CDFIs: On the Front Lines of Disaster Recovery Efforts
Community Development Financial Institutions (CDFIs) are uniquely positioned to meet the lending needs of recovering communities. Disasters hit vulnerable communities the hardest, and many CDFIs have decades of experience providing economically disadvantaged individuals with the tools they need to become self-sufficient stakeholders in their own future.
CDFI Coalition Proposal: CDFI Disaster Recovery Fund
Proposed Legislation: Emergency Support for CDFIs and Communities for Disaster Assistance
(a) APPROPRIATION.—There is appropriated, out of amounts in the Treasury not otherwise appropriated, for fiscal 2025 for the Community Development Financial institutions fund program account, emergency support to carry out this section, $500,000,000, which shall remain available until expended for technical and financial assistance in any state or territory determined by the President to warrant individual or individual public aid from the Federal Government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act between January 1, 2023 and December 31, 2024. Provided that the Fund shall provide grants to certified CDFIs for:
(1) modifications, deferral, and forgiveness of existing loans;
(2) financing for recovery and revitalization of housing, small business, and community facilities; and
(3) Other related and administrative costs.
Justification:
CDFIs are uniquely positioned to deliver swift and targeted financial relief to vulnerable communities during times of crisis. With deep-rooted relationships in low-income and underserved areas, CDFIs are ideal partners for distributing emergency funds to small businesses, homeowners, and individuals who are often overlooked by traditional financial institutions and underserved by complex federal disaster relief programs. In the wake of disasters, access to affordable capital is essential for recovery, rebuilding, and resilience. CDFIs can ensure that this assistance reaches those who need it most, including minority-owned businesses, Native Americans, and rural communities. An emergency $500 million appropriation would empower CDFIs to respond quickly and effectively, helping stabilize local economies and expedite recovery efforts where the need is greatest.
The program’s administration would be similar to the CDFI Fund’s Rapid Response Program (RRP), established in the wake of the pandemic. The Consolidated Appropriations Act 2021 (PL 116-260) provided $1.25 billion for CDFIs to provide technical and financial services to communities and businesses hard hit by the pandemic.
Based on CDFI performance using proceeds from RRP awards,[1] the CDFI Coalition projects that the CDFIs will use $500 million in supplemental appropriations to:
- Make over 165,000 loans and investments totaling $5.92 billion, including:
- $2.2 billion in flexible consumer loans;
- $1.24 billion in affordable home improvement and purchase loans;
- $840 million in small business and microenterprise loans;
- $520 million in residential real estate financing; and
- 4,600 units of affordable housing.
[1] CDFI Fund FY 2024 Agency Financial Report.
CDFIs Support Disaster Recovery
CDFIs have access to tools that are able to effectively rebuild dis-invested communities and make loans to individuals with limited or poor credit histories -requiring more than simply providing access to conventional loans. The flexibility to adapt lending guidelines to the needs of borrowers is possible: allowing for acceptance of unconventional collateral for loans; to help small businesses navigate government red tape; and to provide education, training, and assistance to potential borrowers.
- Providing Financial Services, Loans & investments
- Offering Training & Technical Assistance
- Promoting Development, Enabling Individuals & Communities to Effectively Use Credit & Capital
In the wake of a natural disaster, Americans mobilize billions of dollars in relief through foundations, individuals, and the public sector. While those resources go toward the rebuilding of infrastructure, individual assistance, and the meeting of immediate needs, they also support more complicated medium and long-term efforts to rebuild and repair housing, replace damaged building stock, and jump-start economic activity.
FEMA can handle much of the short-term emergency assistance, but long after federal government is gone, mission-driven lenders – particularly those with long-standing ties to affected communities – will be on the ground working to restore housing stock, rebuild community facilities, and provide technical assistance and financial assistance to businesses and families.
As Congress debates additional federal assistance for communities devastated by natural disasters, they should consider the track record of CDFIs that have the infrastructure and relationships in place to offer immediate and prolonged help throughout recovery efforts.
Natural disasters destroy and damage businesses’ physical assets like buildings, furniture, and equipment. They also wipe out hospitals, schools, and essential community facilities. As lenders, CDFIs have a long track record of providing flexible financial products that are well-suited for the post-disaster environment. Annually, CDFIs provide over $3 billion in loans and investments to over 11,000 small businesses for everything from equipment to working capital to new facilities.
Affected communities can benefit greatly from economic assessment, technical assistance, and capacity building. Specifically, analytical capacity and assistance with navigating federal and state programs and non‐governmental resources can help recovering communities. CDFIs can help businesses navigate red tape and get up and running again.
Before economic recovery efforts can truly proceed after a disaster, people need to be able to return to new or rebuilt homes. Affordable housing must be replaced or repaired. CDFIs have the capacity to finance thousands of new or repaired homes and affordable housing units. In FY 2016 alone, CDFIs financed nearly 33,000 affordable housing units and 11,600 home improvement or home purchase loans.
PathStone Enterprise Center, Inc., an affiliate of PathStone Corporation is a certified CDFI and serves as an intermediary lender for USDA (IRP) and SBA (Microloan). PathStone utilized $100,000 in CDFI Technical Assistance funds to build capacity in Puerto Rico.
Hurricane Maria, did untold damage to housing, businesses, to community infrastructure and to people. Maria was followed soon afterwards by Hurricane Irma, totally devastating an already weakened island.
In the more remote agricultural mountain and coastal communities served by PathStone the post-storm landscape was dire. 45% of Puerto Rico’s residents live in poverty -the highest of any state or territory- with unemployment more than twice the US level. Unemployment in the mountain communities can reach as high as up to 60% of the population outside San Juan, Mayaguez, Ponce and Arecibo. Many of the region’s structures, residential and commercial alike, were either seriously damaged or completely destroyed. The Puerto Rico Power Authority damage was so extensive, more remote regions of the Island did not have power for months. The communications infrastructure was almost completely destroyed. 90% of the cell towers were destroyed.
After Sandy, the CDFI Fund conducted an assessment of CDFI performance during the storm and found that despite experiencing the damage as flood waters reached their buildings, CDFIs once again demonstrated how their flexibility and adaptability make them an important partner in times of crisis. Ten CDFIs had some damage to their offices, i.e., no electricity, heat, phone, Internet, etc. One respondent, Enterprise Community Partners, sustained serious damage and flooding in its New York office.
Below are a few of the initiatives reported in the CDFI Fund assessment:
- ACCION established a small business loan fund for businesses impacted by the storm.
- Business Outreach Center Capital launched a disaster recovery loan program for any small business that was physically and/or financially impacted by the storm throughout the five boroughs of New York City.
- Empire State Development Corporation (in partnership with the Governor’s office) launched a number of assistance programs to address the needs and concerns of the businesses in the areas affected by Superstorm Sandy.
- Enterprise Community Partners launched the Partner Support and Rebuilding Fund (Fund) to provide financial assistance to help its affordable housing partners with immediate recovery and rebuilding efforts.
- Low Income Investment Fund committed $1 million (as of November 2012) to ensure that those hardest hit by the storm have access to food and much needed services.
- Primary Care Development Corporation and the Community Health Care Association of New York City (CHCANYS) co-directed the Primary Care Emergency Preparedness Network (PCEPN), a New York City Department of Health and Mental Hygiene initiative to provide primary care representation at the New York City Emergency Operations Center (EOC). Before, during, and after the storm, PCEPN enabled a core group of approximately 27 primary care networks representing over 90 primary care locations throughout New York City to stay updated about storm situations, resources, and recovery efforts.
- Seedco Financial Services (now TruFund) developed a Small Business Recovery Initiative geared toward addressing a targeted set of disaster recovery related needs for small businesses that suffered from storm-related impact.
New Jersey Community Capital’s REBUILD Fund
In 2012, New Jersey Community Capital (NJCC), with seed funds from Goldman Sachs Gives and other key investors, launched the REBUILD New Jersey loan fund to aid recovery for small businesses in areas most severely impacted by Hurricane Sandy. NJCC has contributed $750,000 in lending capital to REBUILD and immediately began offering low-interest loans to small business owners in order to continue to fulfill its longstanding mission of stabilizing communities in need. The loans were made in Jersey City, Newark, and Asbury Park.
Through May 2013, NJCC’s lending staff had already provided New Jersey small businesses with 23 loans totaling $574,000, creating or preserving over 135 jobs. NJCC also expanded its recovery effort by integrating its proven housing and neighborhood stabilization strategies in Sandy-affected areas, another process that requires a long-term commitment of capital and planning.
In March 2013, NJCC closed its first REBUILD housing loan to support a local partner, the Affordable Housing Alliance, in building 17 new manufactured homes in Eatontown, NJ for families displaced by the storm.
NJCC REBUILD Fund Stories
Grove Street Bicycles, Jersey City
Grove Street Bicycles, a go-to shop for a wide range of Jersey City’s local bicycle commuters and hobbyists, was hit hard by Hurricane Sandy: it lost power for five days, and heavy flooding damaged its basement walls and destroyed tools and inventory. NJCC was the first to respond with recovery funds, providing a low-interest $30,000 REBUILD loan to help the store cover repairs and inventory replacement. It was fully operational before long and is already growing.
Cowerks, Ashbury Park
Cowerks was founded in 2010 as a flexible shared office space and networking hub for Asbury Park-area technology freelancers and startups. When Cowerks outgrew its office, it found a new space in Asbury Park’s downtown, but after Hurricane Sandy forced the company to close its doors for 10 days, it was compelled to redirect its moving funds to its operations. NJCC’s REBUILD New Jersey fund provided Cowerks the working capital it needed to reopen in its new location just months after the storm.
- REBUILD Fund announcement
- Governor and White House honor REBUILD
- N.J. nonprofit lender buys hundreds of troubled mortgages in 9 counties hard hit by Sandy
LIIF Commits $1 Million to Communities Affected by Sandy
Shortly after Sandy made landfall in New Jersey, the Low Income Investment Fund (LIIF) committed $1 million to relief for communities ravaged by the hybrid storm.
Among the first projects that LIIF supported was St. John’s Bread & Life, an emergency food provider that used its mobile soup kitchen in the immediate aftermath of the storm to deliver thousands of meals and supplies to affected areas.
Gulf Coast Renaissance Corporation Created to Aid Mississippi
Hurricane Katrina washed ashore in South Mississippi in August 2005. In the devastating storm’s wake lay some of the greatest structural devastation from a natural disaster that has ever incurred in the country’s history. But amid the flooded ruins, hope found a way to float through the vision of several South Mississippi community and business leaders, organized as The Gulf Coast Business Council. The nonprofit group had the foresight to understand the key to the area’s recovery would be a unified effort focused on redevelopment.
In mid 2006, the council created Gulf Coast Renaissance Corporation, a CDFI, to help rebuild the Mississippi Gulf Coast by bridging the gap in the need for safe and affordable workforce housing. Since then, Renaissance has helped make distinct improvements to the communities by promoting community and economic development through various programs implemented to deliver effective and meaningful results.