An Intro to Section 4
The Section 4 Program strengthens the nation’s lower-income communities by bolstering non-profit community developers that build and invest in those neighborhoods. Section 4 is the only program at the U.S. Department of Housing and Urban Development (HUD) specifically designed to build the capacity of non-profit Community Development Corporations (CDCs).
How Does Section 4 Work?
- Section 4 provides grants on a competitive basis to national intermediary community development organizations (ie. LISC), 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, pre-funding the organization, monitoring their use of the funds, and reporting the results to HUD. Only after deliverables are met does HUD reimburse intermediaries (LISC).
How Does LISC Deploy Section 4 Funds?
- LISC offers organizational development grants that assist community organizations to improve its administrative structures, management and financial systems, and real estate development and management capacities;
- strategic planning grants or seed capital to cover costs associated with the creation of new programs that are important to an organization's overall mission and needs of the community's residents;
- project grants to help cover costs associated with real estate development that further neighborhood revitalization goals.
What are Outcomes of the Section 4 Funding?
- From 2014 to 2018, Section 4 funds have been deployed by 973 CDCs and other non-profit developers, benefitting all 50 states including DC and Puerto Rico.
- From 2014 to 2018, Section 4 has helped create or preserve more than 39,000 homes and attracted over $7.7 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.
- 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.