Section 4 Capacity Building for Community Development and Affordable Housing Program

Section 4 Capacity Building for Community Development and Affordable Housing Program

Section 4 Capacity Building for Community
September 6, 2022
Development and Affordable Housing Program Joseph V. Jaroscak
Multiple federal agencies administer a range of programs and resources designed to support
Analyst in Economic
community development activities, and the capacity of the nonfederal entities that carry out such
Development Policy
efforts. The U.S. Department of Housing and Urban Development (HUD) oversees the majority

of community development-related programs, which provide funding to states, insular areas (or
U.S. territories), units of general local government, and nonprofit entities. The majority of federal

funding for nonprofit community development provides financial and technical assistance to
enhance programmatic and operational capacity of local nonprofit organizations.
HUD’s Section 4 Capacity Building for Community Development and Affordable Housing program (Section 4) is one of its
primary programs designed to support community development organizations. Originally authorized under Section IV of the
HUD Demonstration Act of 1993 (P.L. 103-120), the Section 4 program provides grants on a competitive basis to eligible
national intermediary organizations. In turn, these organizations support the work and enhance the capacity of local
community development organizations. Typically, Section 4 program funds support local community development
organizations through training, technical assistance, and financial support for community development and affordable
housing projects and initiatives. The program’s statute requires private cash or in-kind match of three times the award
amount.
The Section 4 Program is part of a broader network of federal programs and policy tools designed to support and incentivize
local community development and revitalization investments. In some cases, HUD has encouraged the use of Section 4
program funds in a way that supplements efforts funded by other federal programs such as the Community Development
Block Grant Program (CDBG).
Community development needs have evolved since the Section 4 program was last reauthorized in 1997. Although Congress
has not modified the eligibility structure in the program’s statute since 1997, some appropriations acts have limited
eligibility. Some Members of Congress have introduced proposals that would further modify the eligibility structure for HUD
community development capacity funding. Some proposals have sought to expand or establish additional support for local
organizations. Others would include a larger group of eligible grantee organizations and could serve a wider range of
community development entities as eligible beneficiaries.

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Contents
Introduction ..................................................................................................................................... 1
Section 4 Capacity Building for Community Development and Affordable Housing
Program ........................................................................................................................................ 2
Eligible Entities ......................................................................................................................... 2
Application Process ................................................................................................................... 3
Grant Terms ............................................................................................................................... 4
Eligible Beneficiaries ................................................................................................................ 4
Eligible Activities ...................................................................................................................... 4
Program Monitoring .................................................................................................................. 5
Appropriations ................................................................................................................................. 6
Grant Awards ................................................................................................................................... 6
Implementation ................................................................................................................................ 7
Section 4 in Context ........................................................................................................................ 9
Policy Considerations .................................................................................................................... 12
Section 4 Structure .................................................................................................................. 12
Coordination of Federal Community Development Resources .............................................. 13

Figures
Figure 1. Section 4 Program Flow of Funds .................................................................................... 5

Tables
Table 1. Section 4 Application Core Rating Factors ....................................................................... 3
Table 2. Recent Section 4 Program Appropriations ........................................................................ 6
Table 3. Recent Section 4 Awards by Grantee ................................................................................. 6
Table 4. Section 4 Capacity Building Program Examples ............................................................... 8
Table 5. Selected Federal Resources for Community Development Capacity .............................. 10
Table 6. Selected Community Development and Affordable Housing Block Grants..................... 11
Table 7. Selected Federal Community Development Tax Credits and Incentives .......................... 11

Table B-1. Section 4 Awards by Intermediary Organization: FY2010-FY2020............................ 18

Appendixes
Appendix A. Section 4 Eligible Beneficiaries ............................................................................... 15
Appendix B. Section 4 Awards FY2010-FY2020 ......................................................................... 18

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Contacts
Author Information ........................................................................................................................ 18

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Capacity Building for Community Development and Affordable Housing

Introduction
Federal community development programs are intended to empower states, local governments,
and other entities to carry out a range of activities and initiatives tailored to local conditions.
Congress has established and funded a variety of programs and initiatives that have supported the
creation and expansion of many current local approaches to neighborhood revitalization,
affordable housing, and other aspects of community development.1
What Is Community Development?
The Board of Governors of the Federal Reserve System defines community development investments as those
“designed to create new opportunities—primarily related to affordable housing, small businesses, and jobs—that
specifically benefit lower-income neighborhoods and populations.”2 Such activities are generally carried out by
community development corporations and similar nonprofits.
The role and function of individual community development organizations may vary by community based on a
range of factors. The mission and purpose of an organization may allow for access to and participation in a variety
of federal programs. Community development organizations may participate in the local administration of several
federal housing and community development programs. In turn, many community development organizations rely
on federal funding for operational stability as well as project-based funding.
Local community development organizations carry out a variety of activities to address local
issues, including but not limited to3
 affordable housing development and rehabilitation,
 neighborhood beautification and business district enhancement or revitalization,
 local business and workforce development, and
 community wealth building.
The federal government administers a wide range of programs and resources that may support
community development organizations directly or indirectly. Some federal programs support the
capacity of community-based organizations to facilitate or lead community development efforts.
The Section 4 Capacity Building for Community Development and Affordable Housing program
is one such program within the U.S. Department of Housing and Urban Development (HUD).
In addition to the Section 4 program, there are several other sources of federal funding
administered by HUD and other agencies that may also support organizational capacity for
community development or similar efforts. This report provides an overview of the Section 4
program’s structure and funding, briefly describes a selection of similar programs, and discusses
some potential policy considerations for Congress.

1 For instance, the Economic Opportunity Amendments of 1966 (P.L. 89-794) established the Bedford-Stuyvesant
Restoration Corporation, which is generally known as the first community development corporation in the United
States.
2 Board of Governors of the Federal Reserve System, Community Development Investments, May 2014,
https://www.federalreserve.gov/consumerscommunities.
3 This report uses local community development organizations as a general term for nonprofit entities engaging in
community development activities at the neighborhood or community level, including community development
corporations and community housing development organizations.
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Capacity Building for Community Development and Affordable Housing

Section 4 Capacity Building for Community
Development and Affordable Housing Program
Originally authorized under Section IV of the HUD Demonstration Act of 1993 (P.L. 103-120),4
the Section 4 program awards grants on a competitive basis to selected eligible national
community development intermediary organizations. In turn, these organizations support the
work and enhance the capacity of local community development organizations.5 Program
activities are focused on training, technical assistance, and financial support for community
development and affordable housing projects and efforts.
Eligible Entities
As amended, the program’s authorizing statute identifies five national community development
intermediary organizations as eligible applicants for Section 4 program funds.6 Congress has
further limited eligibility to three organizations in recent appropriations acts:7
1. Enterprise Community Partners;
2. The Local Initiatives Support Corporation (LISC); and
3. Habitat for Humanity International.
What Are Community Development Intermediaries?
Generally, community development intermediaries are tax-exempt nonprofit organizations established to support
capacity needs among local community development organizations. Intermediaries support local community
development organizations with financial and technical resources in order to maximize the benefit of their local
knowledge and networks.8 Intermediary organizations may offer a variety of services to member organizations,
including training, technical assistance, networking opportunities, financing for development projects, and access
other types of funding.9
In 1993, Section 4 of P.L. 103-120 authorized HUD to “provide assistance through the National
Community Development Initiative” (NCDI, currently known as Living Cities), a consortium of
private entities funding community revitalization efforts.10 Under this structure, NCDI worked
with LISC and Enterprise to enhance the capacity of community development organizations in 23
designated U.S. cities. Congress amended the Section 4 program’s authorizing statute in 1997
under Title II of P.L. 105-18, which adjusted the program’s structure and expanded its geographic
coverage. Specifically, the act modified grantee eligibility by formally listing LISC and

4 The organizations enumerated in statute are the National Community Development Initiative, Local Initiatives
Support Corporation, the Enterprise Foundation, Habitat for Humanity, and YouthBuild USA (42 U.S.C. §9816 note).
5 42 U.S.C. §9816 note.
6 42 U.S.C. §9816 note.
7 For examples of recent appropriations legislation limiting program eligibility, see Division H, Title II, of P.L. 116-94
and Division L, Title II, of P.L. 116-260.
8 HUD, Building the Organizations That Build Communities: Strengthening the Capacity of Faith and Community-
Based Development Organizations, 2004, p. 64, https://www.huduser.gov/publications/pdf/buldorgcommunities.pdf.
9 Y. Thomas Liou and Robert C. Stroh, “Community Development Intermediary Systems in the United States:
Origins,” Housing Policy Debate, vol. 9, no. 3 (1998), pp. 575-594.
10 For historical information on the NCDI, see Living Cities, “Our History,” https://livingcities.org/about/our-history/.
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Enterprise as eligible direct grantees11 and included additional organizations in statute, such as
Habitat for Humanity and YouthBuild.12
Application Process
Typically, HUD releases Notices of Funding Availability (NOFA) for the Section 4 program on an
annual basis. The NOFAs outline the application process and program requirements for a given
year, as provided in the program’s statute.13 HUD assesses and scores eligible grant applications
based on five rating factors, each with corresponding maximum point values, as outlined in the
program NOFA. The overall maximum point value within the five-factor assessment is 100
points.14 As an example, Table 1 provides an overview of the rating factors and maximum point
values outlined in the FY2021 Section 4 NOFA.
Table 1. Section 4 Application Core Rating Factors
FY2021 NOFA
Rating Factor
Maximum Points
Capacity of Applicant and Relevant Organizational
4
Experience
Need/Extent of the Problem
13
Soundness of Approach
46
Match Requirement and Leveraging Resources
10
Achieving Results and Program Evaluation
27
Total
100
Source: U.S. Department of Housing and Urban Development, Section 4 Capacity Building for Community
Development and Affordable Housing, June 6, 2022, pp. 26-27, https://www.hud.gov/sites/dfiles/SPM/documents/
2021Section4CapacityBuildingforCommunityDevelopmentandAffordableHousing4.13.22.pdf.
Note: Rating factors and their maximum point totals may differ year to year.
HUD may also award preference points for applications that demonstrate planned activities that
align with specified department or Administration priorities. For instance, the FY2021 Section 4
NOFA allowed for up to two preference points for applicants with proposed activities in a
designated Promise Zone. Typically, HUD sets a point threshold that applicants must reach in
order to qualify for additional preference points. In its FY2021 NOFA, HUD required applicants
to have a score of at least 75 points under the five rating factors in order to be eligible for
preference points.15

11 U.S. Government Accountability Office, Capacity Building: Section 4 Program Has Expanded and Evolved, GAO-
03-975, September 2003, p. 4, https://www.gao.gov/assets/gao-03-975.pdf.
12 42 U.S.C. §9816 note.
13 42 U.S.C. §9816 note.
14 HUD, Section 4 Capacity Building for Community Development and Affordable Housing, FR-6500-N-07, June 6,
2022, p. 26, https://www.hud.gov/sites/dfiles/SPM/documents/
2021Section4CapacityBuildingforCommunityDevelopmentandAffordableHousing4.13.22.pdf. Hereinafter, HUD,
Section 4 Capacity Building for Community Development and Affordable Housing.
15 HUD, Section 4 Capacity Building for Community Development and Affordable Housing, p. 26.
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Grant Terms
HUD informs applicants of their application status and negotiates grant agreements and amounts
with grantees based on a process outlined in the corresponding Section 4 program NOFA.16
Section 4 grantees administer program funds over a four-year period in accordance with the
planned activities outlined in the application. Planned activities may be subject to any changes
made during grant agreement negotiations. Grantees are required by statute to match Section 4
funds with private resources in an amount that is three times the amount awarded,17 satisfied by
primary grantees or subrecipients.18 Intermediaries are reimbursed once program costs have been
incurred. Typically, Congress requires that at least $5 million of Section 4 funds appropriated
annually be used to support rural community development capacity efforts.19
Eligible Beneficiaries
As stated earlier in this section, HUD competitively awards Section 4 funds to specified eligible
intermediary organizations. Those intermediaries, in turn, provide funding to eligible
beneficiaries. Organizations may qualify as beneficiaries for Section 4 financial and technical
assistance if they meet one of three sets of criteria for eligible Community Development
Corporations (CDCs) or Community Housing Development Organizations (CHDOs). HUD
defines these beneficiary organizations in annual NOFAs. Generally, the Section 4 program
definition for CHDOs is consistent with that of HUD’s HOME Investment Partnership Program.20
An organization is eligible as a CDC if its work is aligned with eligible program activities and it
meets certain criteria related to organizational structure.21 The specific eligibility criteria as
enumerated in Section 4 program NOFAs and the relevant program regulations defining CHDOs
are included in Appendix A.
Eligible Activities
Section 4 grantees can use program funds to support technical assistance and/or financial
assistance for eligible beneficiaries. Technical assistance activities include (1) training, (2)
education, and (3) advice or other forms of informational support. Financial assistance under the
Section 4 program includes (1) loans, (2) grants, and (3) predevelopment assistance for
community development and housing projects benefitting low- and moderate-income households
and persons.22 Additionally, participating intermediary organizations may seek approval from
HUD for other related activities.23 Figure 1 provides an overview of the Section 4 program’s
funding process, which is further detailed in this section.

16 HUD, Section 4 Capacity Building for Community Development and Affordable Housing, p. 38.
17 42 U.S.C. §9816 note.
18 U.S. Government Accountability Office, Capacity Building.
19 For an example, see P.L. 116-260, Division L, Title II. This required amount is often in addition to a separate
appropriation of $5 million for the HUD Rural Capacity Building program.
20 24 C.F.R. §92.2.
21 HUD, Section 4 Capacity Building for Community Development and Affordable Housing Grants, p. 8.
22 The FY2020 Section 4 NOFA defines low- and moderate-income household as “a household having an income equal
to or less than the Section 8 low-income limit established by HUD, which means a household whose income does not
exceed 80 percent of the AMI [area median income].” It defines low- and moderate-income person as “a member of a
family having an income equal to or less than the Section 8 low-income limit established by HUD, which means an
individual whose income does not exceed 80 percent of the AMI.”
23 42 U.S.C. §9816 note.
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Capacity Building for Community Development and Affordable Housing

Figure 1. Section 4 Program Flow of Funds

Source: Developed by CRS using HUD Program Information.
Note: Intermediary organizations may provide training and technical assistance directly or provide funding for
the procurement of such services.
Program Monitoring
As directed in the Section 4 program authorizing statute (42 U.S.C. §9816 note), HUD
enumerates program reporting requirements and other information for grantees in program
NOFAs.24 HUD requires Section 4 grantees to report program performance, finances, and other
aspects of implementation in accordance with guidance from the Office of Management and
Budget and HUD.25 HUD requires grantees to submit performance reports on a semiannual
basis.26 The semiannual reports provide an update on progress toward the goals outlined in a
grantee’s Section 4 application and approved work plan.27 Grantees submit their semiannual
Section 4 performance reports to the HUD Disaster Recovery Grant Reporting system.28 Grantee
reports typically include updates on (1) expenditures and matching funds, (2) program outcomes,
and (3) an overview of the status of planned activity implementation.29

24 HUD, Capacity Building Programs Reporting Guidance, 2016, https://files.hudexchange.info/resources/documents/
Capacity-Building-Programs-Reporting-Guidance.pdf.
25 HUD, Section 4 Capacity Building for Community Development and Affordable Housing Grants, p. 42.
26 Ibid.
27 HUD, Capacity Building Programs Reporting Guidance: Designed for Section 4 and Rural Capacity Building
Grantees, 2016, p. 1, https://www.hud.gov/sites/dfiles/CPD/documents/Capacity-Building-Programs-Reporting-
Guidance.pdf.
28 HUD, Disaster Recovery Grant Reporting System, https://www.hudexchange.info/programs/drgr/.
29 HUD, Capacity Building Programs Reporting Guidance: Designed for Section 4 and Rural Capacity Building
Grantees, p. 2.
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Appropriations
Congress typically funds the Section 4 program in the Self-Help Homeownership Opportunity
program account in annual Transportation, Housing and Urban Development, and Related
Agencies appropriations legislation.30 Title II of Division L in the Consolidated Appropriations
Act, 2022 (P.L. 117-103), included $41 million in Section 4 program funds for FY2022. This was
equal to the program’s FY2021 appropriation. Table 2 provides an overview of annual
appropriations for the Section 4 program from FY2018 to FY2022.
Table 2. Recent Section 4 Program Appropriations
In Millions of Dollars
Fiscal Year
Section 4 Appropriation Amount
FY2022 Enacted
41.0
FY2021 Enacted
41.0
FY2020 Enacted
36.0
FY2019 Enacted
35.0
FY2018 Enacted
35.0
Sources: P.L. 117-103; P.L. 116-260; P.L. 116-94; P.L. 116-6; P.L. 115-141.
Grant Awards
HUD awards Section 4 program funds to eligible grantees based on analysis of grant applications
and negotiation of grant agreements. As mentioned above, in recent years, program awards have
been granted to three national community development intermediary organizations. Table 3
provides a breakdown of Section 4 program awards to participating intermediary organizations
for funds from FY2021, FY2020, FY2019, and FY2018.31
Table 3. Recent Section 4 Awards by Grantee
In Millions of Dollars

FY2021
FY2020
FY2019
FY2018
Enterprise
15.0
14.2
14.3
13.9
Community
Partners
Local Initiatives
17.0
13.6
14.3
14.7
Support
Corporation
Habitat for
9.0
8.1
6.3
6.2
Humanity
Total
41.0
36.0
35.0
35.0

30 This account also includes funding for other HUD programs such as the Self-Help and Assisted Homeownership
Opportunity Program. For FY2022, Congress appropriated $62.5 million to this account in Division L, Title II, of P.L.
117-103.
31 As of the date of publication of this report, HUD has not announced FY2022 Section 4 program awards.
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Source: HUD, Capacity Building Programs, at https://www.hud.gov/program_offices/comm_planning/
capacitybuilding/; HUD, From Our Federal Partners: HUD Awards $41 Mil ion to Boost Affordable Housing and
Community Development, at https://www.hudexchange.info/news/from-our-federal-partners-hud-awards-41-
mil ion-to-boost-local-affordable-housing-and-community-development/.
Note: Due to rounding, award amounts may not add up to totals.
Table B-1 in the Appendix includes Section 4 program award amounts by organization for
FY2010-FY2020.
Implementation
Section 4 intermediary grantees administer program funds over a four-year period in accordance
with the plans submitted during the application process and as approved in the grant agreement
process.32 In some cases, intermediaries offer training and technical assistance activities,
including facilitation of professional development courses and events.33 Grantees also provide
financial assistance to support the technical and operational capacity of community development
organizations. The most common form of Section 4 financial assistance is subgrants (sometimes
referred to as pass-through grants). It is also common for Section 4 grantees to award subgrants
for purposes that support the administrative and technical capacity of community development
organizational operations, such as staffing or consulting services.34
In its FY2023 Congressional Budget Justification, HUD indicated that with funds awarded
between FY2016 and FY2020, Section 4 intermediary grantees have supported more than 5,000
local community development organizations.35 This assistance included more than 550 trainings;
1,484 sub-grants (totaling $108.7 million); and seven loans (totaling $9.1 million). According to
HUD’s reporting, Section 4 financial assistance from funds awarded during this period supported
the construction of 15,018 new housing units; rehabilitation or reconstruction of 20,649 housing
units; and pre-development support for 44,564 units.36
Table 4 provides a sample of projects that received Section 4 funding from intermediary
organizations since FY2008.37

32 HUD, Section 4 Capacity Building for Community Development and Affordable Housing, p. 31.
33 HUD, 2023 Congressional Justifications, 2021, p. 19-4, https://www.hud.gov/sites/dfiles/CFO/documents/
2023_CJ_CPD5_Program_SHOP.pdf.
34 USA Spending, Spending by Sub-Award, https://www.usaspending.gov/search/?hash=
2a78b969ab0729b01e2a84ba4f3adf41.
35 For these five fiscal years, Congress appropriated a total of $176 million to the Section 4 program.
36 HUD, 2023 Congressional Justifications, p. 19-4.
37 USA Spending data for Section 4 grants is available for FY2008-FY2022.
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Table 4. Section 4 Capacity Building Program Examples
Selected Activity Types
Example Funded Activities
Pre-Development

Activities including stakeholder engagement, master plan
development, and generation of predevelopment
documentation to support the redevelopment of a 162-unit
affordable housing community.a

Pre-development activities for an affordable multifamily
rural housing development, including land appraisal, market
analysis, environmental analysis, and stakeholder
engagement.

Schematic master planning for a sustainable housing and
community development project on tribal land.
Affordable Housing Development

Financial support for the development of approximately 135
housing units in rent-burdened neighborhoods.

Development of five accessory dwelling units and financial
support for five qualified homebuyers to purchase these
units.b

Staffing and other direct costs associated with the
development of 16 affordable rental housing units for
households earning below 80% of the area median income.
Housing Rehabilitation, Reconstruction, or

Financial support for the renovation of an eight-unit
Preservation
transitional housing facility for youth.

Home repairs, beautification, and safety improvements for
30 owner-occupied housing units.

Support for interior home modifications to allow low-
income senior residents to safely age in place.
Community Facilities

Development of a 2.5-acre urban farm to provide training,
community activities, and access to produce.

Capacity building to support the development and
maintenance of water infrastructure.

Funding to support the development of a mixed-use
affordable housing and workforce development facility.
Local Economic Development and Business

Financial support for the revitalization of a craft business
Support
district.

Economic development plan supporting local small
businesses.

Development of a commercial corridor development
strategy that considers market conditions, as well short-
and long-term opportunities and challenges.

Stakeholder engagement, planning, and maintenance
activities for an ongoing commercial corridor program.
Program Implementation and Administration

Implementation of a “Housing Emergency and Rehabilitation
Program” to support communities as part of the recovery
effort from the impacts of Hurricane Maria.

Expansion of an initiative that supports the provision of
healthy foods in corner stores.

Establishment and operations of a homeownership program
for Native veterans.

Funding for the provision of affordable music lessons for
low- and moderate-income residents.
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Selected Activity Types
Example Funded Activities
Organizational and Programmatic Staffing

Partial funding for a special projects officer and community
development manager position to carry out a variety of
social services for residents and clients.

Establishment of a director-level position for the
administration of family services including financial literacy
programming.

Funding to support the staffing of a family self-sufficiency
coordinator and a homeownership center coordinator.
Consulting and Technical Assistance Services

Hiring a construction management consultant to enhance
real estate development production.

Retaining services of planning and development consultants
for projects related to housing, community development,
and water infrastructure.

Training and technical assistance to strengthen staff capacity
in carrying out commercial and residential real estate
development activities.
Source: USASpending.gov.
Notes: This is not an exhaustive or comprehensive list of activity categories or activities.
a. For additional information on this project, see U.S. Department of Housing and Urban Development
(HUD), Office of Policy Development and Research, In Practice: The Village at Washington Terrace Preserves
Affordable Housing in Gentrifying East Raleigh, North Carolina, June 21, 2021, https://www.huduser.gov/portal/
pdredge/pdr-edge-inpractice-062121.html.
b. For more information on accessory dwelling units, see HUD’s Regulatory Barriers Clearinghouse,
https://www.huduser.gov/portal/rbc/search.html?topic=101&PubYear_from=2015&PubYear_to=2020.
Section 4 in Context
The Section 4 program is part of a broader landscape of federal resources that may support the
capacity and efforts of local community development organizations. In some cases, federal
program funds make up a large portion of operating budgets for local organizations focused on
affordable housing and community development.38 In recent NOFAs, HUD has encouraged the
use of Section 4 program funds to enhance projects and activities funded by other federal
programs.39
These programs are similar to the Section 4 program in that they provide funding or technical
assistance to local organizations, through intermediaries or directly, to support operational and
project capacity. Table 5 provides an overview of some federal programs or federally chartered
organizations that provide financial or technical capacity support to community development
entities, including nonprofit organizations.

38 Yael Krigman, “The Role of Community Development Corporations in Affordable Housing,” Journal of Affordable
Housing and Community Development Law, vol. 19, no. 2 (Winter 2010), pp. 235-236.
39 HUD, Section 4 Capacity Building for Community Development and Affordable Housing, p. 15.
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Table 5. Selected Federal Resources for Community Development Capacity
Program
Administering Agency
Program Overview
Rural Capacity Building for
U.S. Department of Housing and
Provides funding to rural
Community Development and
Urban Development
community development
Affordable Housing Program
intermediary organizations to
administer technical support and
financial services for rural
community development
organizations, local governments,
and tribal entities.
Neighborhood Reinvestment
NeighborWorks Americaa
Serves in an intermediary role by
Corporation (NeighborWorks
providing financial and technical
America)
assistance for affiliated organizations
working in order to facilitate
community revitalization efforts (42
U.S.C. §8101 et seq.).
Rural Community Development
U.S. Department of Agriculture
Provides grants on a competitive
Initiative Grants
basis for the expansion of rural
housing opportunities, development
of rural community facilities, and
other community and economic
development projects in rural areas.
Community Economic
U.S. Department of Health and
Provides grant funding to selected
Development Program
Human Services
private nonprofit organizations for
activities supporting employment
and business expansion that
provides economic opportunities
for low-income individuals and
communities.
Community Development Financial
U.S. Department of the Treasury,
Provides financial and technical
Institutions (CDFI) Program
Community Development Financial
assistance grants to support the
Institution Fund
capacity of CDFIs and their efforts
in community revitalization (12
U.S.C. §4703; 12 C.F.R. §1805).
Sources: U.S. Department of Housing and Urban Development, https://www.hudexchange.info/programs/rural-
capacity-building/; NeighborWorks America, https://www.neighborworks.org/Home.aspx; U.S. Department of
Agriculture, https://www.rd.usda.gov/programs-services/community-facilities/rural-community-development-
initiative-grants; U.S. Department of Health and Human Services, https://www.acf.hhs.gov/ocs/programs/ced; U.S.
Department of the Treasury, https://www.cdfifund.gov/.
Notes:
a. NeighborWorks America is a federally chartered nonprofit organization that typically receives
congressionally appropriated funding as a related agency in the annual Transportation, Housing and Urban
Development, and Related Agencies appropriations acts.
b. The CDFI Fund also administers certain other types of programs that provide funding to CDFIs.
Programs focused specifically on strengthening the capacity of local community development
entities generally provide relatively low levels of funding as compared to other federal housing
and community development programs. Some broader federal community development programs
provide funding to states or eligible local governments on a formula basis for a range of activities
related to community development or housing. Although these funds are not exclusively designed
to support community development organization capacity and projects, they may be eligible for
such uses. Table 6 provides an overview of selected federal block grant programs that may
support local community development and housing organizations.
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Table 6. Selected Community Development and Affordable Housing Block Grants
Program
Administering Agency
Program Overview
Community Development Block
U.S. Department of Housing and
A primary source of flexible federal
Grant Programa
Urban Development
funding to states, localities, and
insular areas for economic and
community development, and other
related purposes (42 U.S.C. §5301
et. seq.; 24 C.F.R. §570).
HOME Investment Partnerships
U.S. Department of Housing and
Supports a variety of affordable
Programb
Urban Development
housing-related activities including
acquisition, construction, and
rehabilitation of rental and owner-
occupied housing and direct rental
assistance (42 U.S.C. §12742; 24
C.F.R. §92).c
Source: U.S. Department of Housing and Urban Development (HUD), https://www.hud.gov/program_offices/
comm_planning/communitydevelopment; HUD, https://www.hud.gov/program_offices/comm_planning/home.
Notes:
a. For more information on the CDBG program, see CRS Report R46733, Community Development Block
Grants: Funding and Allocation Processes, by Joseph V. Jaroscak.
b. For more information on HOME, see CRS Report R40118, An Overview of the HOME Investment Partnerships
Program, by Katie Jones.
c. By statute, HUD requires jurisdictions to set aside 15% of HOME program funds for certain affordable
housing activities undertaken by Community Housing Development Organizations. For more information,
see 42 U.S.C. §12771; 24 C.F.R. Part 92, Subpart G; and HUD Exchange, “HOME CHDO,”
https://www.hudexchange.info/programs/home/topics/chdo/#policy-guidance-and-faqs.
Federal programs and policy tools may also influence the attraction of private investment to
community development and affordable housing projects, which may, directly or indirectly,
support the efforts of community development organizations. Table 7 provides an overview of
selected community development incentives.
Table 7. Selected Federal Community Development Tax Credits and Incentives
Tax Credits and Incentives
Administering Agency
Program Overview
Low Income Housing Tax Credits
U.S. Internal Revenue Servicea
Incentivizes the development of
(LIHTC)
affordable rental housing units by
offsetting construction costs.b
New Markets Tax Credits
U.S. Department of the Treasury
Incentivizes private capital equity
investments in economically
distressed communities to support
local business development.c
Opportunity Zones
U.S. Internal Revenue Service
Encourage private investment in
economically distressed
communities designated by states,
the District of Columbia, and U.S.
territories (26 U.S.C. §1400Z-1).d
Sources: U.S. Department of Housing and Urban Development, Office of Policy Development and Research,
https://www.huduser.gov/portal/datasets/lihtc.html; U.S. Department of the Treasury, https://www.cdfifund.gov/
programs-training/programs/new-markets-tax-credit; U.S. Internal Revenue Service, https://www.irs.gov/credits-
deductions/businesses/opportunity-zones.
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Notes:
a. The LIHTC is a provision of the tax code and is therefore under the oversight of the Internal Revenue
Service. The primary administrators of the LIHTC program, however, are state and local housing finance
agencies (HFAs). HFAs screen applications to determine which developers receive awards of credits.
Delegating this authority to HFAs gives each state the flexibility to address its individual housing needs,
which is important given the local nature of housing markets. It also reduces the federal government’s
oversight role, as HFAs are also charged with containing costs and monitoring projects to ensure they are
compliant with the program rules.
b. States are required to award no less than 10% of LIHTC tax credits to nonprofit organizations to develop
long-term affordable housing options in their communities. For more information on LIHTC, see CRS
Report RS22389, An Introduction to the Low-Income Housing Tax Credit, by Mark P. Keightley.
c. For more information, see CRS Report RL34402, New Markets Tax Credit: An Introduction.
d. For more information, see CRS Report R45152, Tax Incentives for Opportunity Zones.
In addition to federal sources, such as those mentioned in this section, community development
organizations may receive additional financial assistance from a variety of state, local,
philanthropic, and private entities.40
Policy Considerations
Community development needs have evolved since the Section 4 program was last reauthorized
in 1997, including shifts in the national housing market.41 As noted in the previous section, the
Section 4 program is part of a broader landscape of federal resources for community development
in the United States. Some Members of Congress have proposed legislation that would modify
the Section 4 program’s structure or create alternative models for providing technical and
financial capacity support to local community development entities.
Section 4 Structure
Since the Section 4 program’s inception, the list of intermediary organizations eligible for
program funding has fluctuated in size. Although Congress has not modified the eligibility
structure in the program’s statute since 1997, some appropriations acts have limited eligibility, as
described earlier. Some Members of Congress have introduced proposals that would further
modify the eligibility structure for HUD community development capacity funding.
Some proposals have sought to expand or establish additional support for local organizations. For
example, the HUD Demonstration Improvement Act of 2010 (H.R. 4737) would have amended
the program’s authorizing statute by expanding the list of eligible grantees to include the National
Urban League and the Housing Partnership Network. Expansion of eligibility under the Section 4
program may increase access and potentially diversify the range of activities carried out under the
program.42 However, any changes to the list of eligible grantees would need to consider the

40 Federal Reserve Bank of St. Louis, Coming Up with the Money: Five Principles for Launching a Successful
Community Development Initiative, Unit 3—Process: Sourcing Financial Resources for Community Development
Initiatives, https://www.stlouisfed.org/community-development/how-to-launch-community-development-project/
process-sourcing-financial-resources-for-community-development-initiatives.
41 For more information on the U.S. housing market, see CRS In Focus IF11327, Introduction to U.S. Economy:
Housing Market, by Lida R. Weinstock
42 Section 4 grantees have broad discretion over the manner in which they administer program funds to support eligible
beneficiaries.
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relative alignment of organizational mission and record of performance with the Section 4
program’s intent.
In the 117th Congress, on November 19, 2021, the House approved the Build Back Better Act
(H.R. 5376), a FY2022 reconciliation measure.43 Title IV, Section 40302, of the bill would fund
competitive grants for “Community-Led Capacity Building” to be administered by HUD with
substantially similar eligible activities to the Section 4 program. However, the proposed
competitive grants would include a larger group of eligible grantee organizations and could serve
a wider range of community development entities as eligible beneficiaries. Specifically, the funds
would be available to
non-Federal entities, including nonprofit organizations that can provide technical
assistance activities to community development corporations, community housing
development organizations, community land trusts, nonprofit organizations in insular
areas, and other mission-driven and nonprofit organizations that target services to low-
income and socially disadvantaged populations, and provide services in neighborhoods
having high concentrations of minority, low-income, or socially disadvantaged
populations.44
As illustrated by these proposals, Congress may consider authorizing or funding a separate
program, with broader eligibility, to supplement or replace the Section 4 program. Congress could
also potentially modify the Section 4 program to address any shifts in community development
needs through reauthorization of the program. Congress may also consider maintaining the
current structure.
The most recent detailed federal assessments and reports on the program’s structure and
performance were conducted in the early 2000s. In assessing potential modifications to the
Section 4 program, Congress may consider commissioning updated reports or conducting
hearings to assess the program’s role and effectiveness in addressing current and emerging needs.
Coordination of Federal Community Development Resources
The Section 4 program represents a model in community development by which federal resources
are used to generate additional private sector investment to support the financial and technical
capacity of community development organizations through selected intermediary organizations.45
Section 4 is one of several federal programs that provides funding to national community
development intermediaries and local community development organizations.
Federal funding represents an integral component to organizational budgets and enables leverage
of other funding and financing.46 Although several federal community development and housing
programs have unique aspects or separate purposes, some analysis has suggested that there may
be redundancies and overlap, which could pose a duplication of benefits risk.47 Accessing the full

43 For more information on provisions related to housing and community development in H.R. 5376, see CRS Report
R46916, FY2022 Reconciliation: Title IV, House Financial Services Committee Provisions, coordinated by Maggie
McCarty.
44 H.R. 5376, Title IV, §40302.
45 Office of Management and Budget (OMB), Detailed Information on the Capacity Building for Community
Development and Affordable Housing Assessment, https://georgewbush-whitehouse.archives.gov/omb/expectmore/
detail/10001165.2003.html.
46 U.S. Congress, Joint Economic Committee, The Promise of Opportunity Zones, 115th Cong., 2nd sess., May 17, 2018,
30-384 (Washington: GPO, 2018), p. 77.
47 OMB, Detailed Information on the Capacity Building for Community Development and Affordable Housing
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network of community development programs, administered by various federal agencies and
offices, might also pose administrative challenges associated with application and reporting
processes for some organizations with limited capacity.48
Congress may consider options to enhance coordination among federal community development
programs and streamline application processes and grant management requirements across
programs. Alternatively, Congress might consider other options and identify other tools to assess
and address local community development capacity. This may include identifying other types of
organizations or other methods for addressing local community development needs.

Assessment.
48 OMB, Detailed Information on the Capacity Building for Community Development and Affordable Housing
Assessment.
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Appendix A. Section 4 Eligible Beneficiaries
HUD competitively awards Section 4 funds to specified eligible intermediary organizations.
Those intermediaries, in turn, provide funding to eligible beneficiaries. Organizations may qualify
as beneficiaries for Section 4 financial and technical assistance if they meet one of three sets of
criteria for eligible CDCs or CHDOs. The specific eligibility criteria for these organizations are
enumerated in program NOFAs and, in the case of CHDOs, Title 24, Section 92.2, of the Code of
Federal Regulations. This appendix includes the criteria for each category of eligible Section 4
program beneficiaries as outlined in HUD’s FY2020 program NOFA.
Section 4 Community Development Corporation Definition 1
A CDC is a nonprofit organization that undertakes eligible Section 4 Capacity Building Program activities as
defined in this NOFA and that meets these qualifications:
a. Is organized under Federal, State or local law to engage in community development activities (which
may include housing and economic development activities) primarily within an identified geographic area
of operation;
b. Is governed by a board of directors composed of community residents, business and civic leaders;
c. Has as its primary purpose the improvement of the physical, economic or social environment of its
geographic area of operation by addressing one or more critical problems of the area, with particular
attention to the needs of persons of low income;
d. Is neither control ed by, nor under the direction of, individuals or entities seeking to derive profit or
gain from the organization;
e. Has a tax exemption ruling from the Internal Revenue Service under section 501(c)(3) or (4) of the
Internal Revenue Code of 1986 (26 CFR 1.501(c)(3)-1);
f. Has standards of financial accountability that conform to 2 CFR Part 200.302, “Financial Management”
and 2 CFR Part 200.303, “Internal Controls”;
g. Is not an agency or instrumentality of a State or local government; and
h. “Community” may be a neighborhood or neighborhoods, town, vil age, county or multi-county area
(but not the entire State or territory).49
Organizations may also qualify as CDCs under the following definition.
Section 4 Community Development Corporation Definition 2
An organization that does not qualify under paragraphs (a) through (h) may also be determined to qualify as an
eligible entity if
a. It is a Small Business Administration (SBA) approved Section 501 State Development Company—or an
SBA Certified Section 503 Company—under the Small Business Investment Act of 1958, as amended
(P.L. 85-699); or
b. The recipient demonstrates to the satisfaction of HUD, through the provision of information
regarding the organization’s charter and by-laws, that the organization is sufficiently similar in purpose,
function, and scope to those entities qualifying under paragraphs (a) through (h) of this definition; or
c. It is a State or locally chartered organization; however, the State or local government may not have
the right to appoint more than one-third of the membership of the organization’s governing body and no
more than one-third of the board members may be public officials or employees of the State or local
government entity chartering the organization. Board members appointed by the State or local
government may not appoint the remaining two-thirds of the board members.50

49 Contents presented as posted in HUD, Section 4 Capacity Building for Community Development and Affordable
Housing, p. 8.
50 Contents presented as posted in HUD, Section 4 Capacity Building for Community Development and Affordable
Housing, p. 8.
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Additionally, CHDOs, as defined under HUD’s HOME program’s authorizing statute and
regulations, are eligible beneficiaries in the Section 4 program.
Community Housing Development Organization Definition
Community housing development organization means a private nonprofit organization that
(1) Is organized under State or local laws;
(2) Has no part of its net earnings inuring to the benefit of any member, founder, contributor, or
individual;
(3) Is neither control ed by, nor under the direction of, individuals or entities seeking to derive profit or
gain from the organization. A community housing development organization may be sponsored or
created by a for-profit entity, but:
i. The for-profit entity may not be an entity whose primary purpose is the development or
management of housing, such as a builder, developer, or real estate management firm.
ii. The for-profit entity may not have the right to appoint more than one-third of the
membership of the organization’s governing body. Board members appointed by the for-profit
entity may not appoint the remaining two-thirds of the board members;
i i. The community housing development organization must be free to contract for goods and
services from vendors of its own choosing; and
iv. The officers and employees of the for-profit entity may not be officers or employees of the
community housing development organization.
(4) Has a tax exemption ruling from the Internal Revenue Service under section 501(c)(3) or (4) of the
Internal Revenue Code of 1986 (26 CFR 1.501(c)(3)-1 or 1.501(c)(4)-1)), is classified as a subordinate of
a central organization non-profit under section 905 of the Internal Revenue Code of 1986, or if the
private nonprofit organization is an whol y owned entity that is disregarded as an entity separate from its
owner for tax purposes (e.g., a single member limited liability company that is whol y owned by an
organization that qualifies as tax-exempt), the owner organization has a tax exemption ruling from the
Internal Revenue Service under section 501(c)(3) or (4) of the Internal Revenue Code of 1986 and
meets the definition of “community housing development organization;”
(5) Is not a governmental entity (including the participating jurisdiction, other jurisdiction, Indian tribe,
public housing authority, Indian housing authority, housing finance agency, or redevelopment authority)
and is not control ed by a governmental entity. An organization that is created by a governmental entity
may qualify as a community housing development organization; however, the governmental entity may
not have the right to appoint more than one-third of the membership of the organization’s governing
body and no more than one-third of the board members may be public officials or employees of
governmental entity. Board members appointed by a governmental entity may not appoint the remaining
two-thirds of the board members. The officers or employees of a governmental entity may not be
officers or employees of a community housing development organization;
(6) Has standards of financial accountability that conform to 2 CFR 200.302, ‘Financial Management’ and
2 CFR 200.303, ‘Internal Controls;’
(7) Has among its purposes the provision of decent housing that is affordable to low-income and
moderate-income persons, as evidenced in its charter, articles of incorporation, resolutions or by-laws;
(8) Maintains accountability to low-income community residents by:
i. Maintaining at least one-third of its governing board’s membership for residents of low-
income neighborhoods, other low-income community residents, or elected representative of
low-income neighborhood organizations. For urban areas, “community” may be a
neighborhood or neighborhoods, city, county or metropolitan area; for rural areas, it may be a
neighborhood or neighborhoods, town, vil age, county, or multi-county area (but not the
entire State); and
ii. Providing a formal process for low-income program beneficiaries to advise the organization
in its decisions regarding the design, siting, development, and management of affordable
housing;
(9) Has a demonstrated capacity for carrying out housing projects assisted with HOME funds. A
designated organization undertaking development activities as a developer or sponsor must satisfy this
requirement by having paid employees with housing development experience who wil work on projects
assisted with HOME funds. For its first year of funding as a community housing development
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organization, an organization may satisfy this requirement through a contract with a consultant who has
housing development experience to train appropriate key staff of the organization. An organization that
wil own housing must demonstrate capacity to act as owner of a project and meet the requirements of
§92.300(a)(2). A nonprofit organization does not meet the test of demonstrated capacity based on any
person who is a volunteer or whose services are donated by another organization; and
(10) Has a history of serving the community within which housing to be assisted with HOME funds is to
be located. In general, an organization must be able to show one year of serving the community before
HOME funds are reserved for the organization. However, a newly created organization formed by local
churches, service organizations or neighborhood organizations may meet this requirement by
demonstrating that its parent organization has at least a year of serving the community.51

51 Contents presented as enumerated in 24 C.F.R. §92.2.
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Appendix B. Section 4 Awards FY2010-FY2020
Table B-1. Section 4 Awards by Intermediary Organization: FY2010-FY2020
In Millions of Dollars
Enterprise
Local Initiatives
Community
Support
Habitat for
Year
Partners
Corporation
Humanity
Total
FY2021
15.0
17.0
9.0
41.0
FY2020
14.2
13.6
8.1
36.0
FY2019
14.3
14.3
6.3
35.0
FY2018
13.9
14.7
6.2
35.0
FY2017
14.5
15.4
5.2
35.0
FY2016
14.3
15.0
5.7
35.0
FY2015
14.7
13.8
6.6
35.0
FY2014
15.8
14.8
4.2
35.0
FY2013
15.8
14.8
4.2
35.0
FY2012
15.6
15.2
4.2
35.0
FY2011
19.7
22.1
7.5
49.4
FY2010
25.3
19.3
4.9
49.5
Source: U.S. Department of Housing and Urban Development, Section 4 Capacity Building for Community
Development and Affordable Housing Program Historical Awards, https://www.hudexchange.info/programs/section-4-
capacity-building/historical-awards/; HUD, “From Our Federal Partners: HUD Awards $41 Mil ion to Boost
Affordable Housing and Community Development,” at https://www.hudexchange.info/news/from-our-federal-
partners-hud-awards-41-mil ion-to-boost-local-affordable-housing-and-community-development/.
Note: Due to rounding, some figures may not add up to totals.

Author Information

Joseph V. Jaroscak

Analyst in Economic Development Policy

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Disclaimer
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