We’ve done this work for more than 35 years, bringing together national know-how, partners, policy leadership, and investment to multiply the impact of local affordable housing development. Over that time, we have invested more than $36 billion through public-private partnerships, resulting in more than half a million healthy, well-designed affordable homes, critical community assets like health-care clinics, and charter schools. We are proud that, together with our partners, we have touched millions of lives.

The community development sector was born of the need to address market failures faced by low-income communities and people of color. In doing so, organizations like Enterprise and our many partners around the country have collaborated closely to solve problems in ways that meet the needs of profit-driven and social justice–oriented organizations. Factors such as a lack of capital, a lack of qualified development partners, or a lack of community engagement are strong indicators of where public-private partnerships could be best deployed to drive change.

One such example is the low-income housing tax credit (LIHTC). Created under the Tax Reform Act of 1986, the LIHTC is one of this country’s most effective public-private partnerships. It was developed to address the lack of private capital available for the development of affordable housing. Harvard University’s Joint Center for Housing Studies found that construction costs would have to be reduced by an average of 72 percent for the private sector to provide housing affordable to low-income renter households.1 The LIHTC addresses this market failure by providing a government incentive for the private market to invest in affordable housing. Data show that without this subsidy, virtually no new affordable rental housing would be developed nor would existing housing be preserved.

The federal government has also tried to address market failures in other ways; for example, by enacting legislation to invest in revitalizing low- and moderate-income neighborhoods. Congress passed the Community Reinvestment Act (CRA) in 1977 to prohibit discriminatory lending practices and affirmatively require banks to lend in the communities in which they operate. This law has resulted in 551,000 community development loans worth $796 billion since 1996.2

What Does It Mean to Invest In Opportunity Outcomes?

Over time, programs like the LIHTC and the CRA have not just created public-private partnerships to invest in building housing — they have also been investments in opportunity for low-income people and communities. As a result, Enterprise is focused on fostering community improvement from the ground up by matchmaking the right partners, directing capital to the right places, and working with government leaders by offering nonpartisan advice and support.

We have intentionally expanded our focus over the past few years, from investing in housing units alone to also investing in outcomes for people.

While housing connected to good schools, jobs, transit, and health care is essential, investing in outcomes for people requires more than providing capital for real estate development. In order for people to have stable homes they can afford, we must have policies that protect renters from eviction and displacement. For housing to be the platform for economic mobility, we need to broaden our understanding of what we seek to measure, from simply wealth and assets to an increased sense of personal agency and of belonging in a community.3

This leads us to take an increasingly comprehensive approach to investing in opportunity, with a few key principles:

  • Investing in opportunity requires research and data. In order to build a strong evidence base for housing as a platform to improved individual and community outcomes, Enterprise has created Opportunity360, a tool that measures opportunity and enables policymakers, investors, developers, and community members to unlock pathways to opportunity outcomes. Opportunity360 enhances our understanding of the critical connection between people and places, allowing better measurement of the impacts of implementations to date, while helping us envision program, policy, and capital solutions for a better future.
  • Investing in opportunity requires policy advocacy and innovative capital solutions. Policy and capital need to be better aligned to achieve the outcomes we’re seeking at scale. While changes in housing and community development policy and finance have assisted millions of Americans over the last several decades, we know there is a lot more work to be done. With a current shortage of more than 7 million affordable units alone and thousands of families facing homelessness each night across the country, it is clear that we need to enhance the current system and tools with approaches that draw on new resources. In addition — and maybe just as importantly — we need to empower low-income people to participate in the advocacy, creation, and implementation of these new solutions.

With this lens of investing in opportunity outcomes, we are now turning our attention to the many market failures that persist for these communities and how we might best seek to bridge or address them through public-private partnerships and other tools.

What Is a Market Failure?

But first – what do we mean by market failure? It’s important to note that financial markets are typically focused on a fairly specific set of criteria that, in turn, are used to determine what kinds of investments are worthwhile. For example, many transactions are underwritten on the financial returns expected from housing development and operations. This makes good sense in the shorter term, but ultimately, these metrics may undersell the longer-term positive outcomes of an investment, such as a good education and stable employment, that can result from providing well-designed homes that are made affordable to families.

This means that the balance sheet of an affordable housing development undervalues its benefit as a long-term, opportunity-enriching asset.

Part of the challenge has been, and continues to be, a lack of reliable data that demonstrate in quantitative terms the true costs of poverty to communities and families. This includes lost potential measured through poorly performing schools, underemployment, and pervasive discrimination. Our work must fill in the gaps by rigorously measuring long-term outcomes that include people with greater earning and spending power, cities that thrive, and regions that are more competitive.

Financial markets — and concurrent policies — have especially failed communities of color by allowing and often encouraging practices that limit opportunity based on race. One historical example is redlining, which limited access to federally supported mortgages — and therefore homeownership — for entire communities of color in every city. A more recent example is predatory lending, which has created and perpetuates entrenched racial wealth disparities.

Unfortunately, in many cases, historical policies failed to explicitly address racial discrimination or implicitly ignored banking practices that excluded access to financial opportunity for people of color. It should be no surprise that after decades of discrimination in both markets and the public sector institutions that regulate them, we are faced with a society in which the median net worth of white households in 2013 was 13 times greater that than of black households — and that gap is growing.4

Another common barrier in the affordable housing and community development sectors is asymmetric information. The perceived risk associated with lending in certain areas has resulted in inadequate financial services in distressed communities. The absence of adequate banking further compounds the economic challenges these communities face. Community development financial institutions (CDFIs) were created to provide financial products that traditional banking models find too risky to provide. As intermediaries, CDFIs signal to the private market that alternative products are viable, ultimately removing institutional discrimination and information barriers.

Financial markets have also failed to reward environmentally sustainable, climate-resilient investments. Financial incentives to invest in green building materials that will last the life of the property are still limited, despite evidence that building green yields savings in the medium term. A 2012 Enterprise study showed, in the average affordable housing development, that there was a “lifetime utility cost savings of $3,709 per dwelling unit, while the incremental cost per dwelling unit for the average project to comply with the Enterprise Green Communities Criteria was $3,546.”5

Similarly, insurance markets continue to provide coverage for buildings built in locations that are going to be impacted by climate change because there is not yet a way to aggregate and deploy capital effectively in order to effectively “climate-proof” buildings or communities. This is especially true in low-income communities, many of which face the greatest risk from climate change.

Where Do We Begin in Acknowledging Market Failures and Pivoting to Exploring Market Opportunities?

Clearly, market failures still exist, despite the work done by the community development field during the last 30 years. So, we must ask ourselves what else we can be doing to address our current market failures and turn them into opportunities. At Enterprise, we see a few promising practices taking place across our field, including:

1. Making strategic investments using new, more comprehensive screening tools

The Strong, Prosperous, and Resilient Communities Challenge (SPARCC) was launched by Enterprise, the Low Income Investment Fund (LIIF), the Natural Resources Defense Council, and the Federal Reserve Bank of San Francisco in 2017 to create a new systemic approach to strategically place capital in regions across the country. SPARCC aims to support investment in the built environment that is driven and informed by community, with a focus on racial equity, climate resilience, and better health outcomes.

With LIIF and through ambitious capital commitments by philanthropic partners, SPARCC is testing investment in six regions: Atlanta; Chicago; Denver; Los Angeles; Memphis, TN; and the San Francisco Bay Area. Before funding was placed in these communities, a screening tool was developed to ensure maximum benefit.6

SPARCC's Capital Project Screen Survey attempts to identify a few important items in scoring responses.

  • How the project strategically supports the vision of the SPARCC site team and advances the larger mission
  • How the project integrates and advances SPARCC’s three lenses — racial equity, health, and resiliency/sustainability
  • How residents and the community have been involved in project conception, design, and implementation 
  • How the project affects system change by producing social benefits and creditworthy investments

This new tool helps SPARCC and its community partners to vet investments based on the process used to generate them, along with their likelihood of achieving the social returns being sought, before we even begin the process of underwriting. The screener allows us to prioritize social outcomes before considering financial outcomes, and our large banking partners are taking notice, interested in understanding and testing the tool.

2. Leveraging new sources of capital through institutional and foundation investments.

Our country’s health-care system continues to undergo major transformations, with increasing focus on the need to invest in the social determinants of health. Part of this shift has led to a growing desire for creative financing solutions. Health-care systems and insurers see the benefits of investing in better health outcomes, and other institutional funders — including union, pension, and foundational endowments — see the importance of social impact investing and the improvements it can bring to disadvantaged communities.

In the health-care sector, these solutions range from region-specific investment funds to national investments in equity funds. The twist here is that many of these funds will rely on community-informed health impact assessments or other similar processes on the front end of development as well as certification of green and healthy building standards after construction to determine the larger social return on investment for all parties. We hope efforts like these will quantify health outcomes for people living in quality affordable housing, which in turn has the potential to direct health-care investment toward affordable housing as a way to ensure healthier outcomes.

Provide New Opportunities Through Opportunity Zones

Finally, we must always be ready to seize the moment, especially when new tools are created that offer the potential for much needed investment in communities. Opportunity Zones are one recent example.

The Tax Cuts and Jobs Act of 2017 created Opportunity Zones, an economic development tool designed to drive long-term capital to distressed communities. The Opportunity Zones model is another example of attracting private capital — in this case, unrealized capital gains — and directing it into a socially desirable outcome — inclusive economic growth in low-income communities. This is an exciting new model with the potential to attract economic activity into areas the private market has historically neglected.7

It is important to make sure that the public side of the partnership in Opportunity Zones is fully realized. Without adequate provisions, there is the risk that the market will ultimately invest in distressed communities without low-income residents or local businesses realizing any of the benefits. In order to ensure that the funds best serve people who need it most, there is a need for additional input on Opportunity Zones from the federal government. In particular, Enterprise has urged the Treasury and the IRS to commit to data collection on Opportunity Zone investments so that we are able to track the impacts of the new tool on distressed communities. We are monitoring the implementation of Opportunity Zones and working with policymakers to ensure that Opportunity Zones can join the list of successful public-private partnerships.


Market failures can become opportunities when entrepreneurial and mission-oriented organizations identify those failures and develop solutions to meet the needs of the most vulnerable people in our communities. The community development sector has repeatedly shown how to do this work effectively. Despite the many challenges facing low-income communities today, I believe we will continue to identify new opportunities for greater impact. By making effective, data-informed decisions that truly seek to invest in opportunity and relying on emergent best practices, we can and will continue to turn market failures into opportunities to serve people and communities with the greatest needs.

Laurel Blatchford Bio

Laurel Blatchford is president of Enterprise Community Partners, Inc., one of the nation’s leading social enterprises. Blatchford leads the organization’s national programmatic and policy work, including the teams working in Enterprise’s local markets across the United States, and Enterprise’s groundbreaking initiatives focused on connecting people and communities to opportunity. She also leads the policy team, which focuses on policy change at the national, state, and local levels; Enterprise Advisors, the organization’s consulting and technical assistance platform; and the organization’s knowledge, impact, and strategy functions.

The views expressed here do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

[1]Joint Center for Housing Studies of Harvard University (2011), “America’s Rental Housing,” www.jchs.harvard.edu/sites/default/files/ahr2011-4-stock.pdf.

[2]NCRC (2016), “The Community Reinvestment Act: Vital for neighborhoods, the country, and the economy,” available at ncrc.org/wp-content/uploads/2017/11/NCRC-CRA-Affirmation-FINALb.pdf.

[3]Gregory Acs, Amrita Maitreyi, Alana L. Conner, et al. “Measuring mobility from poverty,” U.S. Partnership on Mobility from Poverty, April 19, 2018, available at www.mobilitypartnership.org/publications/measuring-mobility-poverty.

[4]Rakesh Kochhar and Richard Fry, “Wealth inequality has widened along racial, ethnic lines since end of Great Recession,” Pew Research Center, December 12, 2014, available at www.pewresearch.org/fact-tank/2014/12/12/racial-wealth-gaps-great-recession.

[5]Enterprise Community Partners, “Enterprise Green Communities: Incremental Costs, Measurable Savings Update,” 2012, available at www.enterprisecommunity.org/resources/incremental-costs-measurable-savings-update-14174

[6]The screening tool is available at www.sparcchub.org/wp-content/uploads/2018/03/SPARCC-Capital-Screen-Guide-Survey-Tool.pdf.

[7]For more on Enterprise’s work with Opportunity Zones, see www.enterprisecommunity.org/policy-and-advocacy/policy-priorities/opportunity-zones-program.