Philanthropy Must Change So Community Development Can Keep Changing for the Better


In the summer of 2020, American foundations, like businesses and institutions across the country, made powerful statements about racism and supporting Black communities. For foundations that have long funded community development, these statements were less an opening salvo than a recommitment.

For decades, community development has been one of the primary ways in which philanthropy has attempted to redress centuries of structural racism. But for foundations to have the impact that they seek on racial inequities, they will need to go beyond making big statements and modest changes to their funding priorities and the way they operate. As professionals close to philanthropy for much of our careers, we call for a broad effort among foundations across the country to step up and take greater risk to achieve greater impact.

Community development emerged during the 1960s and was deeply influenced by a new era in civil rights. At the time, many hoped that economic progress and political power would help to overcome racism and discrimination, as people of color with low incomes became more prosperous and the civil rights movement reformed overt biases in laws and civil structures. Community development was based on the idea that investment in local places and neighborhoods could be an engine for their growth. Resident participation in development was central to its approach.

Most community development rested on the fundamental orthodoxy that housing and economic development were the sources of economic growth. Unfortunately, investment in housing failed to reverse or mitigate decades-old policies that set the hard boundaries of racial segregation and social and economic inequity.

The past 60 years have taught us a lot about what drives prosperity and economic wellbeing. We now know that investing in young children creates social and economic returns superior to the stock market and that education and health are key to unlocking future job prospects. In other words, we have learned that we must invest in people as well as places. 

Fortunately, in the past decade, community development has made significant progress in incorporating these lessons. Developers now widely embrace and include child care and healthy communities within their thinking. Community development practitioners understand that housing is not just an economic investment but a fundamental social determinant of health with a major impact on the future of children and families. There is wider acceptance of the idea that mixed-income development can promote social mobility. As a field, we are firmly committed to anti-racist ideals. But the reality is that we have yet to incorporate these instincts thoroughly into our practice.

Today, with billions of dollars in new investments going to community infrastructure, climate resilience and technology, just as we recognize anew the importance of equity and inclusion, we are at a moment in our nation’s history when it is possible to reach a new consensus about development — and for philanthropy to advance a more generative and more equitable community development system. What will it take? A full-fledged effort to help communities get the capital they need for the work they want to do. Below are our thoughts on how philanthropy can help make this happen.

Foundations should build on their success in supporting multisector, multifield collaborations to establish a consensus on development that centers race and people. In the last decade, philanthropy has increased its investments in equitable and inclusive development, especially through partnerships that bring together diverse community stakeholders to address the systemic and historic barriers to successful, people-centered development. Projects like SPARCC (the Strong, Prosperous, and Resilient Communities Challenge), We Lift (the Coachella Valley’s Housing Catalyst Fund, sponsored by Lift to Rise and Riverside County), and Purpose Built Communities are succeeding in this work, and we need to seed more of them.

Foundations should champion and commit to building the power and capacity of community and resident-led organizations to ensure that planning and decision processes authentically include community voice and lived experience. This will require foundations to reach beyond their traditional geographies and be earnest and intentional in supporting true collaboration and partnership between community organizations, residents and community development practitioners. For example, the Appalachia Funders Network is an integral partner in Invest Appalachia, a community-driven fund that emerged out of years of grassroots, cross-state, cross-sector collaboration

Foundations should use their social investment expertise and influence to set new approaches to community development financing. Beyond grants, philanthropy can influence and demonstrate new ways of financing community development. The past dozen years have seen the expansion of impact investing by philanthropies as well as foundation support for early experiments in providing unfunded guarantees as alternative investment tools. More recently, the Robert Wood Johnson Foundation is supporting the Bond Markets and Racial Equity Project, which seeks to center equity in municipal-bond-funded investments.

Something is terribly amiss when developers cannot make deals work because of the cost of capital and competition from gentrifying forces. These failures are not inevitable; rather, they are the legacy and accumulated result of a chain of interlocking policy choices as well as racially motivated practices that have suppressed wealth, homeownership and economic opportunity for communities of color. Philanthropy has the opportunity and responsibility to create financial interventions and provide more risk-tolerant financing (including equity, longer-term loans and forgivable products) that can help break that chain and shift community outcomes.

Foundations should develop an investment mindset, reimagine community investments with longer time horizons, and adopt an approach that is developmental, adaptive, systemic, and focuses on the whole community. Foundations make grants. That is their raison d’etre. But the kinds of investments that will lead to durable, scalable, replicable change across many communities will require a more astute understanding of how markets can interplay with social change and how social entrepreneurs and local leaders can build vehicles and movements for broad, long-term change. In short, grantmakers will also need to learn how to work with social investors — and think of themselves as social investors.

This means investing in leadership rather than special projects designed to meet foundation priorities, and giving organizations the freedom to manage their own affairs. It also means letting go of short-term definitions of success and failure and committing for the long haul. For many communities of color, decades of segregation, disinvestment and exclusion have eroded local opportunity structures to a degree that cannot be undone by a three- or five-year grant. 

Systems change is arduous, complex work. Organizing people and funding for the time span needed to secure enduring change has historically been beyond the patience and commitment of foundations and their boards. But organizations become stronger when we continue to invest in them, and organizations with consistent, long-term funding are better equipped to tackle our most deeply rooted challenges, like racial equity.

In short, foundations can lead the way toward the change communities seek, but only if they also change the way they do business.

David Fukuzawa is an independent consultant and advisor, with 30 years of grantmaking experience, including as managing director-health for The Kresge Foundation and at The Skillman Foundation, a private independent foundation in Detroit, Michigan.

Nancy O. Andrews, a consultant to the Center for Community Investment, was most previously the president and chief executive officer of the Low Income Investment Fund (LIIF); prior to LIIF, she worked in the Clinton administration departments of treasury and housing and urban development and as the deputy director of the Ford Foundation’s Program Related Investment portfolio.