Program Related Investments for Community Development and Housing

Sept/Oct 1996

PRIs for Community Development and Housing

The community development field – encompassing a wide range of activities, from housing development to neighborhood revitalization in large urban centers to small businesses creation in rural communities - represents the largest single area of PRIs. About half of the PRI funders surveyed invested in community development and housing projects*, and one fourth invested in job creation and the growth of microenterprises.

Of nearly $86.5 million in PRIs for community development, one-half financed urban development, 11 percent went to rural development, and 21 percent financed other economic development initiatives. Nearly 9 percent of PRI dollars supported community improvement, and 7 percent financed small business development.

In the community development field, the top 10 PRI funders accounted for more than 90 percent of total financing. With investments of nearly $34 million and $16 million, respectively, the Ford and MacArthur foundations committed 32 percent of the PRIs and more than 57 percent of total PRI dollars to community development from 1990 to 1992.

Similarly, for housing-focused initiatives, the top 10 funders accounted for 84 percent of all financing. Yet for housing, more than any other field, the top three funders shared financing more evenly, each claiming more than 10 percent of the total.

While a substantial share of funders also use PRIs to support the arts and media, human services, education, health, and the environment, program diversification is more common among large independent foundations and community funds. By contrast, most corporate funders confine their activity almost exclusively to housing and economic development.

* For the purposes of statistical analysis, loans and other PRIs used mainly to finance housing projects were classified first as housing, even if the sponsor had a broader mission. Conversely, PRIs that broadly supported community improvement were classified first as community development, even if the project included a housing component.

Measuring the Market

To help measure the size of the PRI market, the Foundation Center conducted a national survey of PRI funders and recipients. Respondents were asked about their experience with the range of PRI "tools"; reasons for making or seeking PRIs; current practices; and future plans and directions. The Foundation Center also analyzed more than 500 individual PRI records reported by 100 foundations. Among the findings :

Seventy-four funders reported having disbursed or guaranteed PRIs totaling $718.1 million. Of that amount, $403.2 million is held in outstanding portfolios, and about $9 million is in default.
The median PRI amount disbursed per funder totaled $1.7 million, while the median number of PRIs was three.
The Ford Foundation financed nearly one-third ($225 million) of the total PRI amount reported. The John D. and Catherine T. MacArthur Foundation funded close to another 10 percent ($68.1 million). Together these funders accounted for 42 percent of PRI dollars outstanding. Further, in every major field of activity -from community development to the environment -a handful of funders made a significant proportion of the PRIs.
Based on the analysis of more than 500 individual PRI records reported by 100 foundations, 94 percent of PRI dollars went to nonprofit organizations, either nonsectarian (74 percent) or religious (20 percent), and nonprofits received more than 9 out of 10 PRIs. For-profit enterprises received only 3.4 percent of PRIs and 5 percent of total PRI dollars. Government agencies, mostly local or county, received 5 percent of all PRIs but just 1 percent of PRI dollars. Two PRIs financed projects of tribal governments.
Between 1990 and 1992, according to reporting by the 100 largest PRI providers, the top 25 recipients secured $161 million, or 55 percent, of all PRI support from leading funders. These top recipients received total PRI amounts ranging from $2.5 million to $30 million. The number of PRIs granted to single organizations ranged from one to 12 PRIs each. The Local Initiatives Support Corporation (LISC), a major development intermediary, received the largest number of PRIs and the second largest amount - $17.6 million -of PRI dollars. The Enterprise Foundation, also a housing/development intermediary, was next in rank.
From 1990 to 1992, intermediaries* received about 39 percent of the $293 million in PRIs from the sampled funders. Intermediaries received a smaller share - about 24 percent -of the number of PRIs, reflecting the larger average size of PRIs for intermediaries. The top 10 funders invested about 42 percent of PRI dollars and 53 percent of PRIs with intermediaries. Four of those funders -Ford, MacArthur, Robert Wood Johnson, and Rockefeller -invested more than half their PRI dollars with intermediaries. Corporate funders, community foundations, and other smaller funders invested a far smaller proportion of their PRI dollars with intermediaries.
Between 1990 and 1992, more than half of PRI dollars in the sample financed capital projects. Building, renovation, and equipment projects received 27 percent of PRI dollars, while other capital projects (e.g. property purchases) represented another 27 percent. Building projects received a far greater number of PRIs than did other capital projects. PRIs also financed non-capital special projects, operating support, and student aid. More than one-third of PRI dollars could not be identified according to purpose or use of funds.

* In the PRI database, organizations such as loan funds, credit unions, development banks, and venture capital funds were identified as intermediaries.

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