Federal Cuts Threaten Silicon Valley Community Funders

COMMUNITY FINANCIAL INSTITUTIONS serve as the foundation of a thriving society by offering loans to support small enterprises, aid in disaster recovery, assist low-income households, welcome immigrant communities, and develop affordable housing projects. This crucial service is currently under threat.

President Donald Trump’s executive order Disbanding the Community Development Financial Institutions Fund (CDFI) last month aimed a spotlight at these organizations and highlighted their significance. Despite CDFIs being legally safeguarded against elimination, possible reductions in staffing could endanger the entity responsible for managing grant funds dedicated to community development, according to experts.

"If they dismiss everyone who can manage this intricate program, that will create an issue," said Alison Cingolani, the policy director at nonprofit organization SV@Home, to San José Spotlight.

The CDFI Fund offers grants to over 1,430 Community Development Financial Institutions nationwide. This support allows these local entities to extend loans to people with poor credit histories, aid in disaster recovery efforts, promote green energy projects, foster economic rejuvenation, and address various needs within underserved regions. For each dollar received from the CDFIs, an additional eight dollars can be mobilized. private sector investments .

The fund was established to address the detrimental impacts of redlining This refers to a discriminatory practice wherein lenders refused to provide mortgages and financial services to individuals living in neighborhoods labeled as "high-risk," typically due to these areas having large populations of racial minorities. Although redlining has been banned, communities that were once targeted by this practice continue to suffer from significant underinvestment.

The funding for the CDFI Fund will stay at $324 million until the end of the 2025 fiscal year, yet organizations are concerned about how the budget might change beginning in 2026.

Budget cuts might hinder the creation of affordable housing projects.

In Santa Clara County, Housing Trust Silicon Valley, which is a CDFI, offers initial funding to affordable housing The trust offers loans to approximately 15 to 20 development projects annually, as stated by CEO Noni Ramos, which includes the Quetzal Gardens Apartments finished in 2021. Reductions in funding for the CDI Fund might impede these projects from starting. Each of their lending initiatives typically involves providing between $4 million and $5 million in loans per project.

"It might hinder our capacity to secure those public funds, which ultimately are what we can loan to affordable housing developers," Ramos explained to San José Spotlight.

It might hinder our capacity to secure those public funds, ultimately impeding our ability to provide loans to affordable housing developers.
Noni Ramos, the CEO of Housing Trust Silicon Valley

Dora Beyer, who leads community development at Excite Credit Union, stated that without the CDFI Fund’s grant money, certain programs might need to be reduced, such as one offering a $3,000 grant. small business Owners. Over 60% of the credit union’s lending activities support low- and moderate-income families, according to Beyer. Their loan offerings include vehicles, students, personal use, as well as home mortgages.

We particularly want to connect with people who have traditionally distrusted financial institutions—those who might be unbanked, underbanked, or credit-invisible," Beyer told San José Spotlight. "Across the country, CDFIs and credit unions are truly focused on actively reaching these communities.

Reach out to Joyce Chu at joyce@sanjosespotlight.com or @joyce_speaks on X.

The tale initially surfaced in San Jose Spotlight.

The post "That’s going to pose an issue": Federally initiated reductions threaten funding for Silicon Valley community organizations. appeared first on Local News Matters .