‘Empowering’ the People
Denise Fairchild’s favorite verb is “empowering.” She talks about “empowering local people to take control of their own destiny,” and “empowering the little guy” by giving him the clout to change things in his neighborhood.
Fairchild is the director of the Los Angeles office of the Local Initiatives Support Corp., the major resource center for nonprofit community developers.
LISC is at the forefront of an important phenomenon: an increasingly sophisticated alternative real estate industry that links public agencies, private industry and community groups for the purpose of creating affordable housing.
“We’re providing the local people with ownership and control over their own communities,” she said. “My motto is ‘The Community Can Be Its Own Builder.’ ”
As LISC director, she works with grass-roots groups, social service directors and community activists who are serious about turning their communities around. Most of the time, she sees them achieve personal transformations while they are busy transfiguring their neighborhoods.
“The alternative real estate market is the best kind of real estate you can do--it’s not only building with brick and mortar but it’s building community leaders,” Fairchild said.
“I’m inspired by these people. They have a passion for what they’re doing that you wouldn’t find in an ordinary real estate deal because the development is only the cornerstone to a larger agenda for them.”
Community development has evolved to fill a need that has become increasingly obvious over the past decade.
Beginning with the Reagan Administration, the federal government virtually got out of the low-income housing business, Fairchild said. The free market did not provide hoped-for housing solutions for low-income people, and the housing shortage grew more severe.
Nonprofits, aided by organizations like LISC, have stepped in to fill the affordable housing gap.
The communities that LISC targets have been virtually abandoned by the private sector. Places like South-Central Los Angeles, where commercial centers and industrial facilities closed 20 years ago. The banks are still leaving these communities, Fairchild said.
The only institutions that have stayed in disenfranchised communities such as South-Central are the churches, the nonprofit agencies and the activist groups. But with little money and less political clout, they typically find themselves well-meaning but powerless.
“We’re here to provide the groups that have formed with some credibility, so they can go into banks, board rooms, council halls and negotiate with credibility. We want to empower the people that stayed behind, the ones who live there, by giving them access to information, resources, things they’ve never had before,” Fairchild said.
When these groups gain an asset base and a measure of credibility by linking up with LISC, they have a built-in track record they can use to do all kinds of things, Fairchild said. They are buoyed up to approach banks and politicians, and they find new faith and motivation to do for themselves.
LISC is the largest nonprofit financial intermediary in the country, established in 27 mostly urban, inner-city areas around the country. In 1991, the Los Angeles office raised $47 million for 13 affordable housing projects statewide, five of them in Los Angeles County.
A spinoff 11 years ago from the Ford Foundation, the concept behind LISC was born much earlier, stemming from the War on Poverty tenet that poor communities could solve their own problems with their own ideas if only they were given the resources to do so.
The problem for poor activists, the theory went, was not that they did not exist or care, it was simply that they did not have the pull to put their ideas to work.
The first community-based development was in the Bedford- Stuyvesant neighborhood of New York. Because the Ford Foundation, a charitable organization, felt that model was successful, they determined to make it work in other communities. LISC was formed as a financial resource with that goal in mind.
LISC moved into Los Angeles in 1987, and Fairchild, who has a doctorate in urban planning, has headed the 11-person office for three years. Along with financing and training nonprofit developers, the group conducts 32 other programs, including carrying out a cable television market study, doing economic development programs and giving out grants for neighborhood planning.
For nonprofit developers, LISC provides a variety of resources. The Revolving Loan Fund provides a crucial first step: “pre-development” money. The upfront capital is used to test the feasibility of a housing or commercial project before any other funding can be put into place.
Up to $50,000 can be loaned unsecured through the fund without interest charges and it has to be paid back once the funding for the actual project is in place. The money is used to pay for environmental reports, architect’s fees, consultants, site analysis and appraisers.
The loans are not awarded based on traditional measures like equity and collateral, Fairchild explained, because nonprofit developers seldom have either. Instead, the loans are made on an assessment of the builders’ capacity to complete the project and their commitment.
“Our portfolio has a lower default rate than those who use traditional means of securing loans,” she said proudly.
LISC also gives out $250,000 low-interest loans to groups that are getting matching public or private funds. Interest rates are 6% to 7%.
In 1986, a LISC subsidiary called the California Equity Fund was formed. Based on tax credit provisions of the 1986 Tax Reform Act, the fund has become a vital part of affordable housing development. Without tax-credit funding, virtually no affordable housing would be built in this country today, said Pat Johnson, director of the LISC California Equity Fund.
Under the 1986 Tax Reform Act, corporations get major tax credits for investing in affordable housing projects. The California Equity Fund invests money from companies like Great Western Bank and the Walt Disney Co. in low-income housing developments. The companies make their investments for an eight-year period and get tax benefits over 15 years, with tax credits for the first 10 of those years, Johnson said. Overall, the corporations earn a return on their investment in the range of 15% to 18%.
Along with the return on their investment, the companies get community goodwill and public relations benefits for their involvement with affordable housing, Johnson said. If the investor is a bank or savings and loan corporation, they get regulatory favor for their investment under the federal Community Reinvestment Act, he said.
Along with benefits to investors from nonprofit development come benefits to the community. One of the most tangible is that local developers have been able to sustain their developments over time, Fairchild said. Traditional commercial developers come into the neighborhood, build a project and leave when it’s sold. As a result, some of their projects can quickly deteriorate into long-term blights on the community.
But when the people who build the project stay in the neighborhood and stay involved, the project is protected. Community watchdogs own the enterprise so there are no absentee landlords.
In 1988 and 1989 LISC sponsored a housing development training program for 15 nonprofit developers working on 13 projects with more than 400 units in the development or planning stages.
“You can see how people’s ability to get those deals done improved after the training,” Fairchild said. “Most of them come from a social perspective where they are always on the defensive. We had to teach them to be pro-active and to take the offensive.”
“We’ve seen them move further and further toward a level of self-sufficiency,” Fairchild said.
A number of the community developers who met through the training have formed an umbrella group and have continued to meet, share resources and ideas. “The group bonded and the end result was that they have been able to share information. They wanted to keep working together,” she said.
The group has formed two coalitions, a group for neighborhood developers and the South-Central Development Consortium, which is coordinating neighborhood planning to revitalize South-Central Los Angeles.
“They are also involved in political advocacy in Los Angeles City Hall, Sacramento and Washington, D.C.,” Fairchild said. “It’s something we had never intended to happen, but it shows that we truly empowered them.”
