At Capital Impact Partners we put money to work, focusing our efforts on the best ways to use dollars to achieve powerful outcomes. Our lending work at Capital Impact Partners in 2015 increased more than 17 percent above our 2014 level—a success that we celebrate in the present as we look ahead to new levels of accomplishment. This level of lending volume is a source of strength as it supports our organization financially while simultaneously reinforcing communities with increased access to critical housing, services and employment opportunities.
As Capital Impact’s new CEO, I am incredibly excited to take this opportunity to both look back at 2015 and to expound on our new five-year vision to 2020.
Over the past year, we continued to build upon the organization’s strong financial position, deep partnerships, and innovative product development. We provided ongoing leadership in the health care space, helped a number of charter schools expand their educational offerings, and saw several of our projects come online across Detroit. We also launched two new lending initiatives that will expand access to healthy foods and support age-friendly communities.
As I think about my 32 years with Capital Impact Partners, I am overwhelmed when I consider the thousands of stakeholders that have made contributions to our work of helping people and communities across the country reach their highest potential.
This army of people and organizations, all part of the ongoing and thriving community development finance sector, includes partners who have worked shoulder-to-shoulder with us; investors whose capital participation helped us stand up a strategy that continues to generate high impact outcomes; foundations whose contributions increase our capacity and enable transactions that otherwise would not be possible; and our many board members whose selfless contribution of their time and talent helped to guide us in our endeavor. In my mind, they are our real heroes.
Since Benjamin Franklin launched the first mutual fire insurance company in 1752, the cooperative sector has seen waves of success in the United States. Dairy and cheese coops were first organized in the early 1800s, and other agricultural cooperatives followed. By the Great Depression, cooperative businesses were developing in urban and rural areas, bolstered by President Roosevelt’s New Deal legislation. In the late 1960s and 1970s, a new wave of consumer food co-ops grew out of the counterculture movement. In 1981 Capital Impact was born out of federal legislation to keep up that momentum. And for the last four decades, Capital Impact has sought to do this through a mix of financing, capacity building and technical support.
“Co-op development is evolving and picking up steam with an excitement that we haven’t seen in decades,” says Alison Powers, program officer of cooperative development at Capital Impact Partners. “We’re seeing growth in food and worker co-ops as well as bigger attendance at national co-op conferences and more investors entering the co-op conversation. Co-ops solve problems and empower people around a lot of issues.”
To meet the needs of the growing cooperative market, Capital Impact Partners will be expanding its programs and increasing its co-op lending over the next five years. Working with loan funds and CDFI partners is a big part of this strategy, says Powers.
“We’re also involved in national conversations and working groups around opportunities for growth,” she says. “One area that we are excited about is worker co-op conversions, retiring baby boomers are selling their businesses and hopefully they will choose to sell to their workers. We’re working with partners to bring the field to scale, and we’re very excited about the next few years.”
To further this work and expand its outreach, Capital Impact Partners created the Co-op Innovation Award in 2015, providing grants to organizations that support food, worker and housing co-ops in underserved communities. Democracy at Work Institute (DAWI) and United States Federation of Worker Cooperatives (USFWC) were the first two recipients, each receiving $20,000.
With the first year of the awards completed, the recipients are excited to share about their projects’ successes.
Democracy at Work Institute
The grant from Capital Impact supported DAWI’s Conversion Collaboration, a national effort designed to help small businesses transition to worker-owned co-ops.
“Conversions offer an opportunity for worker co-ops to grow to scale in the U.S. and that’s something we are looking at strategically,” says Powers. “The work DAWI is doing aligns with our strategy on a larger level, and choosing them as a grantee was a great opportunity for everyone.”
“The award opened up more possibilities than we anticipated,” says Melissa Hoover, DAWI executive director. “We’ve seen a massive amount of interest in worker co-op conversions from other organizations, capital providers, local governments and even civil rights groups. And we’re gaining a better understanding of the challenges we need to address.”
Capital Impact recently announced the second round of Co-op Innovation Awards, and DAWI was selected again in 2016.
“The second year of funding is really important to us,” says Hoover. “It’s going to help us use the tools and research we did with the first year of funding to implement a clear strategy, specifically conversions in the minority-owned legacy business community.”
Since its launch, DAWI has focused on developing metrics, such as job quality. “One of our goals is to influence the field of economic development and community development, and to influence policy makers,” says Hoover. “By pointing to data, you can illustrate the real impact. Also, you can’t track what you don’t measure. The act of measuring sets our compass. If we measure job quality, for example, then that’s what we will foster. One of the best ways to set an intention is to commit to measuring it.”
The intensity of interest in worker cooperative conversions surprised Hoover. “It’s exciting to see interest from many different quarters,” she says. “We heard from economic development people from the City of Miami and a representative from a national civil rights group,” she says. “We were also invited to do a live chat on Forbes.com. We’re seeing a large breadth and range of interest.”
And the future looks bright. “I’m excited to see cooperative conversions at larger scales, whether that means the size of business converting or that there are more and more of them,” says Hoover. “If we can provide models and support, this idea has potential to gain a momentum of its own to be self-generating and sustaining.”
United States Federation of Worker Cooperatives
USFWC received the Innovation Award for its Grants for Growth fund. This revolving grant fund provides small technical assistance grants to existing co-ops that want to grow their business, increasing the number of loan-ready worker co-ops and their capacity to create new jobs.
“We’ve heard from lending partners that there aren’t as many deals in the pipeline for successful worker co-ops trying to expand, and that’s one reason we were excited to support the USFWC,” says Powers. “Their members had told them they needed this kind of funding. This program is a direct response, and supporting the US. Federation is a perfect fit.”
“We were spot on with the fact that people need loans for growth, but we learned that we had to reorient and go deeper,” says Amy Johnson, Co-Executive Director for the USFWC. “I have to remind myself that this is a pilot program, and we don’t have all of the resources to help everyone. We are working to address the needs of three specific organizations, and we’re hoping with each comes lessons that we’ll learn to support future programs. We’re staying grounded in knowing that this program is making a contribution to an ecosystem that is growing.”
A small organization, Johnson says the grant has enabled USFWC the time and space to think about how to provide the most benefit and value.
“At the core, we’re a connector and base builder,” she says. “We’re reorienting around how a federation can be a network of advisors rooted on the ground in a community. We have great experts across the country, but what doesn’t work is to fly in for an intensive training and leave. It’s about who stays on the ground and who is doing the work, and that requires a long-term relationship over time. Our contribution is figuring out how to support a network of locally rooted and national experts.”
Co-op Strategy for the Future
“We’re excited to see how far these organizations have come in the last year,” says Powers. Their progress is the reason our board and management team decided to renew the Innovation Award in 2016.”
The Co-op Innovation Award represents just one part of Capital Impact’s strategy to promote food, worker, and housing co-ops that support underserved communities. The organization also provides direct capital to food co-ops looking to grow and expand through its National Co-op Grocers Development Cooperative Loan Fund. Over its 30-year history, Capital Impact has disbursed more than $283 million dollars in financing to more than 200 cooperative businesses that serve close to one million customers.
“The convergence of the growth of worker co-ops and a wave of retiring small-business owners offers a unique opportunity that is attracting the attention of foundations and investors previously unfamiliar with co-ops,” says Powers. These award winners are leading the charge in building a nationwide ecosystem for worker co-op conversions with a focus on low-wage jobs. This aligns with our strategic focus on stabilizing low-income communities and increasing cooperative growth nationwide.”
More than 10,000 low-and-moderate income homeowners are sleeping better at night thanks to our partner ROC USA. Instead of worrying about rent increases or land sales that might force them to move, residents of manufactured-home communities (what many commonly refer to as mobile home parks) across the country have purchased their land and put down roots through ROC USA’s cooperative ownership program.
Since 2008, the nonprofit social venture’s innovative model has spun off 182 resident-owned communities in 14 states, ranging in size from eight to 300 dwellings. The 10,000th home was recently secured at Turnpike Park Cooperative in Westborough, Mass.
By Candace Baldwin, Director of Strategy, Aging in Community
Making a community a great place to live and work while also supporting the needs of low-income and vulnerable older adults is difficult. It takes patience, planning, and a group effort.
With this goal in mind, Capital Impact Partners joined with the AARP Foundation and Calvert Foundation to create the Age Strong initiative. Our goal? To build a first of its kind program that enables all of us – whether individuals or retail operators or philanthropic enterprise – to support strong and vibrant communities that can help low-and-moderate income individuals who are 50 and older to age with dignity, independence, and security.
Picture it: the freezer breaks and you’re scrambling to save all your frozen food. In a home, a big cooler or the generosity of a neighbor may solve your problem – but for a grocery store, the goods in a broken freezer cannot be housed at a neighbor’s house until the freezer is fixed.
The freezer, top of the line when it was purchased in the 1970s, was just one challenge faced by First Alternative Cooperative, a community co-op market in Corvallis, Oregon. Along with replacing equipment, including its critical point-of-sale system, which was past its prime, the grocery store needed to make some building improvements and consolidate debt to improve its cash flow.
There is no doubt that improving access to fresh, nutritious foods in low-income communities can help people improve eating habits and prevent diet-related diseases, such as obesity, high blood pressure, diabetes, and heart disease.
But the impacts for people and communities are even greater than that.
The Affordable Care Act (ACA) sets out to provide access to health care for all. The ACA will only be fully implemented in California when all people, including low-income residents in underserved communities, have local access to quality, affordable care.
Community health centers and clinics (CHCs) play a vital role in this effort by providing preventive and primary care to patients in California – and across the nation – regardless of their ability to pay. Since 2009, health centers have increased the number of patients served from 17 million to 23 million annually. With the ACA’s implementation, however, it is estimated that CHCs will need to serve 35 million patients in the coming years.
2015 was a year of optimism for post-bankruptcy Detroit.
We saw significant investments pour in, including the first projects due to the $100 million pledge from JP Morgan Chase. Combined with the $30 million Woodward Corridor Investment Fund, new and rehabbed buildings are getting developed at a fast clip. Thousands of new streetlights are on. Blight is being tackled at a faster pace than ever before. Detroit’s comeback story is replacing the apocalyptic headlines of recent memory.
However, as a longtime Detroit resident and community development professional, I believe our city is at a significant crossroads.
Take Midtown, the bellwether of Detroit’s momentum-rising story. Since 2000, Midtown has been able to attract over $1 billion in new investment, and it has secured well over 50 new businesses since 2010. It achieves 97-99 percent occupancy rates of its redeveloped housing stock annually. With that resurgence, the area has also seen some predictable – and strategically intended — increases in its higher-income and upwardly mobile populations.
The fundamental question remains: Will redevelopment in Detroit lead to equitable growth? Will Midtown’s lower-income and working-class residents who have lived there for decades continue to be a significant part of Detroit’s rich culture, history, and vibrancy?
Ensuring Growth Across the Income Spectrum
Full-blown gentrification (i.e. the rise of higher-income households that effectively displace low-income households from a particular neighborhood) may seem far off given the economic fundamentals in Detroit – Midtown, for example, still has a poverty rate of over 40 percent, and over 60 percent of its households earn less than $25,000 per year. Nonetheless, the gentrification debate is gripping our city and threatens its progress. While I’m the first to acknowledge that current redevelopment efforts, while exciting and necessary to grow Detroit once again, aren’t inclusive enough, I think this debate is premature at best, and harmful to our city’s future prosperity.
I argue instead that in Midtown and across Detroit, we need to focus on inclusive growth.
Inclusive growth in Detroit’s development priorities must start with strategic investments into higher-density centers that connect residents to genuine pathways to economic mobility. Such efforts require specific equity and inclusion metrics, and demand that Detroit become a city where newcomers and current residents alike – across the entire income spectrum — possess equal access to good homes, safe and vibrant districts, good jobs and quality educational supports.
On the surface, these prescriptions may seem obvious. Yet realizing that vision will be complicated and fraught, as few policies in Detroit address growth strategies that also focus on equity and inclusion in specific ways. They are further complicated by the unique characteristics, strengths and trajectories of Detroit’s diverse neighborhoods.
Strategies for Growth
As part of Capital Impact Partners’ work in Detroit, which I direct, my colleague Elizabeth Luther and I have explored what an “inclusive growth” strategy might look like for the city as it promotes development and wrestles with its inclusion imperative for all residents.
In our report, Towards Inclusive Growth in Detroit: Density & Income Mix Strategies for Detroit’s Mixed-Use Corridors, we’ve laid out a framework that addresses scenarios for cultivating mixed-income neighborhoods where a diverse set of residents can live, work and grow together.
Among the keys steps, we believe the city must:
Collect more market data, including a review of the available and required real estate capital sources;
Craft scenarios that maximize land use and development policies the city of Detroit will support and enforce;
Secure commitment from community development financial institutions (CDFI) and philanthropic partners to develop patient, long-term financing tools that will support mixed-use and single-family housing, while preserving affordable housing.
The report also maps out a path that groups can follow to successfully invest in ways that drive inclusive growth. This includes:
Driving investments to achieve strategic density targets in Detroit’s mixed-use corridor areas;
Collaborating with other CDFIs and the city of Detroit to make sure money is being invested strategically;
Using the regional income mix as a general guide for developing neighborhoods;
Ensuring there’s enough high-quality housing for low-income households so that current residents aren’t forced out of their neighborhoods;
Collaborating with workforce initiatives to help individuals and households rise from poverty;
Developing policies and development practices explicitly aimed at reducing concentrated poverty in Detroit.
We plan to conduct more research into the best ways to support healthy, mixed-income neighborhoods and we welcome — even require — input and cooperation among residents, community-based organizations, philanthropists and governments at the local, state and federal level.
Moving Toward Growth
Fortunately, other examples exist of how to properly invest in projects that create inclusive growth. At Capital Impact Partners, a national CDFI, we have developed our mission-driven lending approach over the course of nearly a decade of investing in Detroit. Through these lending efforts, we’ve deployed over $100 million in financing for projects to increase access to critical services across the city for things like education, healthy food, health care, housing, and dignified aging options.
As a result, Capital Impact is responsible for over 10 percent of the redeveloped or new housing stock in the greater downtown area since 2010. We’ve taken care to ensure that this housing is accessible to the low-income and working-class residents of the city.
2015 was an especially exciting year for Capital Impact Partners and our work in Detroit. Regis Houze, our first project through the Woodward Corridor Investment Fund, brought 58 workforce housing units and several retail spaces to New Center, providing transit-friendly housing to hospital staff, government employees, and students in a neighborhood where occupancy rates usually hover at 98%.
We financed the purchase and renovation of the H.R. Apartments in Detroit’s Midtown district. The building had been vacant for seven years, and will be rehabilitated and renovated into 28 new workforce housing units and two small retail spaces.
We celebrated the opening of Rainier Court, a rehabilitated apartment building in Midtown that brought 36 workforce-housing units back into the neighborhood.
This work by Capital Impact and other CDFIs has delivered investments into Detroit when many others were unwilling to take that risk. This financing has bridged the gap for the financial, philanthropic, and governmental sectors to unlock investment potential in the city’s greater downtown and beyond.
Success won’t happen overnight. The process will require long-term commitments from the city to set policies and provide services that retain current residents and ensure Detroit is an attractive place to invest. While ongoing commitments from philanthropy and businesses will provide seed money and create jobs, there’s also a deeper need for teamwork and unity to guarantee that Detroit’s mixed-income development creates benefits for current and future residents of the city. We hope Detroit may ultimately prove to be a model city for inclusive and equitable economic development, but as we grow we must ensure that our approach to inclusive growth strategies is actionable and measurable instead of mere sloganeering. The prescriptions might be the same in other cities, but the results matter most.
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