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Frequently asked questions


What is a community wealth strategy?

A wealth strategy aims at improving the ability of communities and individuals to increase asset ownership, anchor jobs locally, expand the provision of public services, and ensure local economic stability.

 


How do community wealth strategies benefit communities?

Community wealth strategies are designed to draw more dollars into the community — by raising the financial assets of individuals, by increasing the level of “common” assets within a community that are locally owned, and by leveraging the use of funds from institutions that are based in the community (such as city governments and universities) for community-benefiting purposes.

 


What are the types of community wealth building strategies?

There are a growing number of distinct community wealth strategies. On this site we provide information about a dozen of the most important institutional examples. These include nonprofit and profit-making models such as community development corporations (CDCs), community development financial institutions (CDFIs), employee stock ownership plans (ESOPs), community land trusts (CLTs), cooperatives, and social enterprise. Local and state government also has an important role to play, as do the nation's 4,000 colleges and universities. In recent years a new individually-focused wealth strategy (individual development accounts, or IDAs) has experienced rapid growth. There are also a number of innovative wealth building models occurring outside the U.S. Information about all of these models can be found on our C-W Access Panel »

 


Can different community wealth strategies be combined?

Yes. There are numerous ways to combine different strategies. IDAs are often funded by government agencies and are commonly administered by CDCs, which use the programs as part of their strategy to assist low and moderate-income families to be able to afford home ownership. CDFIs frequently finance projects that are developed by CDCs. Community land trusts often set up their housing as limited equity cooperatives. CDCs may set up social enterprises as part of their effort to provide job training and increase neighborhood employment opportunities. In the state of Ohio, the state government provides funding for an employee ownership support center to encourage ESOP formation as a way to reduce plant closures and thus reduce government social service costs. Indeed, the best community revitalization efforts are likely to contain individual-focused elements, community elements, and government support.

 


What do these community wealth strategies have in common?

All emphasize building assets or wealth as a way to contribute to the solution of social and economic problems. These efforts provide income, savings, direct services, jobs, and by building the local tax base, they provide support for needed public services. While there is no “one size fits all” approach, the various strategies do share some common values and operating principles. They focus on building and anchoring assets and capital in local communities, often broadly distributing ownership among community members. They increase the local economic “multiplier effect” by recycling dollars within the community in which they are based. And they tend to orient themselves not just to the financial “bottom-line” but to producing public benefits of various kinds.

 


Is the use of community wealth strategies on the increase?

Yes, community wealth strategies are growing around the country. IDAs, for example, didn't exist 15 years ago; today, there are more than 500 programs in the United States. State pension funds didn't target any funds to local investment three decades ago; today, they invest over $12 billion in venture capital (much of which is invested locally) and tens of billions more in other forms of economically targeted investment. Community approaches, such as social enterprises, CDCs, CDFIs, and ESOPs, have also grown. For instance, the number of CDCs has risen from a handful 40 years ago to over 4,000 today, while, at the same time, the number of employee owners in ESOPs has increased from 200,000 to over 8 million.

 


What is driving the expansion of community wealth strategies?

These developments are not occurring in a vacuum. They are being spurred by two converging trends with historic importance: (1) the steadily increasing insecurities of the global economic era–which, in turn, are generating a demand for new approaches to local economic instability; and (2) the dramatic and rapidly expanding fiscal crisis at all levels of government–which is systematically forcing consideration of new alternatives that promise new ways to achieve service-supporting revenues.

 


Does the federal government support community wealth strategies?

Many federal programs support community wealth strategies, although the dollars involved are a small part of the total $1.8 trillion budget. (It should also be noted that President Bush's FY 2006 budget proposes both restructuring and cutting funding for many of these programs.)

In housing, key programs include the Low Income Housing Tax Credit which provides about $4 billion a year and the HOME Investment Partnerships Act which contributes about $2 billion. Both support affordable housing development, a significant percentage of which is done by CDCs. Community land trusts also receive some funding under these programs. The CDFI Fund, established in 1994, provides slightly over $50 million a year in capital grants and other grant support to local CDFIs. Tax credits can also be used to support wealth strategies: since 1974, about $2 billion in tax credits have been given to support the expansion of ESOPs.

There are also a number of community development efforts funded under other programs, such as the Community Development Block Grant ($4.7 billion in FY 2005) and the New Markets Tax Credit program, which is designed to provide $15 billion in tax credit financing for retail and commercial development over a period of seven years.

 


In what ways can state and local governments support community wealth strategies?

State and local governments can and do provide support in a number of ways. In housing, a key instrument has been the housing trust fund. As of 2001, 34 states had housing trust funds that disbursed $437 million. City and county trust funds disbursed over $300 million that same year. In Ohio, the state provides a few hundred thousand dollars for the Ohio Employee Ownership Center, which provides technical assistance for groups wishing to convert their companies to ESOP ownership. Another increasingly common policy at the local level is inclusionary zoning, in which developers gain the right to build with higher than normal densities in exchange for setting aside a percentage of the units built for people with low or moderate incomes. Additionally, city and state governments often have flexibility to disburse federal dollars in ways that can promote asset strategies. For instance, some states and cities use Community Development Block Grant dollars to support asset strategies while others do not.

 


Are there new policy proposals that promote community wealth strategies?

There are many ways that government could support the expansion of asset and wealth strategies. In 2001, Rep. Dana Rohrabacher's (R. - Calif.) proposed to create a sub-category of ESOPs that would get additional tax benefits in exchange for giving workers more rights. A current initiative in the area of housing development is the 2005 proposal to create a National Low Income Housing Trust Fund: the National Low Income Housing Coalition is backing a proposal to develop a trust fund to finance the construction of 1.5 million homes over 10 years. Also in 2005, a congressional caucus of asset strategy supporters was formed, which has focused on expanding individual-oriented programs such as individual development accounts. In addition to these initiatives, there are a number of ways that government could further support asset strategies – from expanding current support programs to duplicating leading examples at the state level (such as the Ohio Employee Ownership Center).

The role citizens can play in advocating new policies that support community wealth building is key. Voicing your support to elected and appointed government officials, both at the national level and locally, is a critical step in helping these asset strategies acquire the support they need to continue to grow and flourish. Learn more about the range of innovative community wealth and asset development policies (PDF 154KB) »