Across the country, communities are working to address affordable housing and community development needs, yet too many struggle to access the capital required to move projects forward. The challenge is not simply a lack of investment; it is how the current capital delivery system operates – or fails to operate. To expand opportunity, we need to try new models that connect trusted local organizations with the efficiency and scale national investors require.
I recently shared a four-part LinkedIn series exploring this challenge: how to make the capital delivery system for community development more efficient and fair. This article brings those ideas together and outlines why a new approach is needed and what that approach looks like.
Why efficiency determines where capital goes
Achieving greater efficiency in community development finance is often discussed in the context of mergers. That conversation is important, and I support exploring merger opportunities where they strengthen impact. But an equally important question is how to make the capital delivery system itself more effective. Â How do we identify and address systemic weaknesses to improve access to capital?
Today’s system reaches many communities, but it serves larger cities and markets prioritized by national and regional banks and intermediaries more consistently than smaller markets. As we move farther from those hubs, the system begins to fail. Two primary factors contribute to this gap:
- Efficiency pressures across investors, intermediaries, and developers
- Policy incentives that influence geographic investment patterns, including the Community Reinvestment Act (CRA)
Large investors, intermediaries, and developers operate under similar constraints: limited staff, pressure to deploy capital efficiently, and incentives that reward scale. As a result, investment naturally flows toward larger markets and established partners. Communities outside those networks often receive less attention because it is inefficient for investors to reach those communities. Â
The result is most visible in smaller and rural communities, as well as suburban and smaller urban markets that do not receive sustained CRA-motivated investment. These communities often face greater barriers to accessing both capital and specialized expertise.
If we want broader access to capital, we need delivery models that expand reach without sacrificing efficiency. We also need to think differently about how investors can work together to provide more consistent access across markets. NeighborWorks Capital, NeighborWorks America, and National NeighborWorks Association have a collaborative approach designed to help achieve that goal.
How efficiency can limit fair access: a real-world example
Imagine you are the Executive Director of a nonprofit community development organization serving Wilmington, Delaware’s Eastside neighborhood, where the median household income is approximately $28,000.
Your organization wants to renovate vacant homes, expand homeownership opportunities, and explore a Community Land Trust. Your team is small but motivated, local stakeholders are engaged, and residents can see a path toward opportunity. Then the financing reality sets in:
- Local banks value the work but have limited specialization and risk tolerance.
- A Delaware-based CDFI can help but has limited capital and is generally too small to access many national investors directly.
- These investors operate with small teams and need to move funding through larger CDFIs to be efficient. They do not have the capacity to develop a relationship with the CDFI in your market.
- National intermediaries focus on larger nearby markets because those markets provide sufficient scale to justify dedicated staffing and operations.
- Your organization lacks the relationships needed to identify specialized consultants who could accelerate the work.
As you work to build support, your limited capacity is consumed by documenting need, developing relationships, and identifying technical assistance.
Meanwhile, national funders are supporting organizations pursuing similar housing and Community Land Trust strategies in other regions. Those organizations benefit from established relationships, coordinated technical assistance, and growing investment. Over time, capital, expertise, and momentum accumulate there, but not in your community.
Because today’s system is optimized for scale, geography itself becomes a barrier. Communities become separated from peers, expertise, and shared learning. This is how the pursuit of efficiency is experienced in many places.
Even in Wilmington, where CRA investment is significant, capital often concentrates on LIHTC transactions because those investments can be executed efficiently at scale. Addressing neighborhood-level community development challenges in Wilmington would require a greater investment in staff resources by the investor.Â
A way to deliver capital efficiently—and more fairly
The challenge is not choosing between efficiency and fairness. It is designing a system that delivers both. The best way forward is to build efficient delivery channels that give trusted local organizations the reach of a national platform. Doing so allows capital providers to deploy funds more effectively while expanding access for communities that have historically been underserved.
To expand the reach of our capital delivery system, we need stronger connections between national resources and local organizations. We need to address the systemic inefficiencies that have created a barrier. NeighborWorks Capital and the NeighborWorks America network are uniquely positioned to help build those connections, with 250 organizations serving communities in every state, the District of Columbia, and Puerto Rico. The network combines national reach with deep local relationships, an essential combination for expanding access to capital beyond traditional markets.
Network members understand these challenges firsthand. Many operate in communities that are underserved by today’s delivery system and face daily obstacles in securing capital and technical expertise.
A central part of our strategy is organizing the network so investors can engage with members collectively to efficiently deliver resources to local communities. Collectively, network members represent a three-year development pipeline exceeding $30 billion, creating a significant opportunity for investors.
The objective is straightforward: create efficient pathways for investors to deploy capital through this national network, benefiting both investors and communities. Once created, these new pathways can be made available to other intermediaries to increase their reach. Â
NeighborWorks Capital Advantage Partners: Building an efficient pathway
Meaningful change will require our industry to rethink how capital reaches communities. NeighborWorks Capital Advantage Partners (NCAP) is designed to create a bridge between community-based nonprofits and capital providers that have historically been unable to reach many local markets. It provides a platform through which many organizations can seek to extend their reach and impact.Â
NCAP builds on what makes NeighborWorks distinctive: a national network of trusted local affordable housing and community development organizations. By organizing members to engage funders collectively, we can leverage national scale while directing resources into communities that are frequently overlooked. Bringing together multiple CRA-motivated investors with different geographic priorities also creates opportunities to deliver scalable national initiatives while achieving local investment objectives. There is no perfect solution to the capital-access challenges many communities face, but this is an ambitious effort to make meaningful progress. It is a big step in the right direction.
NeighborWorks Capital is leading the next phase of this collective work in coordination with NeighborWorks America, National NeighborWorks Association, and network members. National Equity Fund was our first collaborative partner through our LIHTC work, and we are actively seeking additional partners to expand our work into new areas.
Through NCAP, we intend to create multiple pathways for investors, philanthropy, and other intermediaries to bring capital into new communities through coordinated initiatives. We are creating multiple layers of efficiency by making it easier for funders to reach new communities and through building shared infrastructure at NeighborWorks Capital that these 250 nonprofits across the country can use to reach funders. Collectively, the network can do much more than if members built duplicative capital-related infrastructure at each organization.Â
Over the coming months, we will continue working with network members and partners to identify new opportunities for collective investment through NCAP. We look forward to sharing our progress as this work evolves and welcome collaboration from organizations that share this vision.
Progress requires partnership.Â
We invite others who share this vision to help build a capital delivery system that reaches more communities, more efficiently. If you would like to discuss how your organization might be part of NCAP, please reach out.Â
As we continue to develop NCAP and explore new ways to expand access to community development capital, we invite you to follow NeighborWorks Capital on LinkedIn. Connect with us to stay informed about our progress and join the conversation about building a more efficient and fair capital delivery system.
