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2014 CD Perspectives Report

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Federal Reserve Community Development Perspectives 8 • conducting research, analysis, and outreach aimed at improving the design and implementation of community development programs and the sourcing of new partners and capital; • organizing events geared toward bolstering the capacity of community development organizations and the entire infrastructure of the community development field; and • providing support for the effective implementation and increased impact of the Community Reinvestment Act (CRA) through analysis, events, and trainings. Background The CD field is undergoing profound changes in the way it is funded. The field traditionally drew on capital from federal, state, and local governments, CRA-motivated banks, and socially motivated investors. All have been affected by the economic downturn, fiscal retrenchment, and banking sector consolidation. The impact of decreased funding has been significant for the community development sector. According to the New England Community Outlook Survey last year, for example, the third and fourth most important challenges to lower-income communities were federal, state, and local budget cuts, topped only by shortages of jobs and affordable housing. Respondents to another 2013 Reserve Bank survey similarly indicated that funding was a top challenge. Despite these challenges, various innovations and new funding tools and sources are emerging, including: • government funding initiatives that foster cross-agency and cross-sector collaboration, such as the Sustainable Communities and Promise Zones programs; • promising new innovations in how the public and private sectors fund community development through social impact bonds and other "pay for success" financing; and • the emergence of large, sector-specific funds and the growth of new socially motivated investors utilizing vehicles such as crowdfunding and mission-related investments. Finally, a shift has occurred from a focus on standalone projects, such as multifamily housing, toward more holistic, place-based approaches. There also has been considerable work to understand and share insights into how new models of collaboration are Policy and Practice The Federal Reserve's community development (CD) function seeks to promote the economic well-being of underserved communities by enhancing the scale, sustainability, and impact of the community development field. As part of this "policy and practice" work, CD staff around the country support a range of activities, including: 8

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