HUD Secretary Henry Cisneros urged the House Banking, Finance and Urban Affairs Committee on June 16 to amend his budget request for fiscal 1994 in Part to accommodate a $50 million appropriation for community development programs. That same day, James Pickman, program secretary of the National Community Development Initiative, testified to the panel regarding community development corporations and efforts to interest the secondary mortgage markets in that work. Here are excerpts from Cisneros' and Pickman's testimony.

Henry Cisneros

Mr. Chairman, we propose $50 million for a new capacity building for Community Development Corporations program. This program would help community-based corporations rebuild low-income communities by leveraging additional grant and below-market rate loan funds from private sources.

I believe in community-based solutions; I'm convinced that it is imperative for us to build, nurture and maintain community-based capacities such as community development corporations. And this is an exciting way to tap into the resources available from foundations committed to community development.

At least half of the $50 million is proposed as a grant to the National Community Development Initiative, NCDI, to support their efforts to help rebuild communities from the bottom up and offer a ladder of opportunity for the residents. Our participation in this effort would help NCDI attract other potential funding sources.

In other words, Mr. Chairman, our dollars would be matched by a pool of funds that we could not possibly provide within this tight budget environment, and they would leverage from the private sector funds that would not have been committed to community development, or that at least would not have been committed to this extent.

Every federal dollar would have to be matched by three nonfederal dollars. We expect these funds - the grant dollar and the 3-to-1 match - to leverage about $5 to 8 in additional community investment. The $25 million we propose, then, would leverage $500 million to $800 million in community revitalization funds.

The grant funds would enable a host of capacity building activities: training, technical assistance, seed money and project pre-development costs, revolving loan pools, secondary market activities, community development corporation operating support and other capacity building needs.

I understand that later today, you'll be hearing from Jim Pickman. with the National Community Development Initiative, which was created to strengthen the community development corporation movement and extend its reach and impact.

By working with national foundations and investing corporation, we can help to bring about the kind of change so desperately needed in America's most distressed cities and towns. We can bring about an increase in the supply of decent, affordable housing and homeownership opportunities, jobs and business opportunities, commercial development ... all the ingredients essential to revitalize communities and create a nurturing environment for families and individuals.

We would expend the remaining funds for activities authorized by Section 233 of the HOME Investment Partnerships Act and for demonstrations related to management, development or preservation of affordable housing, to be conducted by the assistant secretary for policy development and research.

This initiative helps meet our need for flexibility, the freedom to take advantage of new opportunities as they arise.

We propose funding for this broad initiative to be allocated as a set-aside within the HOME Investment Partnership program.

James Pickman

The NCDI funders are seeking to support ways of tapping the mainstream capital markets to meet the housing finance needs of community development corporations. We are encouraged by discussions currently under way between Enterprise and Fannie Mae that would address an important low-income multifamily housing finance need - the provision of attractive first mortgages on projects using the low-income housing tax credit.

We are also expecting to support a secondary market program operated by LIMAC designed to purchase community development loans made by national and local nonprofit lenders, such as the McAuley Housing Fund, the Low-Income Housing Fund, the National Trust for Historic Preservation, Seedco, numerous local community development loans funds and others. ... We have had preliminary discussions with HUD about the possibility of the federal department joining the NCDI national funders consortium - on the same basis as the other national private sector partners. The objectives of this expanded partnership would build on and enhance our current efforts. The proposed second round would be similar to the current NCDI effort HUD would sit at the table - as an equal partner - with the other national private sector core funders.

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