HUD Section 4 (Capacity Building Grants)

Policy Guide

Capacity Building for Community Development "Section 4" grants are awarded to intermediaries that re-grant to community development corporations (CDCs). CDCs use the funds for specific investments, including affordable housing and economic development. 

The Section 4 program began when the Department of Housing and Urban Development (HUD) decided to financially support a collaborative of large philanthropic foundations and financial institutions, now known as Living Cities and originally known as the National Community Development Initiative. 

From its inception, Living Cities has leveraged investments of $600 million into more than $16 billion in useable funds. Using loans, grants, equity guarantees and other financial vehicles, Living Cities builds the long-term capacity of national and community based organizations, contributing to stronger housing, community wealth building, workforce development, and education.

Originally, Living Cities disbursed funds to CDC intermediaries (primarily the Local Initiatives Support Corporation (LISC) and Enterprise Community Partners, Inc.(Enterprise)). These intermediaries have played a critical role in assisting in the development of CDCs: both by helping CDCs assemble financing for specific development efforts (often serving as a conduit for both tax credit equity and debt financing) and by providing direct grants that have helped CDCs augment their capacity. Since 1991 when the Section 4 program began and 2005, the number of CDCs nationwide has climbed from 2,000 to 4,600.

Living Cities has since changed its strategic focus to directly fund initiatives on its own, and the Section 4 program now provides direct HUD funding for five intermediary organizations: Living Cities, LISC, Enterprise, Habitat for Humanity and YouthBuild USA.

These five Section 4-funded intermediaries may use their grant funds for three purposes: to provide training, education, support and advice to enhance the technical and administrative capabilities of CDCs and community housing development organizations (CHDOs); to make loans and grant, and offer development and predevelopment assistance to CDCs and CHDOs; and to support other related activities that advance HUD programs and objectives.

The grants under Section 4 are awarded on a competitive basis to the eligible applicants and have a 48-month performance period. In FY 2008, the Section 4 program made awards totaling over $33 million, which, pursuant to the program, the recipients had to match on a 3:1 basis with private funds. In FY 2010, Congress increased its allocation to Section 4 to $50 million.

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