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(Unedited) Podcast Transcript 331: A New Conversation about Development Finance

April 28, 2021

This week we’re joined by Dan Nissenbaum, CEO of the Low Income Investment Fund. We chat with Dan about Liif’s many projects including early childhood education, housing, and connecting transportation to community development.

For the full (unedited for now) transcript, go below the fold.

 

Jeff Wood (1m 32s):
Well, Dan Nissenbaum welcome to the talking headways podcast.

Dan Nissenbaum (2m 3s):
Thank you so much. I’m delighted to be here

Jeff Wood

Before we get started. Can you tell us a little bit about yourself?

Dan Nissenbaum

Sure. I’m a DC native. I always like to say that right off the top, since that’s a, sometimes a rare being, essentially I have worked in community development finance for over 25 years and then segwayed into the community development financial institution, CDFI sector about three years ago. And I’m now the chief executive officer of the low-income investment fund, but really there’s two things to know about me. I get teased about them. Both one is I was once called a leading economic indicator because of my job transitions. I’ll tell you why.

Dan Nissenbaum (2m 44s):
And the second thing is I may be the only person people know who gave an informational interview to somebody and that person one year later was their boss. That was me.

Jeff Wood (2m 58s):
What, what does that mean indicator?

Dan Nissenbaum (3m 1s):
So I worked at a series of banks and as an example, and I don’t know your demographic, some people may not recall these names, but I started my career at chemical bank in New York city as a real commercial real estate lender stayed for a couple of years, quit. And I went to chase Manhattan bank when it was chase Manhattan bank. A few years later, chemical bank buys chase Manhattan bank keeps the name. They stayed for a few years. I left, I went to JP Morgan when it was JP Morgan and a few years later, chase Manhattan bank buys JP Morgan. So I guess I was then a leading economic indicator, but of course, if I had had any inside information, I wouldn’t be sitting with you.

Jeff Wood (3m 44s):
You were last at Goldman Sachs, is that right? So they’re going to buy Goldman Sachs next.

Dan Nissenbaum (3m 50s):
I’m really not privileged to this, but yes, in the interim, there were a couple of other banks and I was at Goldman last. And actually during that time, during that decade, I was very closely aligned and affiliated with the low-income investment fund. I was a lender. I was a funder. I sat on their board, chaired the board for a period of time. And then when Nancy Andrews, who’s a icon in the field, decided to step down. After 20 years, I was invited to apply and I don’t know why I was selected, but here I am.

Jeff Wood (4m 21s):
Well, we had Nancy on the show and she’s wonderful. So yeah, we look forward to chatting with you. How do you get into community development? Usually we ask folks, you know, how they got into planning or transportation. Is it when they were a kid? Did they see some trains? What was the impetus for community planning for you and getting involved?

Dan Nissenbaum (4m 37s):
Sure. I think the short answer is from all directions. It says something about our industry. I think being in community development, finance’s sort of the best job in the universe. I think it gives you mission. I think it gives you impact. And I think it gives you nuance because, and policy, you know, we are doing financing of projects, but we are working closely with the public sector and often trying to look at neighborhood impacts of the work that we do. So frankly, the people in this industry be they in the banks or be they in the CDFs and there is flow going both ways. You see finance types, you see planning types, you see just generally smart people.

Dan Nissenbaum (5m 18s):
And you’ll see people who are interested in climate. There’s a whole range of ways. I would say though, having said that we are a financial institution. And so, you know, you most typically see people who have some financial background and may have worked their way up, but not necessarily through an MBA, but through some sort of business career. But again, all kinds of avenues have led to CDFs, which is terrific. It is an extremely collegial industry. And it’s just, again, because of the fact that we finance affordable housing and charter schools and early learning centers and economic development projects, you really see a range of expertise and experiences.

Jeff Wood (6m 1s):
So for those who might not be familiar, what is a CDFI? Exactly. Cause you hear the term a lot. There’s an alphabet soup of acronyms. So what is a CFI and what does it do?

Dan Nissenbaum (6m 11s):
The short story. We describe ourselves as a mission-driven non-profit real estate lender and program manager. What that means is that we raise capital from folks like commercial banks and others. We aggregate those funds and we go into local communities and we make loans. That’s primarily what CDFI is to slight digression. There are actually four different types of CDFIs. We won’t go through them in that taxonomy, but type one is a credit union, just like a credit union type two is a bank, just like a bank type three is a venture fund, just like a venture fund.

Dan Nissenbaum (6m 52s):
And the last type, which is where we live is a loan fund. So we are a financial institution, but we are not subject to banking regulations. That’s what makes CDFIs so unique is that we are mission-driven. We are financially rigorous. Lyft has an S and P rating. We have the backing of dozens of major banks. We’re a member of the federal home loan bank. We have all of that financial sophistication and we simply intermediate between the capital markets and local communities. And we’re doing both lending and program management.

Jeff Wood (7m 30s):
What kind of regulations are not assigned to you all as a CFI versus maybe other banks and lending institutions? Sure.

Dan Nissenbaum (7m 37s):
So, you know, again, we’re not subject to the federal banking laws, Dodd-Frank others that have requirements around safety and soundness. Having said that it’s simply a parallel system. We are certified by the us treasury. We are overseen by our investors. We are analyzed by S and P. So we sort of maintain the same kind of rigor, but we’re not subject to banking laws, which means we have a significant amount, more latitude and flexibility we’re patient lenders. Primarily. The other thing that makes us different is that we really go where banks don’t go. We were set up to fill the gaps. If you will, in the capital markets banks, as you know, are getting bigger, are consolidating they’re closing branches more than I think they’re opening branches.

Dan Nissenbaum (8m 25s):
Although I think the opening of branches is more digital and more flexible. So we are present in rural areas. So we extend into other geographies, we’ll do loans that are much smaller than other lenders that banks won’t do. And we’ll take on the kind of risks where there is a perception of risk where there may not be an actuality of risk, but we’ll take on more complex projects and we’re able to then make these loans on of banks who may be motivated by their community reinvestment act obligation, but we’re also serving as a partner to the public sector and we’re serving as a partner to foundation.

Dan Nissenbaum (9m 6s):
And often we bring all those resources together and create pretty unique and innovative structures.

Jeff Wood (9m 12s):
What’s an example of one of the projects or some of the projects that you’re working on these days. So

Dan Nissenbaum (9m 17s):
New strategic plan, which we really finalized toward the end of 2019 really focuses on affordable housing and on early care and education, we certainly have done a lot of transit-oriented development work. Although we have really pushed into what we call ETOD Tod equitable transit-oriented development. So there’s some great examples in that vein. And I know we’ll talk a little bit about this later on in the podcast. So we did a fantastic transaction in Los Angeles and the little Tokyo neighborhood. We financed a nonprofit, the little Tokyo service center, which has been there for decades. And frankly there was a new transit station there that had opened up.

Dan Nissenbaum (10m 0s):
And as you know, what typically happens, the knock on effect is that once that new transit line starts to be developed, there is speculation all around. And what typically happens is that there’s eviction, there’s displacement, rents and land prices are bid up and you begin to see more market rate development. So what we were able to do was to help little Tokyo service center acquire a building, which was an SRO and actually had commercial tenants and the base of the building. We were able to help them acquire that building preserve those units actually convert that SRO to permanently affordable housing and preserve the commercial tenants who were all, you know, Asian run businesses, been there for some time and upgrade the building.

Dan Nissenbaum (10m 49s):
So our bent is often around preservation of those types of community assets, but frankly, we’re doing lots of interesting transactions, charter schools, healthcare centers, a significant amount of affordable housing.

Jeff Wood (11m 4s):
Well, that’s the thing is you all, don’t just look at housing. You guys take a comprehensive look at community development from childcare. Like you said, an education to health and wellness in addition to housing. So why are these items important in concert rather necessarily than individual solutions per se?

Dan Nissenbaum (11m 18s):
That is a great question. You know, here’s what I would say. We have a gigantic financial system that works in certain ways and is really good at financing assets, housing, warehouses, hotels, other, what we’re less good at is financing neighborhoods, systems connectors, but we know that that’s actually the way people live. And frankly, one of the first deals I ever did in my career really illustrated this very starkly for me, that we need to develop housing or whatever we’re doing and connect it to other community assets because that’s what I benefited from when I was growing up.

Dan Nissenbaum (11m 60s):
Maybe you, and if we have a system that just goes in and finances, housing, and assumes the rest will take care of itself, we know that’s not going to happen. So this particular building was in the Bronx. It was at the end of a very long dark street. It abutted an electrical power system, a grid. It was a way from the subway and it happened to be in foreclosure and we were going to finance a group to renovate. And so we assembled our crew and we got the construction consultant and we all went out to the building to size how big the loan should be, which was going to be a 30 year loan. And we brought our construction consultant and he took one look at the building and he said, Oh, this is going to be easy.

Dan Nissenbaum (12m 42s):
We did this building five years ago

Jeff Wood (12m 46s):
And it’s

Dan Nissenbaum (12m 46s):
Tragically comic, right? Yeah. Because it just, it’s just awful. And so we have learned those lessons, community development has learned those lessons. And what we realize is we have to finance the social determinants of health. It is education. It is healthcare. It is access to services, not just affordable housing, which is really crucial, early care. And education is something we’re turning to much more deeply than we did before, because we now understand that the power and the importance of really the first 24 to 36 months of care for somebody in terms of brain development. So in other words, that’s why we think it’s so important to think about community assets and to think about the intersection of housing with these other types of assets, because we know that they both makes place better and it creates economic mobility.

Dan Nissenbaum (13m 40s):
And we want both those things for the folks that we serve.

Jeff Wood (13m 43s):
If I had to create an instant catchphrase, I’d say financing people rather than things, it sounds pretty good to me. So that discussion about mobility and access, you know, in the deeper sense of the word are there. But how about that outside in terms of transportation and access from a physical standpoint, how does that fit into the formula?

Dan Nissenbaum (14m 1s):
So it’s super interesting. First of all, I’m in New York city guy, you know, I started my career there. I was doing real estate deals. You know, every deal we did, you know, we had in mind how far from the subway is this. We knew that this was part of the critical web that would determine how successful this asset was going to be. You know, frankly, in terms of transit, it’s not something I think our industry has paid a huge amount of attention to. And the first question is when we see that, is this something that’s going to help stabilize this community? Or is it something that’s going to help these stabilize this community? And I think we’ve seen that as public infrastructure has been brought to bear, it’s not always something that has been a positive impact in a community.

Dan Nissenbaum (14m 47s):
It may not have incorporated community voice for community, for the folks who live there or have lived there for a long time. Again, back to the issues of increasing land value in gentrification. It might actually physically destabilize a neighborhood and remove housing or small businesses, things that were very important. So we see that as infrastructure, but we also see everything around it as critical community infrastructure as well. So again, that’s why our work started in Tod financing. And again, what we would do is help for some mission-driven, for-profits often not for-profit owners to acquire land so that the land could be preserved.

Dan Nissenbaum (15m 31s):
And we could ensure that there was mixed income and economic integration in those communities. And that’s really important. Transit agencies have actually begun to see groups like ours as partners, and we are terrific partners and they’re investing in our funds, investing upstream, quote unquote, if you will, to help us stabilize these communities, whether it’s affordable housing or small businesses. And we have transit agencies, two of them in California that are doing that with us right now in funds, understanding that transit has a significant impact. And we want to both make sure it’s there and make sure it extends into lower income communities or communities of color and serves those populations, but is done in a way that is inclusive in a way that reflects what the community is looking for.

Dan Nissenbaum (16m 20s):
And doesn’t just sort of arrive without those critical.

Jeff Wood (16m 23s):
It’s surprising that it’s taken this long to be partners just because I know that, you know, obviously we’ve been discussing Tod since the eighties and nineties, and now there’s kind of a turn in terms of the discussion, but it seems like something that’s always been on the front of people’s minds, especially at transit agencies. But why do you think it’s just now that they’re starting to kind of come around to working with folks like Lyft?

Dan Nissenbaum (16m 44s):
So I think a couple of things, I think one is we’re just in different universes, we’re just in different sectors. And I think, you know, when you’re a large scale public agency, it’s a little bit harder to connect with groups like ours. We actually work with the public sector in all kinds of ways, delivering healthcare, delivering education, delivering housing. And so I think honestly, they’ve looked around and seen the lessons there. I think too, you know, I think the world for whatever reason, even before the last year has understood that equitable development is an important thing. It’s not only the right thing to do. It’s the important thing to do. And it’s going to make projects have better reception and have better sustainability.

Dan Nissenbaum (17m 25s):
And they see groups like ours who were able to organize community voice, provide technical assistance, and actually kind of provide the financing of the connective tissue all around the transit hub. In the city of Chicago, we’re working with CTA through our spark program, our strong, prosperous, and resilient communities challenge program. We do that with two other CDFIs and that group called elevate Chicago has worked much more closely with the trends that agents see there. And they’ve actually designated the half mile area around a transit hub as an EA hub and sort of work together to create a very comprehensive community plan for how to bring in public art and how to stabilize small businesses and encourage more small businesses and how to preserve affordable housing.

Dan Nissenbaum (18m 16s):
So I think everybody’s coming around to this, everyone seeing the intersectionality a little bit more at the end of the day, these are public transit clients. To me, it’s the same reason why healthcare companies, insurers and payers are also investing with CFIs because you know, we’re doing the upfront investments that will make their own public investments again, be more successful, be more sustainable

Jeff Wood (18m 43s):
Earlier about your strategic plan. And one of the goals I think for you all is building and preserving 10,000 housing units. I’m curious, do you all have any rules and regulations for fitting transportation into the decision about where you invest to preserve housing? One of my favorite projects that I did when I was at reconnecting America was we worked with ARP to look at section eight, section two, two housing units. And I did a map of every frequent transit line in 20 cities. And we looked at which ones were expiring and two thirds of the units were expiring near frequent transit in 20 cities. And so I’m curious if there are any plans or thoughts about, you know, you’re looking at preserving those types of units, building new units.

Jeff Wood (19m 23s):
Is there any kind of structure to make sure that they are accessible by transportation or any metrics that you all use to determine whether those folks will have access to transportation?

Dan Nissenbaum (19m 34s):
Sure. Our plans are much more audacious by the way, we have a joint venture arrangement with a low income housing tax credit syndicator that is the national affordable housing trust and a terrific new partnership. They represent 13 of the strongest nonprofit developers across the country. And it is there that we’ve set that goal for those numbers of units. But Lyft more broadly in our company has set a goal to drive $5 billion of capital over 10 years towards projects that advance racial equity. And we’ll do that with debt and equity and our programs, including with early care and education. I want to come back to that. So the answer to your question is that we always look at that as a factor.

Dan Nissenbaum (20m 15s):
Again, we have a racial equity lens. We have a set of underwriting criteria. We see a set of success factors and we try to factor in community voice. So we’re always looking at that as something that is an underwriting factor, something that will contribute to the project and separately. Again, we have these specific funds that are set up as transit oriented development, financings, where we have private investors, foundations, and transit agencies. And there we are specifically trying to do this work. I’ll give you another great example. Also Los Angeles MacArthur park, we were able to help provide financing. I think it’s within a half mile again of the subway now, the new subway extension and we’re financing a nonprofit that is going to take a 36 unit project and convert it to a hundred units of permanent affordable housing.

Dan Nissenbaum (21m 8s):
And they’re doing that with some upside. I mean, what could be better, right? We all understand that transit-oriented development is crucial and you need to increase density around these areas. The biggest inhibitor to affordable housing, as we all know, certainly can be a lack of capital, but it is primarily zoning and it is often around community opposition. So to see a project, which again comes from a local not-for-profit that is doing that kind of up zoning and providing that kind of stable, affordable rental housing at a higher density. That’s fantastic. We would do that all day long.

Jeff Wood (21m 43s):
You mentioned the racial equity lens. How do you attach that lens to the camera if we’re going to use a metaphor because obviously the world has changed in the last couple of years in terms of thinking about that. We focused on that a lot when we were working in communities back in the two thousands, not as much maybe as we should have obviously, but you know, it’s something that has changed the way people are looking at how to invest in communities and how to think about things. So I’m wondering how you all were able to kind of refocus on that goal and, and that important work.

Dan Nissenbaum (22m 11s):
Yes. Wonderful question. Let me take you through a little bit of a trajectory that starts with, I think everybody thought they were doing that and we weren’t. And so I think we have to start there. Look, we’re in an industry where a lot of our capital comes through community reinvestment act motivation of banks, which is targeted at income, but is conflated with race. And so that is something that I think has brought us to this moment where we’re our entire industry is realizing that we’ve done a lot of terrific projects. We’ve done a lot of good. We have not been as intentional about race. And frankly, we haven’t been as intentional about gender as we needed to be. And that’s why we continue to see some of the disparities that we have seen.

Dan Nissenbaum (22m 54s):
You know, we’ve looked up after being in this industry for years and years and years and seeing hundreds of billions of dollars that have been invested yet, our country is segregated more now than it was before. And some of these areas we’re working in have segregated more quickly. And frankly, that’s not just housing that’s education. So start there and then you simply have to do a lot of internal work to say, what are we going to do? What do we really mean when we talk about race? How are we going to be authentic about this? How are we going to hold ourselves to accountability? What are we talking about, literally, what are we talking about? And so we’re going through that journey and that’s a whole other podcast possibly, but you can start in a place that’s not that hard.

Dan Nissenbaum (23m 38s):
Meaning who are you financing? Right. So we’re an intermediary. We raise capital. We provide that capital to developers, they build housing and other things. And those projects benefit people of color or are located in communities of color. I think the big pivot point here is agency and equity, not just racial equity, but dollar equity. And so what it really means is who are you financing in order to build that project to benefit whomever. And that is one way that our industry is turning and we have also pivoted in that regard and become more intentional. So in other words, the affordable housing industry is frankly, fairly white dominated in terms of the developers who control the capital, who build the project.

Dan Nissenbaum (24m 27s):
And so we’re doing work around that. We’re trying to think about where our capital will flow. We’ve come up with a new loan product that will be targeted to black developers who may or may not be emerging. May also have been around for awhile. And we’re completely recasting the credit standards to reflect the fact that black developers relative to white developers, maybe others have not had these historical opportunity to build assets or liquidity or a track record or other things. And so they have been historically disadvantaged. And so when it comes down to the finish line for a bank to make a loan, and they’re looking at two candidates and one has a lot of assets and the other doesn’t who are they going to lend to?

Dan Nissenbaum (25m 10s):
And so we are designing a product to get to that specifically to make sure that we are going to be accountable and to make sure that we’re intentional about this. We are developing a new model for ourselves, and it’s going to look at impact risk and profitability together. And we’re constructing our own framework for how we see equity and how we’re prioritizing racial equity. And we’re going to start running our portfolio through that. It doesn’t mean that every loan that we make will maximize risk, profitability and equity that will not happen. We’ll see things all across the spectrum, but it will guide our lending decisions.

Dan Nissenbaum (25m 51s):
And after a period of time, we hope to end up living up to our promise that we will have directed capital to projects that we think advance racial equity. And frankly, that’s something we want to share out with other city advise and kind of open source in the industry. So, sorry, a little bit of a long-winded answer, but I think that’s a real trajectory I wanted to take you through. And for another question, maybe we’ll come back to other types of partners that we’re working with who are also advancing racial equity. And we simply need to double down with them as well.

Jeff Wood (26m 22s):
Equity is a funny term because you can talk about it from a capital standpoint, but you can also talk about it from a human standpoint. I’m wondering how these projects, like, what does that mean to invest in racial equity, in a specific project? You know, what does that actually mean when you get onto the ground and you start investing in kind of the bricks and mortar of it all. Yeah.

Dan Nissenbaum (26m 40s):
Great question. So again, you can start with ownership and then you can start with who the beneficiaries will be, and then you can extend to the process. So for instance, we’re financing charter schools. We certainly look at where the charter school is located. We look at the population that we think the school will serve. We’ll look at the leadership of that school. Honestly, we won’t go deep into the pedagogy. We’re not educational curricular experts, but we will look at a set of equity indicators that we have worked on with other CDFIs that look at community engagement that look at discipline that look at parental involvement.

Dan Nissenbaum (27m 24s):
And so we will assess the degree of equity that we see, which will vary by asset class. Housing will be different in charter school. And we’ll use that as a screen in some ways. And a big part of that is community voice, many projects in the world, as you know, go through a quote unquote public approval process and many lenders say, okay, public approval, check the box. That was a community board meeting. Well, you and I probably both know that community boards and their processes may be inclusive, but are often not. And so we’re digging a little more deeply into that. And look, we’re trying to learn about this ourselves and try to come up with standards that we think are practical and authentic and will be well received.

Dan Nissenbaum (28m 8s):
And so we’re doing all those kinds of things so that, and then there are different types of models. There are community land trusts that we’ve been working on in innovating us have other CDFIs, so that it’s not just a building we’re financing that a lower moderate income person might live in. It’s an asset owned with community ownership that the residents actually own. We have also looked at other scenarios where we’re looking at the proximity of housing to high quality education. And we think that’s an important equity dimension. I want to come back to early care and education. This is an area where we’ve decided to double down and where I think community development has touched, but not deeply enough.

Dan Nissenbaum (28m 52s):
Listen, if COVID showed us anything, it was that childcare matters and childcare is a crucial support. And ultimately childcare is something that we need to think about as a public good science, you know, sociologists all have showed us that it’s really the years between zero to two or three that matter the most in terms of brain development and have the farthest reaching implications for how successful somebody will be, how healthy they will be and their economic prospects. So right now we have a childcare system that is a shambles, as you know, the irony is that particularly for lower income families, childcare is among their most significant expense.

Dan Nissenbaum (29m 40s):
We talk a lot about housing and we talk about how for lower-income people, affordable housing is often half of their income childcare adds a significant amount as well. Yet the people who work in childcare facilities receive wages typically below the poverty line and need to rely on public benefits in order to survive and support their own families. Yet, if we don’t have childcare, nobody goes back to work. And we’ve also seen the implication and the reality that women are dropping out of the workforce because we don’t have a stable childcare system clearly for lower income communities and often communities of color.

Dan Nissenbaum (30m 24s):
This is even more pronounced and we have real childcare deserts and you have a whole system of informal care. So we have done a lot of work in this area. I’d life to date. Lyft has invested almost $180 million in childcare facilities. We’ve supported almost 270,000 slots of childcare. And so we see this as a very important racial equity strategy that will bring needed investment to this sector that will support the entrepreneurs who run these centers, who are almost entirely women of color and who will support working families. And so we’re working with state governments.

Dan Nissenbaum (31m 5s):
We’ve been deploying cares, act funding as emergency supports in factor in the pandemic, we raised $25 million, including cares, act money, PPP loans, and private philanthropy, just to sort of buoy these owners through the pandemic. And in many cases, not just saving their businesses, but saving their homes because these are home-based providers in many cases. So this is a system that needs a significant amount of federal investment. The Biden ministration has put forth in the rescue plan, $50 billion. It’s an amazing, amazing result for childcare, but it’s a bit of a one-shot and we are now working to get legislation passed.

Dan Nissenbaum (31m 47s):
That would include $10 billion for facilities financing. So it’s a really important piece of community development that doesn’t often have the same visibility or funding as does housing or schools or other, but it is again, back to the social determinants of health. This is so primary, it’s the most important start and it’s where we’re failing most significantly. We need to change it

Jeff Wood (32m 12s):
Ability so low on this. I mean, I’ve noticed just only in the last three weeks to a month, people, you know, especially here in San Francisco, flipping out about the school system, not opening their doors and then childcare as a kind of adjunct to that. You know, why is it something that doesn’t have the visibility to all these other things? Haven’t we know that there are so many people that face this issue,

Dan Nissenbaum (32m 32s):
Childcare. Yeah. Look, I think you have to start with the fact that people presume this is women’s work and that is literally on two levels. They assume that within families that’s going to be women’s work and a woman will defer or delay or drop out of the workforce in order to take care of kids. Or there will be some informal off the books arrangement usually with a woman of color whose kids are somewhere else while they’re taking care of. So, you know, people patch this together. So that’s one part of the answer, and that is really the deepest inequity issue here. The other is, this is not a public good. You know, why is it that we have at the most critical moment in a child’s development?

Dan Nissenbaum (33m 15s):
Why do we have this patched together system only to have public education start now, you know, increasingly at five or maybe a little bit below, it just needs to be extended. It doesn’t have the visibility because it’s not a public good. It’s not a public system. And it isn’t a asset class. Guess what? It’s back to exactly what you said, it’s financing people and we have to do a better job at that, for sure. So again, we’re learning, we’re trying to hold ourselves accountable. We’re changing the direction and the flow of our capital. And we’re trying to think about who we’re partnering with is that

Jeff Wood (33m 50s):
Hard to kind of reconcile what a community decides that it wants to be developed and what works in the typical financing arena. It seems like something that you all obviously are going in opposition of the typical financing, you know, cause a lot of times you go into a community, you ask them what they want and then a bank will say, or the financing folks will say, no, you can’t do all the things that you want to do, but actually you probably can.

Dan Nissenbaum (34m 13s):
I think you’ve hit the nail on the head. And I think one of our learnings out of spark was that the community wants different things. They are not looking for short-term debt. They’re looking for long-term equity, right? They’re not looking for somebody to come in and build a building. They’re looking to control those assets. And they’re looking for a different way that these community assets are developed again with an equity perspective and with an inclusive development approach. So there are certainly those tensions. I think that’s a spot on questions. So then you have two choices, you know, to that financing or you change your product and you change your approach. And I think we all have to think about how we’re going to be doing that. And we are pivoting in ways to do that. That also requires, and this is where you get to systems change.

Dan Nissenbaum (34m 57s):
You’ve got to work back through the process, right too often, lenders like us or others are masters of the capital that is fed to them. And so if we have this flow of capital, whether it’s low income, housing tax credit investment, whether it’s Freddie and Fannie, whether it’s, you know, charter school funding, you know, it tells us what to do. And it tells us where to do that or community reinvestment act. And so really where we’re spending a lot of our time is going back up the chain, right? We are advocating right now in front of the federal regulators with others. That race should be a factor in community reinvestment, examinations of banks.

Dan Nissenbaum (35m 38s):
That should be a factor. It shouldn’t just be, was it in the right geography? And did it necessarily meet an income test? It should say of racial equity as a goal. We need capital that looks for racial equity as a goal. And so we’re having those kinds of conversations and those are really important. Then we’re going to need to change some of those systems. If we want more capital to flow in this direction, look at opportunities to solves what a tremendous opportunity there is to change the opportunity zones, which really need to be right. That’ll take that really accomplish the goals that some of those legislators had hoped for, or we’re designing it for. And I think be at the infrastructure funding that’s going to come or other, we have a major opportunity to go back in and say, here’s a terrific way that private capital incentivized by tax benefits could really help.

Dan Nissenbaum (36m 29s):
And that could be infrastructure and that could be housing and that could be schools. And that could be lots of other great projects. You have to have impact

Jeff Wood (36m 36s):
So interesting because obviously we have this opportunity to change a lot of rules and regulations up in the federal level. And right now, you know, in the infrastructure world, which, you know, obviously these things shouldn’t be siloed. They should all be kind of coming together in concert with each other because they’re so connected to each other, as you know, from your discussions about education and health. But it’s interesting to see what’s happening with infrastructure and the discussion about changing all the rules and regulations. There’s a big fight about to happen over the mut CD, the, the manual on uniform traffic control devices, which has basically made to a certain extent. A lot of people believe that it’s made streets unsafe for cyclists and walkers and pedestrians and active transportation. So, you know, it’s interesting to see that in parallel with changes in regulations that need to happen in the housing sphere or the health sphere or the education sphere, because they’re all necessary and they’re all needed in concert, but it’s often in these silos, which is really interesting to think about how to connect it.

Dan Nissenbaum (37m 27s):
I think that’s right. You know, we’ve all been moving forward. We’ve all been moving forward within a certain set of systems. And now we’re trying to stop and redefine our goal and figure out what needs to change. And Oh, by the way, we had a pandemic and, you know, everyone kind of conflates everything that went on and over the last year, I think it’s pretty clear. We’re having three separate things happen at the same time. So that the interesting question will be what’s the new normal, right? And by the way, how are we going to be prepared for the next time? Because there will be a next time, be it something like this or something different. We had a public health crisis with COVID. We had the recession that was the knock on effect of COVID. And we had what people are calling a racial reckoning, a reckoning around racial equity.

Dan Nissenbaum (38m 11s):
Those things are lumped together in part because Covid and others, other parts of this simply laid bare more starkly, the disparities and the inequities that have persisted for a long time. So, you know, folks are trying to figure out what to do. I think these things are great motivators to change some of these systems and to think about where capital requirements and other things let us unintentionally the Biden administration is putting forth racial equity as a primary goal. We just got off the phone earlier today with folks on the domestic policy council who are interested in the work of and who are interested in thinking about changing federal programs.

Dan Nissenbaum (38m 52s):
The paycheck protection act program is a classic example, right? Stimulus trying to reach small businesses, trying to pull people out of the recession caused by COVID tons of money went out. And, you know, honestly, if you’re using the same plumbing you used before, you shouldn’t expect that it’s going to have a different conclusion. And that’s what we saw larger businesses, not all of which needed the money, got a lot of money who were primarily bank customers, smaller businesses who desperately desperately needed the money. And weren’t prominent bank clients got crowded out. CDFI has played a major role in being part of that distribution chain.

Dan Nissenbaum (39m 34s):
And I think actually we have a more prominent visibility now at treasury and another parts of the federal agencies. And I think good things will come of that because they will see that we reach farther. We reach into different areas. We reached down better and farther than others. So I think that’s going to be a huge impact on all of this as well.

Jeff Wood (39m 53s):
You mentioned spark and elevated Chicago and the purpose built communities network. What difference has it made for Lyft to be a part of these kind of on the ground organizations and collaboratives that are really in the trenches and doing the work?

Dan Nissenbaum (40m 5s):
Yeah, boy, those are different answers, but really important, you know, spark, which was started four or five years ago and credit to our funders and credit to the San Francisco federal reserve bank, which really launched this, you know, that was a program focused on climate racial equity and health. And I think what we learned there was what equity conversations really look like and what community voice really looks like. And it’s back to exactly what you said earlier, which is that, you know, you think, you know, what communities need you go to communities. You talk to them, there’s a whole different conversation. Spark has really pushed our company toward racial equity work.

Dan Nissenbaum (40m 49s):
There is no question about it. We had a screen for Capitol that we used in the spark program. And again, we share that program with enterprise and within our DC, and we’ve taken elements of that. And we’re bringing that over into Lyft and not only beginning to develop that concept about a racial equity screen in our own capital, not just in spark, but it has really triggered a company-wide conversation about race and a significant amount of internal work around racial equity, training, orientation, and overhaul of some of our practices, et cetera. So spark has been a significant experience. And I think one that other funders should look to, to learn about what funding racial equity really looks like.

Dan Nissenbaum (41m 35s):
We hope to hold that up as an example. So that’s spark, which has been significant, purpose-built similar, but really very different purpose-built as you may know, is a national organization that has affiliates in 18 or 20 something different cities. And it is a capacity building organization that has its own theory of change its own model around wellness and housing and education. And frankly, they are what we call the community quarterback. These purpose built community affiliates. These are local anchor organizations that bring together coalitions and go through extensive community planning and extensive community engagement and come up with their own plans, really equity driven as well.

Dan Nissenbaum (42m 23s):
We are the financial quarterback to these community quarterbacks, and we’re doing that in two important ways. One is a very unique financing tool called we call it equity with a twist. Others might generally know it as a program related investment. Long-term very, very low rate equity like features, which is basically a financing that we give to these local affiliates. And they can use not to finance a project specifically. It’s not a project based financing, it’s an organizational type financing and it gives these groups very flexible capital to develop projects or to acquire land or to pay staff or to provide working capital.

Dan Nissenbaum (43m 5s):
That’s the kind of organizational capital that’s just not available in the world. So we’re providing that. That’s a little bit of sort of seed capital, a little bit of a lighting, a match. Then separately, we’ve set up a fund called the accelerator fund right now it’s $50 million and we have some banks in it as well as some foundations. And we will provide a lot of different flexible financing for the projects that these affiliates developed. So we’ve sort of have this organizational support going out first, and then we have people funded out of the fund. So what we’re learning from that is the importance of capacity building the importance of developing Pru, community, voice, and community led projects and the importance of an integrated community development model that looks at the health and wellness of the community.

Dan Nissenbaum (43m 53s):
What really drives those factors. And we believe the same and we’re happy to provide those financing tools. And frankly, they’re scaling very quickly. They started at 18 cities. I think they’re going to get to 35 very quickly. That is the kind of model you don’t see in community development too often. And frankly, you know, you could imagine something like the Biden administration going back to something like choice neighborhoods or promising they’re put. So looking at those early investments about how to build capacity and having that, then be a little bit of a launching pad for the types of development. We want to say, what have you learned personally in the last few years?

Jeff Wood (44m 32s):
Like what stood out to you in terms of all these things that we’ve been talking about?

Dan Nissenbaum (44m 36s):
Wow, I learned a lot. It’s been three years. In some ways it’s felt like a month. In some ways it’s felt like five years. One of the biggest lessons is really around the intentionality of capital. And I’ll go back to what I said in the beginning. I was a community development bank for 25 years and I felt good about what I did. And I thought the work that we were doing in these various banks was impactful and it was good. But again, I think we’ve realized that it’s not moving the needle fast enough and significantly enough. And so I am at this place with my organization, with my colleagues at Lyft, where we really are getting a deeper understanding about what we need to do to advance racial equity.

Dan Nissenbaum (45m 19s):
And so that’s just a gigantic learning. And I think understanding how to move your own organization through that work, which you cannot do by simply making a statement. And you cannot do by just saying, we’re going to check off a few boxes and finance a project. It’s hard work. It’s a lot of internal work and it’s really from top to bottom, we had to work with our board, which has been incredibly supportive and incredibly demanding also in this regard for what they think we should be doing all the way down to the folks in every part of your organization. Because if people aren’t on the same page, it is a little royaling dislocating to have these conversations about racial equity.

Dan Nissenbaum (46m 2s):
We have an amazing array of folks, even in our abandoned 80. And, you know, having these conversations means as one person in my organization, put it bringing the personal to the professional, right? Because if you’re having conversations about what you think our strategy should be, where our resources should be deployed, whom we should be prioritizing in a spectrum of racial equity categories, racial categories that gets down to some choices. And, you know, people sometimes will feel left out of that if they themselves are not represented in that conversation. And so that’s sort of an ongoing conversation about the kind of organization we want to be kind of work.

Dan Nissenbaum (46m 44s):
We want to do the fact that we’re very small and you know, we do have to focus on resources. And so what I’ve learned is that I have a group of people who really, really want to engage in this and that it’s incredibly hard. It’s hard to do it, right? Certainly not linear two steps forward, two steps back, one step to the side, go around the big circle, try to keep pushing forward. And I think we’re all trying to do it as gracefully and patiently as we can with some sense of urgency given what’s around us. And so those are challenging things to work through, but again, our folks are responding and moving very fast.

Dan Nissenbaum (47m 25s):
We were a beneficiary of the McKenzie Scott, one of those grants, which manna from heaven, just wonderful, completely unrestricted, but really given to us to support our racial equity work. And there’s a line of people who are ready to spend that money to advance our racial equity, work,

Jeff Wood (47m 42s):
Your work with those organizations, the sparks of the world, et cetera. It’s an amazing group of folks. And it’s a good process to go through. I’m wondering if it’s replicable, if it’s something that other organizations can put together and do I want it to be, but I’m wondering how hard it is to make it more standard than just kind of the individual group that’s working on this, you know, in the process.

Dan Nissenbaum (48m 2s):
Look, I think the short answer is it’s totally replicable. It’s totally replicable. It just takes money. And there’s a lot of money out there. There is a lot of money out there. I mean, just think back to all the new commitments that large corporations have made around racial equity and where banks have made their new pronouncements, et cetera. It’s not necessarily the fastest thing and the easiest thing, but they are certainly replicable. I mean, we’ve gone through the experience. We have a template. We have lessons to share spark at the end of the day is simply going into communities and funding local coalitions to come together and be led through a process of discussing and arriving at the definition of inclusive development and increasing that voice for how they want to intersect with public policy.

Dan Nissenbaum (48m 54s):
And we’ve seen these groups too, that we have seen groups across the country. You know, again, working with transit agencies, Marta and Atlanta around a station after some community engagement developed a soccer field and youth programming, there are a lot of lessons out of these coalitions and collaborations that I think are very replicable. They may take more philanthropic funding at first, for sure. But that’s the great tension, right? The world of private capital looks for standardization looks for volume and looks for no risk. That’s not the business we’re in. And if people want to see the world change, they’ll have to get used to a little risk.

Dan Nissenbaum (49m 36s):
Again, the difference between actual and perception of risk is important. They’ll have to get used to maybe changing some of their criteria. And our industry is also looking at the types of financing criteria, which inhibit racial equity, appraisal limits, things like that, FICO scores, all that. So I think it’s incumbent on the providers of private capital and the larger and government sources of capital to change the way that they’re doing things as well. And that’s part of the advocacy we’re part of. And we’re beginning to see that at the federal government level, it’s very exciting.

Jeff Wood (50m 10s):
It is very exciting. Well, Dan, what’s the best way for folks to find out more about your all’s work,

Dan Nissenbaum (50m 14s):
Work, lift.org, L I f.org. That’s our website. That’s the best way to probably get to as quickly I’m afraid. I don’t have a very large presence on Twitter and my Instagram. That’s not something do either. So

Dan Nissenbaum (50m 29s):
I probably don’t worry. I need to develop my profile, but we’re working as hard as we can. Yeah. Well, just keep doing the work you’re doing Dan. Thank you so much for joining us. We really appreciate it. Thank you.

Jeff Wood (50m 44s):
And thanks for joining us. The talking head podcast is your project out the overhead wire on the web. If you ever had wire.com sign up for a free trial of the overhead wire daily or fourteen-year-old daily cities news list by clicking the link at the top, right of the overhead wire.com. And please, please, please put the pod, you know, pitch on.com/the overhead wire many thanks to our current patrons for their ongoing support. And as always, you can subscribe to this podcast on iTunes, Stitcher, SoundCloud, overcast, Spotify, and wherever you get your podcasts. And you can always find a traditional home at USA dot Street’s blog.org. See you next time at talking headways.


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