
Erin Patch, TUC: During the pandemic, we’ve seen an increase in collective impact work, with CDCs and partners coming together to solve big issues in support of our communities. CDCs have raised corporate and philanthropic dollars to develop small business and tenant support programs. The robust and immediate response CDCs have implemented since the pandemic will need to grow to protect and preserve the culture and vibrancy of the neighborhoods we serve. An inclusive recovery in the communities we serve will take an intentional and significant investment, fully engaged partners, and a shift to holistic strategies that build and scale programs to support small business, workforce development, and financial services. Large-scale community programs are necessary to ensure the health and sustainability of our community real estate assets and BIPOC small business community. We need all our partners, including lending institutions, local, state, and federal government, and philanthropy, to engage in developing long-term strategies for success.
As our interviewees make clear, CDCs play critical roles supporting cultural and economic vitality in communities around the nation. I encourage you to explore local conditions in the communities you serve and consider how you can play a role in boosting the sustainability of CDCs as we emerge from the COVID-19 crisis.
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