Special Report: Survey Results on CDFIs+Policy

CDFI industry practitioners are unsure of and concerned about policy prospects for CDFIs in 2017 and 2018 but tend slightly to a positive outlook overall, according to the first CDFI Pulse survey on CDFIs+Policy . The uncertainty reflects the volatile and unpredictable nature of federal policy making under President Trump and the Republican-controlled Congress.

While half the respondents answered that are “not sure” of prospects, just 17% are “negative” or “very negative” and nearly double that percentage–33%–say the outlook is “positive.” No one said the prospects for CDFIs through 2018 are “very positive.”

Overall View of Prospects for CDFIs in 2017 and 2018?
Very Positive 0%
Positive 33%
Negative 12%
Very Negative 4%
Not Sure 50%

“It all depends on if the Trump Administration and Congress can actually move their agenda,” one respondent commented. “If they can, my view will be negative for CDFIs. If not, I think prospects will be neutral.”

Expectations for Declining Support

That view is reflected in expectations for specific programs and areas. Nearly 72% of respondents think the Trump Administration will support lower funding levels overall for CDFIs and 55% expect lower support for Low Income Housing Tax Credits. For the Community Reinvestment Act, 75% expect little or no support from the White House.

Respondents’ expectations for Congress are only a little more positive.

Two-thirds (67%) of respondents say they expect Congress to lower CDFI funding, 55% think Congress will lower support for LIHTC, and 60% say that Congress will provide little or no support for CRA.

Level of Support You Expect for CDFI Funding?
from The Trump Administration from The Congress
Higher 0% 0%
Unchanged 9% 29%
Lower 71% 67%
Elimination 19% 50%

NMTC Views Relatively Upbeat

There is a consistent, if lukewarm, outlook for the New Markets Tax Credit (NMTC) program–approximately half the respondents expect the Trump Administration (48%) and the Congress (50%) to maintain steady support for the New Markets Tax Credit Program (NMTC). This view seems to reflect the thought that NMTC may be pitched as a jobs program.

“I think [CDFIs fit] well if [President Trump] means what he says about supporting small business and cities/towns that need to be boosted by jobs and business creation and growth,” one person explained.

Another countered, “I don’t think he knows or cares about us.”

There is a difference in expectations for NMTC downside, however. While 45% think both the Trump Administration and the Congress favor lower support for NMTCs, 19% say that the Trump Administration will seek to eliminate New Markets and just 5% say that about the Congress.

Level of Support You Expect for NMTC?
from The Trump Administration from The Congress
Expansion 5% 5%
Steady 48% 50%
Less 29% 40%
Elimination 19% 5%

All tax credit programs–including NMTC and LIHTC–appear to be vulnerable to lower corporate tax rates, which the President and the Congress have pledged to pass. Lower rates would decrease the value of LIHTC and might also lower the value of NMTCs, though some estimates are that NMTC could become more valuable.

Tax policy is one of many areas of change and uncertainty in 2017 and 2018. Survey respondents cited a wide range of possible concerns across fiscal policy, including Native American programs, immigration reform, health care, Dodd-Frank financial reforms, the Consumer Financial Protection Bureau (CFPB), Individual Development Accounts (IDAs), the Community Development Block Grant (CDBG) program, women’s issues, and others. One respondent highlighted rising interest rates as a significant concern, particularly should CRA be weakened or eliminated.

CDFIs Are Gearing Up

Nearly half–45%–of respondents said policy is “essential” to their work, and a total of 85% said it is important, very important, or essential. Most report active policy efforts.

  • 57% say they have advocated for CDFIs to the Trump Administration since the 2016 elections, and 55% plan to continue
  • 76% have done Congressional advocacy, and 65% are planning more
  • 60% have talked about it among their staffs, and 71% plan to
  • 50% have discussed policy changes and their effects on their customers, and 67% intend to

In addition, 65% of the participants in the survey have started alternative budgeting scenarios and 52% plan to.

Despite that activity, 45% of the respondents are not sure they are prepared for the policy environment they see before them, but 41% say they are ready.

Level of Support You Expect for LIHTC?
  from The Trump Administration from The Congress
Expansion 5% 5%
Steady 25% 40%
Less 55% 55%
Elimination 15% 0%
Level of Support You Expect for CRA?
from The Trump Administration from The Congress
Strong 0% 0%
Moderate 5% 30%
Little 25% 50%
None 50% 10%
Opposition 20% 10%

A pdf version of this report is available here.

Editor’s Note: The 
CDFI Pulse Survey on CDFIs & Policy was open for approximately one week concluding Wednesday, February 22nd. Invitations were sent initially to a select sample of industry participants, including staff at CDFIs, investors, funders, and policy makers. On Monday, February 20th, the survey was opened to all readers of MONEY+PURPOSE. Participation in the survey was open and voluntary. The results provide a momentary look into the thinking of some CDFIs, investors, and policy makers as the legislative season starts and CDFI advocates mount their advocacy.

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