Using Federal Funding to Mobilize Private Capital
If America is to retain its role in the world, all citizens must become part of the economic mainstream. While access to private capital is central to any community’s economic vitality, distressed communities face special challenges. Over the past three decades, federal policies have proven both effective and essential in helping to overcome those obstacles.
Indeed, many distressed communities have made real progress in recent years, bucking the conventional wisdom that had written them off as hopeless. Partnerships among community-based and other nonprofit organizations, the private sector, and government at all levels are sparking this revival. The progress is undeniably impressive, but it is only the first step. Much work remains if Americans are to continue to rebuild communities to make them good places for families to grow, economically sustainable, physically revitalized, and connected to the mainstream. Government must continue to play a central role in building sustainable communities, both to benefit communities and to achieve other national policy goals.
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The Community Development Finance System and Federal Policies
Federal policies contribute in important ways to virtually all affordable housing and community development projects. Over the past 20 years, a cluster of federal policies has supported a flexible, decentralized, and well-integrated production system. The system is distinctively market driven, locally controlled, and performance based. It builds sustainable partnerships among nonprofit and for-profit developers, private lenders and investors, as well as among all levels of government.
Attracting private capital is critical to the system, especially when governmental resources are scarce and must be stretched as far as possible. Equally important, private financing provides market discipline, ensuring that projects are properly planned, underwritten, and operated. Successful projects breed further private investment for subsequent activities, replacing the vicious cycle of disinvestment with a virtuous cycle of reinvestment.
This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.
