As the community development finance field looks toward its next chapter, housing-focused community development financial institutions (CDFIs) are confronting new questions about scale, efficiency, and how best to support the next generation of developers. Melinda Clemons, vice president at Enterprise Community Partners, brings a perspective shaped by years of work across banking, housing development and multiple regional markets. In this interview, she reflects on how CDFIs can evolve to remain catalytic in the decade ahead — and what happens to local housing markets when that mission-driven financing infrastructure isn’t present.
Q: If you look five to 10 years out, how do you think CDFIs focused on affordable housing will need to evolve to remain catalytic in their markets?
A: The most effective CDFIs are not just providing loans; they’re combining capital, technical assistance and market-building tools to help shape stronger and more resilient housing markets. Over the next decade, CDFIs can become even bigger players in community development by continuing to broaden their scope.
One opportunity is expanding resources for scalable infill and single-family housing. That includes standardized lending products that allow capital to move more efficiently, as well as more creative approaches like expanded lending to Community Land Trusts and helping convert legacy land contracts into mortgage-ready products. As homeowners struggle with ongoing repair costs, CDFIs should continue exploring the use of maintenance reserves for single-family homes — similar to the reserves lenders require on multifamily or commercial properties — which can help stabilize housing assets and equip homeowners with the skills and tools to maintain and appreciate the value of their property.
As CDFIs scale, operational efficiency will also be important. Streamlining underwriting processes and developing standardized, ethical AI tools can help institutions deploy capital faster while maintaining strong lending discipline. Finally, the next generation of community development finance can continue to connect lending with broader community outcomes like workforce development, local ownership and climate resilience.
Q: You’ve worked in markets with strong CDFI ecosystems and in places where that infrastructure is thin or absent. What happens in housing development when CDFIs aren’t present?
A: Without CDFIs, capital becomes concentrated on the safest and most conventional transactions. Banks and investors often prioritize developers and projects with the strongest balance sheets, cash flow and experience. That means smaller infill housing, emerging developers and innovative neighborhood projects have a much harder time accessing capital.
This creates a credit gap — particularly for early-stage development and smaller-scale projects in communities that have been starved for capital access. Projects requiring microloans, predevelopment, or flexible underwriting rarely move forward, limiting local ownership and slowing neighborhood-level development.
CDFIs function as essential market infrastructure for catalytic projects that are initial market movers. By providing flexible, patient capital, they create an enabling environment for banks, institutional lenders and individual investors to support more place-based developments with less risk. Without that infrastructure, mission-driven outcomes often take a back seat to the financial viability of a transaction.
Q: What role should housing-focused CDFIs play in equipping small and emerging developers in underserved communities?
A: CDFIs have a major role to play in equipping small and emerging developers with technical assistance and capital to advance housing — especially in places like Detroit, where early-stage financing like predevelopment loans is the highest risk.
After decades of disinvestment, as much as we need experienced developers to help us scale housing production, we also need to support the next generation of developers who may not have had the same opportunities or capital access. Many of our smaller developers are from Detroit and understand community needs at the granular level. Emerging developers benefit from access to patient capital alongside coaching and development support that helps them build sustainable businesses.
Most of Detroit’s small and medium multi-family housing stock is owned by mom-and-pop operators. CDFIs can help preserve this housing by providing tools like acquisition financing that allow mission-driven buyers to compete with speculative investors.
Q: When you’re working in a market without a strong CDFI presence, how do you get housing deals done? What partnerships or strategies become most important?
A: In markets without CDFIs, capital gets stuck at the institutional level. A great aspect of CDFIs is that they aggregate resources to flow into communities that might otherwise be overlooked. Philanthropic and public agency capital can step in to fill the gap, but these resources are often limited by funding cycles, political priorities and leadership changes, which makes funding less predictable, and are unable to effectively leverage private capital. Plus, philanthropic investments are generally smaller than private capital, and not at the scale needed.
In these environments with less risk tolerance, deals often take longer to close, and only the most straightforward transactions move forward. Private equity and predatory lending also become more prevalent. In Detroit, for example, there was a period when more land contracts than mortgages were written every year. Many of those contracts were predatory, and people lost their homes.
CDFIs help prevent those outcomes by creating a stable, mission-driven financing ecosystem that allows responsible investment to reach the communities that need it most.