Intro to Section 4, Capacity Building for Community Development & Affordable Housing
Capacity Building for Community Development & Affordable Housing
The Section 4 Program strengthens the nation’s lower income rural, Native, suburban, and urban communities by bolstering nonprofit community developers that build and invest in those neighborhoods. Since 1993, Section 4 has been the catalyst for these nonprofit community development corporations (CDCs) to revitalize lower income neighborhoods and communities through the expansion of affordable housing, job creation, economic development, and other activities. Section 4 is the only federal program that is specifically designed to increase the effectiveness of nonprofit organizations by providing them with critical capacity building funds so that they may better serve all types of communities in need.
How does Section 4 work?
- Section 4 provides grants on a competitive basis to national intermediary community development organizations, which in turn provide training, education, financial support and development assistance to local CDCs throughout the country.
- Section 4 funds are matched on a 3 to 1 basis, and then used to leverage additional private capital. Total aggregate leverage has consistently been in the range of $20 or higher for each dollar of Section 4 funding.
- Intermediaries provide vital oversight and compliance functions. They are responsible for delivering plans to HUD outlining how the dollars will be invested, selecting the qualified organizations to receive the funding, prefunding the organization, monitoring their use of the funds, and reporting the results to HUD. Only after deliverables are met does HUD reimburse intermediaries.
What are the outcomes?
HELPING COMMUNITIES AND PEOPLE IN NEED NATIONWIDE
- From 2020 to 2024, Section 4 funds have been deployed by 1,012 CDCs and other nonprofit developers. Since the program’s inception, Section 4 has benefited all 50 states plus the District of Columbia and Puerto Rico.
- From 2020 to 2024, Section 4 has helped create or preserve more than 40,000 homes and attracted over $11 billion in investment for lower income neighborhoods and communities across the country.
- Section 4 has also provided disaster recovery relief and has been used to assist communities impacted by Hurricanes Katrina, Sandy, Harvey, Irma, Maria, Michael, the California wildfires and other federally declared disasters.
STRENGTHENING LOCAL NONPROFITS
- A 2011 independent study by Social Compact assessing the effectiveness of Section 4 found that despite severe economic challenges, the median operating budgets for Section 4 assisted CDCs grew over 157 percent between 2001 and 2009. This has resulted in increased potential for revitalization, inspiring further investment in areas in which traditional investors have seen little value.
PROVEN RESULTS
- Evaluations – ranging from the federal government’s U.S. Government Accountability Office and Office of Management and Budget to independent research organizations like the Urban Institute and Social Compact – attest to the effectiveness of the Section 4 model as well as the efficacy of the intermediaries that administer the program.
What has been LISC’s involvement?
- Since the initiation of Section 4, LISC has invested Section 4 resources to build the capacity of 1,425 CDCs in 349 cities and rural communities across all 50 states, the District of Columbia, and Puerto Rico.
- LISC’s Section 4 investments have positively impacted communities as diverse as the Mid South Delta; small urban communities such as Providence, Rhode Island; larger sprawling cities such as Phoenix, Arizona; and urban cores such as the Bay Area in California.
- LISC’s Section 4 grants in both rural and urban areas have leveraged more than $16.1 billion in direct real estate investments and have assisted in building, renovating, or preserving approximately 87,137 affordable housing units.
- LISC has also invested Section 4 money in programs that address critical national challenges. These initiatives support a wide variety of programs such as green building, the development of healthcare and childcare facilities, the strengthening of neighborhood commercial corridors, job creation, and community safety
What can Congress do?
Preserve Section 4 and provide funding of at least $50 million in FY 2026.
- The Section 4 Program is the sole source of funding at HUD that provides financial support and development assistance to nonprofit CDCs to support their housing and community revitalization efforts.