COMMUNITY FINANCIAL INSTITUTIONS are the backbone to a healthy society, providing loans for small businesses, disaster recovery, low-income families, immigrant communities and affordable housing developments. That essential service is now in danger.
President Donald Trump’s executive order to dismantle the Community Development Financial Institutions Fund (CDFI) last month put a target on these institutions and brought to surface the role they play. Even though CDFI activities are protected by law, and therefore cannot be eliminated, potential staff cuts still pose a risk to the fund that oversees grants for community development, experts said.
“If they fire everybody that knows how to administer this complex program, that’s going to be a problem,” Alison Cingolani, policy director of nonprofit SV@Home, told San José Spotlight.
The CDFI Fund provides grants to the more than 1,430 CDFIs across the country, which enables local institutions to provide loans to individuals with low credit scores, for disaster recovery, green energy, economic revitalization and more in underfunded areas. For every $1 CDFIs receive, they are able to bring in $8 in private sector investments.
The fund emerged to combat the harmful effects of redlining, a discriminatory practice where lenders denied mortgages and financial services to people in areas deemed “risky,” often because it predominantly had people of color. Though redlining is now outlawed, areas previously redlined still remain significantly underinvested.
Funding for the CDFI Fund will remain at $324 million through the 2025 fiscal year, but groups are worried what the budget will look like starting in 2026.
Cuts could slow affordable housing development
In Santa Clara County, Housing Trust Silicon Valley, a CDFI, provides seed money to affordable housing projects. The trust provides loans to about 15 to 20 developments each year, CEO Noni Ramos said, including the Quetzal Gardens Apartments completed in 2021. Cuts to the CDI Fund could potentially hinder projects from getting off the ground. The housing trust provides about $4 million to $5 million in loans per project.
“It could slow our ability to be able to then go out and raise those public dollars, which, at the end of the day, that’s what we’re then able to lend to those affordable housing developers,” Ramos told San José Spotlight.
“It could slow our ability to be able to then go out and raise those public dollars, which, at the end of the day, that’s what we’re then able to lend to those affordable housing developers.” Noni Ramos, Housing Trust Silicon Valley CEO
Dora Beyer, director of community development at Excite Credit Union, said without the CDFI Fund’s grant dollars, some programming would have to be cut, including one that provides a $3,000 grant to small business owners. More than 60% of the credit union’s lending goes to low- and moderate-income households, Beyer said. They provide a range of loans, including car, student and personal loans along with mortgages.
“We specifically aim to reach out to folks who historically mistrust financial institutions who may be unbanked, under banked or credit invisible,” Beyer told San José Spotlight. “CDFIs and credit unions across the nation are really the ones who proactively aim to reach those communities.”
Contact Joyce Chu at joyce@sanjosespotlight.com or @joyce_speaks on X.
This story originally appeared in San Jose Spotlight.