2025 Public Policy Priorities

Grants are a vital source of capital for CDFIs, which leverage federal dollars to attract private and philanthropic investment. Specifically, the U.S. Treasury’s CDFI Fund provides critical organizational support, enabling CDFIs to make localized funding decisions based on community-specific needs. Unlike many federal programs, which direct project-level grants from Washington DC, CDFI Fund programs invest directly at the institutional level, empowering local decision-making.

Maximizing appropriations for the CDFI Fund is essential to expanding opportunity in areas where traditional banks fall short. With 29% of CDFI lending directed to high-poverty areas, increased funding will spur greater private investment and help bridge critical financing gaps. Congress should allocate at least $354 million to the CDFI Fund for Fiscal Year 2025 and 2026 to continue driving private-sector-led economic growth in underserved communities.

Investing in proven federal programs that leverage private sector solutions and local decision-making is essential to creating lasting prosperity. With a focus on fiscal responsibility and a commitment to stimulating economic growth, CDFIs expand opportunity and help communities achieve the American Dream. Expanding CDFI access to federal credit and lending programs ensures that taxpayer resources are used efficiently and effectively.

Existing federal programs have the potential to unleash even more resources to address pressing issues like the nation’s housing affordability crisis. The federal government should:

• Reform the Department of Treasury’s CDFI Bond Guarantee Program: This program offers long-term credit at below-market rates but faces high barriers to entry. Making the program permanent and reducing the minimum bond size from $100 million to $25 million will allow more community lenders, particularly in rural markets, to participate.
• Expand CDFI involvement in USDA Rural Development programs: Programs such as the Section 502 Direct Loan Program and Rural Energy Assistance Program can benefit from CDFIs’ on-the-ground expertise, increasing homeownership and energy resilience in rural areas.
• Enhance SBA lending programs: By partnering with CDFIs, the Small Business Administration can improve access to small dollar lending that businesses need to start, expand, and create jobs, particularly in rural and low-income areas through proven models like the Microloan program and Community Advantage program must be preserved and expanded.
• Increase CDFI financing of critical community infrastructure: Supporting health centers, childcare facilities, and charter schools through existing federal programs at the Department of Health and Human Services to build thriving communities.
• Promote affordable housing through market-driven initiatives: Partnering with HUD and FHFA to leverage private investment will expand affordable housing options and address the nation’s housing crisis. In particular, the federal government must ensure Fannie Mae and Freddie Mac continue to make contributions to the Capital Magnet Fund and Housing Trust Fund. Additionally, increasing the role of CDFIs in federal programs like Opportunity Zones and aligning the program with other housing initiatives will allow CDFIs to combine these investments to amplify their impact.

CDFIs are pivotal in advancing American energy independence by reducing risks for communities facing rising energy costs and natural disasters. Low-income communities are disproportionately impacted by these challenges, which not only burden local economies but also lead to rising costs for the federal government. Strategic investments in pre-disaster mitigation, resilient infrastructure, and local energy solutions can lower long-term costs while enhancing national energy security.

CDFIs also serve as financial first responders in the aftermath of disasters, providing swift support to small businesses, homeowners, and community organizations. By offering energy financing solutions, CDFIs help reduce energy costs for communities and promote economic resilience. Additionally, CDFIs drive investment into diverse, American-made energy sources, ensuring that communities benefit from cleaner, more affordable energy options while boosting domestic energy production.

As the federal government addresses environmental challenges affecting low-income households, we recommend leveraging the proven, market-driven solutions offered by CDFIs to build more resilient communities and support economic stability.

CDFIs are uniquely positioned to partner with the private sector to leverage market-based solutions through the tax code, ensuring that capital flows efficiently to where it’s needed most. Congress should ensure these bipartisan priorities are included in tax reform:

• Make the New Markets Tax Credit permanent and index allocations to inflation, promoting long-term private investment in low-income areas.
• Support key tax incentives, including the Community Development Investment Tax Credit Act, the Neighborhood Homes Investment Act, and the Affordable Housing Credit Improvement Act, to encourage private sector-led revitalization of local economies, expand affordable housing, and create jobs.

A strong financial system relies on fair competition, transparency, and responsible lending. CDFIs play a key role in ensuring small businesses and consumers have access to affordable financing, offering alternative financing options to harmful predatory lenders. Predatory lending practices distort free market competition and undermine local economies by limiting access to capital. Federal policies should reinforce these free-market principles by supporting accountability and transparency in lending.

Key priorities include:

• Accelerating implementation of policies that promote fairness and transparency, such as the Dodd-Frank Section 1071 rule on small business lending data collection, to ensure that capital flows efficiently to businesses in underserved areas.
• Modernizing the Community Reinvestment Act (CRA) to drive significantly more private-sector investment in CDFIs, especially in rural areas with limited physical bank branches and CDFIs step in to fill the gap in financial services.
• Promoting lending policies that protect entrepreneurs from irresponsible financial products, helping to preserve a vibrant small business sector and strengthen local economies.