Economic Development

Locally driven economic development is at the heart of LISC’s approach to helping residents build communities of opportunity—great places to live, work, visit, do business, and raise families. When the tools of economic development focus on building the capacity of residents and community-based organizations, they have tremendous power to revitalize underinvested neighborhoods and expand the ability of people, places, and businesses to build prosperity. LISC pursues policies that support community-driven efforts to fuel economic growth.

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Supporting and Strengthening Local Economies

Investments in community resources help to spur broader economic growth. Federal investments often fill gaps in project financing and are at the core of funding that makes economic development initiatives possible at the local level. This cooperative effort—joining federal investment with locally led development—expands the entire economic ecosystem by revitalizing neighborhoods, attracting businesses, creating jobs, and broadening access to opportunity for all residents. LISC supports robust investment in programs across federal agencies that promote comprehensive community development initiatives and facilitate cross-sector partnerships at the local level.

Policy Asks

Invest in Community Development Financial Institutions

Community development financial institutions (CDFIs) provide capital, credit, and financial services to low-income communities and individuals throughout the country. There are over 1,400 certified CDFIs across the country, ranging from credit unions to small nonprofit loan funds to large national organizations. CDFIs serve borrowers and geographic areas that are not readily served by mainstream financial institutions, providing loans to first-time homebuyers, financing for affordable housing and community facilities, and small business financing. In many cases, CDFIs provide gap financing that allows projects to secure traditional financing. LISC supports efforts to expand the impact of CDFIs, including:

  • Funding the CDFI Fund: The U.S. Department of the Treasury’s CDFI Fund certifies CDFIs and administers several different awards programs to build the capacity and financial strength of CDFIs. In FY 2024, the CDFI Fund’s top-line appropriations figure was $324 million, which is just a tiny fraction of the total assets of all certified CDFIs, currently estimated to be $222 billion. CDFI Fund programs need robust appropriations to meet the growth and needs of the industry.
  • Helping CDFIs scale their impact: LISC supports federal legislation that would support CDFI operations and help them to meet community needs more effectively, including:
  1. Expanding and funding a secondary market loan-purchase program for loans issued by CDFIs as proposed in the Scaling Community Lenders Act of 2023. This bill would ensure that CDFIs have the liquidity to expand their impact in addressing vital community needs.
  2. Ensuring CDFIs have the resources to immediately provide assistance to communities impacted by disasters and other emergencies by enacting the CDFI Crisis Fund Act.
  3. Providing long-term debt for CDFIs financing affordable housing and other projects benefitting low-income people near transit stations, through the Equitable Transit Oriented Development Support Act.
  4. Enacting the Community Development Investment Tax Credit Act to provide an incentive for private-sector investments in CDFIs. This bill would provide a credit for investors that make equity, equity-equivalent, or long-term patient capital investments in CDFIs, which then utilize these investments for their financing activities in working-class communities.

Enhance the Community Development Block Grant and Disaster Recovery Programs

Established in 1974, the Community Development Block Grant (CDBG) program is a critical source of community development funding that supports low- to moderate-income (LMI) communities and enables them to meet locally identified needs. When disaster strikes communities, the Community Development Block Grant–Disaster Recovery (CDBG-DR) program provides the resources they need to rebuild, expand resilience capabilities, and strengthen post-disaster opportunities.

Congress should provide robust funding for CDBG. Despite the proven impacts and bipartisan support of the program, CDBG has had its funding decreased by 80 percent from its peak in 1979. Congress should also permanently authorize and strengthen the CDBG-DR program, as proposed in the Reforming Disaster Recovery Act. Reauthorizing and reforming the CDBG-DR program would ensure timely and well-targeted federal assistance to support recovery efforts, ensuring that much-needed investments for aid and recovery reach disaster-stricken communities when they are most needed.

Enhance the USDA’s Community Facilities Relending Program

Established in 2016, the Community Facilities (CF) Relending Program of the U.S. Department of Agriculture (USDA) aims to better target direct loan funds to persistently poor communities by delivering them through CDFIs and other re-lenders with deep local networks and capacity for technical assistance. LISC supports efforts to improve implementation of the CF relending program to streamline the program and ensure that eligible re-lenders can deliver the most impact for their communities.

Promoting Public Private Partnerships

While many federal programs help support local community development efforts through direct financing, some of the most effective programs are those that incentivize the private sector to make these investments. Building off the success of the Low-Income Housing Tax Credit of 1986, Congress has enacted a number of place-based investment incentives in the tax code in the past 30 years, including Enterprise Zones, Empowerment Zones, Renewal Communities, New Markets Tax Credits and, most recently, Opportunity Zones. These incentives have helped the private sector to become more engaged in making community development investments and, alongside the Community Reinvestment Act (CRA), have been essential to encouraging regulated financial institutions to make significant investments in community development activities.

Policy Asks

Enhance the New Markets Tax Credit Program

The New Markets Tax Credit (NMTC) Program attracts investment capital to neighborhoods that have been left behind by the traditional private marketplace. Under the program, investors receive a tax credit for making equity investments in certified Community Development Entities (CDEs), which in turn use the proceeds to make loans and investments in businesses, real estate projects, and community facilities located in distressed communities. The Treasury Department reported in 2024 that over $66 billion has been invested through the NMTC Program.

Through 2024, LISC has placed over $1.2 billion of NMTC investments in 186 different projects in low-income communities, spurring $4.2 billion in total development costs and supporting more than 29,000 jobs. These investments enabled construction of 14 million square feet of real estate, healthcare facilities serving more than 300,000 patients annually, and education facilities serving more than 40,000 students annually.

NMTCs are set to expire in 2025. Congress should enact the New Markets Tax Credit Extension Act of 2025 (H.R.1103/S. 479), which would make the NMTC permanent, allocate no less than $5 billion in tax credit authority per year, index it to inflation, and permit it to be used to offset the alternative minimum tax (AMT).

Improve the Opportunity Zones Initiative

The Opportunity Zones initiative, enacted in 2017, encourages investors with realized capital gains taxes to reinvest those dollars in businesses and real estate projects located in Opportunity Zones (communities designated by state agencies) by: 1) allowing for a reduction (of up to 15%) and deferral (of up to seven years) of taxes owed on the realized capital gains, and 2) eliminating taxes on any gains realized from investments in the Opportunity Zones, if the investments are held for at least 10 years. Through 2024, the initiative has spurred over $80 billion of capital investments into distressed communities.

As promising as the initiative is in its sheer scope, there are structural constraints that should be addressed through legislation or regulation. Specifically, the initiative lacks a requirement that the investments provide direct benefits to the residents of communities in the form of enhanced services, high-quality jobs, affordable housing, etc., and has only minimal reporting requirements, which will make it difficult to ascertain over time whether or not the program is appropriately serving the communities and residents it was designed to serve.

LISC supports the bipartisan Opportunity Zones Transparency, Extension, and Improvement Act, which would strengthen reporting and disclosure requirements, retire certain less impactful Opportunity Zones from the program, and create a source of funding for states and localities to use to help finance more impactful Opportunity Zone projects. LISC also supports efforts to spur more development of affordable housing in Opportunity Zones, including by: 1) creating more incentives for investors to twin Opportunity Zones investments with the Low-Income Housing Tax Credit, and 2) requiring that at least 50% of the units at multifamily housing properties financed with Opportunity Zone investments be affordable to low-income families.

29,000+ jobs supported by LISC's 2024 NMTC investments

Preserve the Community Reinvestment Act

The Community Reinvestment Act (CRA), enacted in 1977, requires banks to invest in the communities, including low-income communities, where they are taking deposits. The CRA has proven to be a critical, if not the most critical, resource available to facilitate the flow of private capital into underinvested communities. It has been successful not only for the communities and community residents that have benefitted from these investments, but also for the banks—which have managed to find new and profitable investment opportunities that generally perform as well or better than other bank investments.

As successful as the CRA has been, its regulations have not been substantively updated since 1995, despite the fact that the banking industry has undergone significant changes in that period, most notably in the rise of interstate banking, internet banks, mergers of institutions, and mobile banking. The banking regulatory agencies attempted to publish new final rules in 2020 and again in 2024, but both times were forced to rescind those regulations and revert to the 1995 regulations.

Preserving the Community Reinvestment Act is essential for the entire community development financing ecosystem. LISC would prefer at this time that the regulators do not attempt to change the rule yet again, given the uncertainty and instability this may cause, but will engage as necessary in efforts to ensure that any subsequent rulemaking results not only in a more transparent and simplified examination process, but also in greater community-based outcomes.

Empowering Small Businesses

Small businesses create two out of three net new jobs and account for nearly half of the country’s gross domestic product (GDP). Beyond their direct economic impact, small, locally owned businesses create communities where people want to live, work, and visit. They provide vital spaces for social connection, open opportunities for new entrepreneurs, and reinvest back into their neighborhoods.

Policy Asks

Build Local Small Business Support Systems

Many small business owners, particularly those in rural and low-income communities, face significant barriers to accessing the resources and support they need to start, strengthen, and expand their businesses. Although traditional economic development programs focus on attracting large employers to communities through various incentives, research suggests that customized business services are a more cost-effective solution to encourage job creation and investment in distressed communities.

LISC supports enactment of the Capacity Building for Business Districts Pilot Program, which would bolster the work of local organizations that support small businesses and revitalize downtowns. The program would enable the Economic Development Administration (EDA) to partner with trusted national nonprofit organizations to deploy federal resources to local business district organizations. This approach would direct resources and technical support to local business organizations that traditionally lack access to federal grant programs, enabling them to deliver locally tailored business development activities where they are most needed.

LISC also supports permanent authorization of the Community Navigator Pilot Program (CNPP) of the U.S. Small Business Administration (SBA), which was implemented from 2021 to 2023 to more effectively support small business owners and connect them to SBA resources. By leveraging partnerships with trusted capacity-building organizations (“hubs”) operating at the national, statewide, and regional levels, the CNPP bolstered the impact of hyperlocal organizations (“spokes”) serving business owners who often are not connected to traditional SBA programs. An external evaluation of the program commissioned by SBA found that the CNPP increased business owner participation and trust in SBA programs while enabling entrepreneurs to improve their business performance.

LISC supports the Small Business Artificial Intelligence Training and Toolkit Act, which would authorize the U.S. Department of Commerce (DOC) to work with the Small Business Administration (SBA) to create and distribute artificial intelligence (AI) training resources and tools to help small businesses leverage AI in their operations. Efforts like these ensure that small businesses can fully participate in and benefit from technological innovation, no matter what their size or where they are located.

Expand Access to Quality Small Business Financing

Small businesses often face barriers to accessing the capital and financial products they need to start and grow their ventures. Research from the Federal Reserve finds that about half of small businesses that applied for financing in 2023 were denied or did not receive the full amount they sought, while nearly 20% didn’t even apply due to an assumption that they wouldn’t be approved or that the cost of credit would be too high. Business owners are increasingly struggling with the cost of credit, particularly those who receive financing from “online lenders,” or non-bank financial technology companies. Entrepreneurs also face challenges overcoming financial shocks, which can harm their household finances. LISC’s priorities include:

  • Expanding the impact of SBA lending programs: The Community Advantage Pilot Program expanded 7(a) loan guarantee authority to CDFIs and other non-bank lenders that primarily serve low-income communities. Compared to the broader 7(a) program, Community Advantage loans are more likely to support startups, businesses looking for smaller loan amounts, and veteran-owned businesses. Expanding programs like these and making them permanent would close critical gaps in small business capital access. LISC also supports the Small Business Child Care Investment Act, bipartisan legislation that would increase the availability of affordable, high-quality child care for working families by allowing nonprofit child care providers that qualify as small businesses to participate in Small Business Administration loan programs.
  • Promoting responsible innovation in small business financing and operations. Innovation is critical to address small business financing gaps, particularly for small-dollar loans and products that help business owners overcome financial shocks. Unfortunately, gaps in financial protections for small business owners too often lead them to take on harmful debt that can devastate their finances and threaten their livelihoods. LISC encourages Congress to enact the Small Business Financing Disclosure Act, which would ensure that entrepreneurs access the same information about the cost and terms of business financing products that is mandated for consumer financing products such as credit cards, mortgages, and personal loans. Better cost disclosures will support a healthy business financing market by rewarding finance providers for offering the most innovative and affordable products, rather than devising the most misleading pricing information. LISC also supports the continued implementation of requirements to disclose small business financing data that were included in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 1071). This information will encourage the adoption of products and practices that the data reveal are effective in reaching the small businesses and communities that need access to capital.

Investing in Broadband Infrastructure

Affordable, reliable, high-speed internet access stimulates economic growth, lowers health care costs, improves access to education, and strengthens community ties to needed services—making it a necessity, not a luxury, that should be accessible to all. More than 20% of U.S. households lack a home internet connection, and this is especially true in low-income and rural areas. Recent federal efforts have created opportunities to close the digital divide, but further action is needed to ensure that all communities can fully participate in the digital economy.

Policy Asks

Deliver Broadband Infrastructure and Skills Training

The bipartisan Infrastructure Investment and Jobs Act of 2021 represented the most significant federal investment in internet connectivity to date, including the appropriation of $42.5 billion in grants to states to fund the construction and deployment of broadband networks and the creation of a $1.2 billion grant program to support community-based organizations in connecting people to internet services and providing necessary skills training to ensure that communities experience the full benefit of these investments.

As the current Administration assumed leadership of the Commerce Department, the Federal Communications Commission (FCC), and the National Telecommunications and Information Administration (NTIA), all appropriated funds for broadband deployment had been obligated, every participating state and territory had had its initial proposal approved by the NTIA, and three states (Louisiana, Delaware, and Nevada) were poised to begin deploying new broadband infrastructure, having published their final plans for public comment in their states. Additionally, $600 million in grants to 65 organizations for digital skills training programs had been announced.

LISC supports efforts to continue this momentum and ensure that states and organizations can deliver critical broadband infrastructure and skills training without delay.

Connect Households to Affordable Broadband Internet Service and Computer Devices

The bipartisan infrastructure law also created the Affordable Connectivity Program (ACP), which modified and extended the Emergency Broadband Benefit Program created during the COVID-19 pandemic and allocated $14.2 billion to connect households to affordable broadband internet service. ACP also enabled people to fully benefit from broadband connection by providing one-time discounts for computer devices, further expanding the program’s impact.

Despite the popularity of the Affordable Connectivity Program and its success in connecting more than 23 million households to broadband, the program concluded in June 2024, as Congress has not appropriated additional funds to extend it. Internet affordability programs funded through FCC’s Universal Service Fund (USF), including the High Cost Program, the Lifeline Program, the Rural Health Care Program, and the Schools and Libraries Program, are also at risk due to an ongoing Supreme Court case challenging its funding structure, which is supported by fees assessed on telecommunications carriers rather than through appropriations.

LISC supports efforts to maintain and expand on recent successes in connecting people to affordable broadband, including through the Bipartisan Working Group on the Universal Service Fund and Broadband Access.