Recognition as a Community Development Corporation

by Rather Not State
(Florida)

Reviewed: June 12, 2024

Visitor Question: We are in planning to establish a Community Development Corporation in the State of Florida. We have a 501(c)3. Is there an application or process that we must follow with the U.S. Department of HUD or the local government to be recognized as a CDC?

Editors' Reply:

Although we are not experts on Florida programs and law, we don't see any evidence that Florida has a particular community development corporation recognition process.

Just ask your county or city if they have any official designations. We would be pleasantly surprised if they did.

For that matter, there is no application to HUD (the U.S. Department of Housing and Urban Development) to become a CDC either.

Corporations providing many different types of programming call themselves CDCs, and many corporations that observers would call community development corporations identify more as something else, such as neighborhood housing corporations, membership-based neighborhood associations that happen to be corporations, nonprofit housing developers, or another title.

You should be aware of a couple of definitional issues though. Many community development corporations want to become CHDOs, or community housing development organizations. A CHDO is a private, non-profit corporation interested in providing housing for low- to moderate-income individuals and households.

Currently the most active use of the CHDO concept and designation involves the use of the federal HOME program. To be certified as a CHDO for purposes of becoming a partner in a HOME project, you must follow the guidelines established by your state housing finance agency or sometimes a large city's development agency. Communities that qualify for a HOME allocation must set aside at least 15 percent of that allocation for CHDOs. Quite an opportunity, wouldn't you say?

CHDO's must be governed by a board consisting of at least one-third representatives of low-income communities. If you're interested, you would need to follow your state's guidelines closely.

Our advice is that you have in mind housing production—either housing renovation or new construction of low- or moderate-income housing—you should be thinking of being a CHDO. It gives you real funding advantages, and having a board truly representative of low-income folks is just the right thing to do anyway.

We recognize that you already have a board, because you have your 501(c)3, but boards always can be changed if need be.

In addition, it could be important to note that the U.S. Department of Treasury has a program of certifying what they call Community Development Financial Institutions and Community Development Entities. Let's take them one at a time.

A CDFI is an organization involved in financing for community development purposes. Treasury CDFI certification rules, when followed, then will allow a community development bank or credit union, for example, to receive funding opportunities from the CDFI Fund, a part of the U.S. Department of the Treasury, and to have some preferential treatment from the Bureau of Economic Analysis too.

If your CDC plans to get into being a lending entity, this certification is well worth your time to pursue.

Similarly, a Community Development Entity certification allows a corporation to make loans, invest directly in projects, or offer financial counseling to low-income community projects. The funding source is also the CDFI Fund.

One difference is that a CDE is what federal bureaucrats call an intermediary for distributing New Market Tax Credits to qualifying projects and organizations.

This is valuable to you if you want to get into this fairly sophisticated operation. We say that because the New Market Tax Credits are too complex and costly for a new little mom-and-pop store, for instance, and are intended for fairly sizable projects.

Unless you have the specific idea of becoming a lender, the CHDO designation might be one you wish to pursue, but don't feel compelled.

This is a long way to say no, there's no specific application or process that you have to go through to be called a community development corporation. Just keep educating yourselves on your community, take an asset-based community development approach unless there is a compelling reason to be negative, and start acting like a high-quality community development corporation.

Do notice what other CDCs do, attend conferences to the extent that your resources will allow, and just start addressing real needs in your community. Keep one eye out for government programs, as they do change.

Funding often drives these certification or recognition processes. For a few years, there were Community Economic Development competitive grants offered by the Department of Health and Human Services. Remain alert for a possible rebirth of this program or something similar.

It would be some grant program such as this one that requires a specific official verification. Until then, carry on.