Why Start a Community Development Corporation

Last Updated: May 9, 2024

If you want to start a community development corporation, you will need to take the 10 steps listed below. Along the way, they will probably test what you are made of, but reach down to find your courage and you can succeed.

These corporations are often abbreviated to CDC, by the way, and we will use that convention too. Do not be confused with a U.S. government health agency using those initials; we will not be discussing public health on this page!

If you just like start-ups--and some of us fall in that category--look for another community development project. This start-up will be lots of work and can lead to years of frustration if not carefully conceived and genuinely embedded in the community.

Here are the promised 10 steps:

  • define the community need and geographic boundaries
  • find some like-minded individuals
  • form a steering committee
  • discuss your statement of need and preferred focus areas with the steering committee and with community members you meet as you attend neighborhood events, and refine your mission and territory based on feedback
  • determine whether you will duplicate efforts of any existing organization, and if so, try to join or reform it
  • share your vision informally with additional community members and with any community leaders you believe might be supportive, and incorporate their criticisms and priorities
  • provide a face-to-face forum in which all interested individuals are invited to learn of the vision of the steering committee
  • consider carefully how you will have enough money to complete one or two early projects, which usually requires a partnership with a major corporation, philanthropic organization, or local government
  • find a sympathetic attorney who will do some early work for you pro bono (free), schedule a consultation with that attorney, then discuss and determine the legal form of the corporation, and recruit and name an initial board of directors 
  • name officers and take other steps required to actually start a community development corporation, get some money together, and apply for non-profit status providing you choose this most common form of organization.

Each of these steps is considered below.

Define the Need to Start a Community Development Corporation

start a community development corporation 2

Make sure there is a real need that existing governments, organizations, for-profit businesses, and non-profits cannot or will not meet.

The history of community development corporations in the U.S. is quite urban, and the early pioneers focused on urban neighborhoods that had fallen on hard times. However, recently we are seeing an uptick in trying to adapt the same format for suburban and even rural situations. 

Just in the last couple of months, we received two messages from people exploring how and whether a CDC would be appropriate in their settings. After some conversation, we all decided that the steps in forming such a corporation would be nearly identical regardless of how densely populated the area.

One rural area activist told us that he was sorry it had taken him so long to recognize that people are people everywhere, and that in his rural area where people felt that government had long ago stopped serving their needs, leaders were especially grateful to hear about the possibility of a private sector entity that could be more nimble than the public sector. 

Sometimes it seems easier to start a community development corporation than to reform an old organization or a local government, but in the end, you should think twice about whether that is really true.

We are paying attention to a new dataset released by the Urban Institute, which catalogues what they term community-based development organizations. They identified 6,897 such organizations in the U.S., but they appear to have used a considerably looser definition than what we would consider to be a CDC. We will be updating our information as necessary, based on this extensive analysis using IRS data for nonprofit corporations that identify some type of place-based community work.

Determining Duplication of Effort

Try not to start a community development corporation if someone else is already handling neighborhood issues satisfactorily or if the issue that's causing you to organize is minor.

If you don't get along with other community organizations, I understand. But try harder, or try to take over their organization or persuade them to your perspective.

It takes effort to start a community development corporation, not to mention some legal fees and yearly maintenance fees. Why do that if it's unnecessary?

What Community Development Corporations Do

When you start a community development corporation, you'll often be asked what CDCs actually do. While each situation will be unique and you may have one or two ideas that you want to begin with, it's good to know the range of projects that other knowledgeable people may associate with CDCs.

Typical CDC activities are:

Larger, older corporations may provide all or most of these services, and indeed as you can see from the number of these activities that are discussed on separate pages, a CDC's mission is intimately related to community development in the very broad sense, as we use it on this website.

Some visitors have asked for a list of CDC activities.  Previously we have recommended a listing  from the National Alliance of Community Economic Development Associations, NACEDA, but that has now become quite dated.    In fact,  NACEDA changed its own name and is now called Community Opportunity Alliance. As a substitute for that great but old report, see their latest research on CDC activities. We urge organizations with the capability to do so to take up the project of compiling a directory of all the CDCs and what they do.

Finding Like-Minded Individuals

I hope you're already aware of other existing community organizations, but if not, now is the time to become very familiar with them.

If you're affiliated with one, venture over to a meeting of the other, if you can do so without hostility. (If not, mend fences with the leadership in private.)

Try to learn everything happening in the geographic area where you want to start a community development corporation.

Network, talk to your neighbors, go to events, broaden your horizons in general, and be out and about talking with folks. As you do, discuss why you want to start a community development corporation with anyone who seems to share some of your perspective on the area and its policy issues.

Talk to old and new friends till you have at least three or four others who may be interested.

Forming a Steering Committee for the Possible CDC

When you have a list of four or five, including yourself, you have a committee if the others are willing to meet and stick with it.

Someone who doesn't attend and doesn't explain their absence probably isn't really interested, so you need to check again on whether they will participate.

This committee will have quite a bit of work ahead of it, although it isn't necessary that these particular people continue with the CDC after it is formed.

Keeping this point in mind, if you have trouble with attendance and keeping people interested, continue to reach out and also find some people who are skilled in community development or paid to work with the community in some capacity.

Leaders in any organization, including congregations, know how to approach new initiatives. Sometimes a local university will have either faculty or students who will be interested in helping you start a community development corporation, and there's nothing wrong with using that expertise.

Look to nearby universities, hospitals, corporations, and congregations for talent.

Refining Your Statement of Why You Need to Start a Community Development Corporation

By this point, you should have an idea of what people (including yourself) think the CDC should do, or maybe shouldn't try to do.

Maybe by now some possible projects seem too ambitious,and instead of doing 10 things, you feel as though the corporation should be more focused. Take this approach if you discover organizations you didn't know about at the beginning.

For example, you might think a youth drug problem is a major reason to start a community development corporation, but you might learn that there is already an effective organization working on that issue.

Meanwhile if no one is working on the jobs issue, economic development might become the major focus of your CDC.

Incidentally there will be people who tell you that a CDC always has an important affordable housing component, but I don't believe it. All community development approaches are local.

Sharing the Potential Community Development Corporation's Vision with the Community

Especially if you do not live in the community where you want to start a community development corporation, you should work hard at this point to make sure that you have talked with many real, ordinary residents. Emphasize any long-time residents who may have outsize influence on what their neighbors think. These informal leaders exist on many blocks; if you cannot identify them easily, just start asking people until you notice a bit of a consensus. Often these firmly planted residents will challenge you because change is threatening to all of us, but just persist, be humble, and be willing to learn and accept advice, and many will finally come around to your side.

Sometimes if it's a community with problems of poverty, you'll find that initiating a CDC is remote from the daily struggles of existence, and so the people who are thinking long-range about this community don't live there.

That's great; the U.S. and many countries would be nowhere without altruism. But if you're an outsider looking in, you must now recruit "just folks" for your team.

Get to know them. If necessary, try free food and summer festivals, but also go where they go if you possibly can. That might be a worship service, the street corner, a game, park, bar, ward meeting, or whatever it takes.

Then when you meet people, ask them about your vision to start a community development corporation and see what needs they think it might address.

Don't be surprised to find the locals skeptical that any new corporation or organization could help them out of their dire situation, but just humor them, and say, "OK, I agree it will be hard, but if we could do it, what do you think the new corporation should do that would make a difference?"

Again, in really blighted areas, you may hear an answer such as, "Nothing." Don't give up; keep pressing. Give local examples, if you know some, of neighborhoods that have turned around.

Setting Up a Forum on the Proposed Community Development Corporation

Forum is vague enough to mean almost any meeting format. If at all possible, this needs to be a face-to-face meeting, so that the people who are interested, or those you would like to attract, can see and interact with each other. Although usually it is good to allow anyone interested to attend, you may want to issue specific invitations.

If you are constrained by the coronavirus pandemic, the aftermath of a hurricane, or other emergency situation, and you feel you must act now, you can try the online forum route, but it will be less successful in stirring up enthusiasm.  Unless your CDC directly addresses the emergency though, expect low participation.

Part of whether or not people will participate depends on who else is there. For instance, influential people too often look around to see if everyone else is beneath their perceived level of power and authority.  On the other hand, it's tough to be the only one without money and education on an organizing board, or the token neighborhood resident.

We especially like the Friday afternoon and Saturday morning conference idea when you want to start a community development corporation, but it actually can be a series of weekly meetings no longer than an hour each, if that will work best for your group. Just don't allow this routine to drag on for months.

Somehow there needs to be time for people to meet each other, reflect, and then decide for sure whether this venture is for them or who they know that could contribute to the effort.

Begin with spirited discussion of the current condition of your target geographic area, let people list the problems and issues that aren't addressed by someone else, and allow a general airing of opinion. In other words, start where people are.

Then progress to what the steering committee sees as their agenda so far, taking into account their outreach to the community if they don't actually live in and participate in the community.

Then allow the steering committee to explain succinctly why they believe it is a good idea to start a community development corporation.

Allow anyone who doesn't want to participate to leave, and continue discussing and refining the ideas. The steering committee should be prepared to modify their vision on the spot if they truly agree with the input they are receiving. If not, feel free to stick to your guns.

The organizing forum, conference, or series of meetings should conclude with a lively, realistic, and serious discussion of who wants to start a community development corporation. Implicitly, this means beginning to talk about who will serve on the board and who will be involved in other ways.

You will need to discuss in general terms whether there will be any memberships.  Many CDCs operate without "members" and simply have a board of directors and a community outreach effort.  If you are to have members, you should at least consider whether these would be individual members and also corporate members, and whether dues would be required.  You also may want to discuss the possibility of having an advisory board of people who raise money for you and give the board occasional advice, but otherwise are not active in governance.

In early discussions you will want to reach out to those who can help you obtain the professional assistance you need, which might range from attorneys to accountants, people with nonprofit fundraising experience, political leaders, and experts in economic development, community development, housing, social problems, cleanup of contaminated areas called brownfields, rebuilding after a disaster, business attraction, or whatever your focus will be.

It would be great if one more than a third of your board, on up to 100 percent of it, could be residents of the community in question. In cities where you are dealing with a blighted neighborhood, this may not be possible, but get close to that ratio even in that scenario.

Money for CDCs

It's time to get practical now. Is the vision you are developing expensive, involving construction and redevelopment?

Or does it consist mostly of social services that can and will be performed by volunteers? Does it consist mostly of providing creative activities for the youth?

That could be relatively low-budget, while cleaning up an abandoned factory for an adaptive reuse leads to major fundraising challenges.

Don't allow yourself to fall into the trap of thinking, "Oh, we'll get a grant." Maybe you will, and maybe you won't. Investigate that probability realistically before you call this your financial plan if what you dream about is expensive.

If your fund-raising possibilities are dim, maybe you shouldn't start a community development corporation after all.

Deciding on Your Corporate Form

Most of the time, CDCs are non-profits. However, some are for-profit corporations. Remember that a non-profit corporation can have profit-making activities, as long as the profits go back into the non-profit cause.

Of course, just because you decide you'll be "for profit" in organization doesn't mean that you'll make a profit.

The major advantage of being a non-profit in the U.S. is simply that most foundations and donors will require the non-profit status before they make a donation. The process begins with an IRS Form 1023, a fairly complex undertaking requiring a review process that, while shorter than it once was, still can stretch into months if you don't do it correctly.

There's also the tax advantage. You won't be liable for paying most taxes, and items you sell will be exempt from sales tax if you apply and receive permission in most states. You do have to file a tax return but it may be less complex than even an individual income tax form.

To learn more about the most common non-profit status in the U.S., see the IRS information on applying for 501(c)(3).

In our opinion, the only time to consider a for-profit is when you have a successful entrepreneur or wealthy individual who is basically willing to back the corporation with his or her own money, but would like the privilege of taking profits when an enterprise is successful.

In neighborhoods where would-be investors are few and far between, that is a trade-off that could be considered. If your major backer restores a community or a major detriment to the neighborhood, do you really care that much if he or she makes some money, especially if this individual is willing to share decision-making with a community corporation board?

Lastly, you must begin to think about and approach possible board members, decide whether there will be many or few, and fantasize about the ideal composition of the board.

You really must have found an attorney, whether you hire one or find one to work pro bono (that means "free") by this time. Be sure to find one who is experienced in forming non-profits, if that's what you decide you'll be. There's a bit of an art to it.

By the way, no, we don't think you should form the corporation yourself with a $150 kit from the Internet. You should probably talk this one over with a real live person unless there is considerable expertise among the prospective board members.

Get Moving! Start a Community Development Corporation!

If all signs are positive, do something and do it now. If you procrastinate, nothing good will happen. Pick some good folks to team up with, incorporate, and try a project. Clean ups as described on this site are good first projects.

If National Night Out is approaching, usually the first Tuesday in August or October in the U.S., make your debut then. Similarly, if any holidays are on the horizon, they can be used as an occasion to rally the community to undertake a small beautification project.

If you have a contractor or someone related to the construction business on your board, seize the opportunity to demolish an eyesore, whether it's a teetering railing or a house that's falling down.

After you have one simple project completed, dig into something of lasting value.   Board members, volunteers, and community members could collaborate to perform a housing condition survey to provide a baseline of data that helps in visualizing areas where housing quality needs to be supported. This would help with the all-important task of making sure that all board members become familiar with all parts of your geography.

You can learn plenty of relevant information and gain valuable ideas if you read this website very closely; check the sitemap for relevant topics, and follow the many links to outside resources.  If you contemplate starting a faith-based corporation, see our page on the Christian community development corporation for some tips, regardless of your faith tradition.

Your initial organizing may yield better results if you can project yourself into the future and envision the indicators of a well-functioning CDC performs. Cleveland Neighborhood Progress has published what they call performance standards for CDCs; this excellent document would be a great resource as you daydream about what success would look like.

Finally, we have answered a number of site visitor questions about community development corporations. You may be especially interested in our take on cities funding CDCs, city involvement in a CDC in general, elected officials and a CDCclosed CDC meetings and transparency, multiple CDCs, whether CDCs can have employees, and recognition as a CDC. Each of these is really germane to your quest.

Read More Pages Relevant to Many CDCs

Join GOOD COMMUNITY PLUS, which provides you monthly with short features or tips about timely topics for neighborhoods, towns and cities, community organizations, and rural or small town environments. Unsubscribe any time. Give it a try.