The first Community Development Corporations (CDC) grew out of the Civil Rights Movement to provide social services and fight unemployment, poverty, and divestment in cities. Initially led by community leaders with grassroots activist backgrounds, many local community organizations transformed into CDCs to attract financial resources for social and economic development projects.

The CDC idea stemmed from Robert F. Kennedy’s concerns in the early 1960s that President Lyndon B. Johnson’s War on Poverty did not effectively reach the nation’s most vulnerable and least-served communities. Kennedy helped create CDCs through the 1966 Special Impact Program, an amendment to the Economic Opportunity Act in 1964, allowing federal funding of community development projects in poor urban areas.

Traditionally neighborhood-based, many early organizations transitioned from political activism to tax-exempt economic development corporations with governing boards that included local officials and residents as well as business leaders. As non-profit institutions, CDCs received donations and grants from private and public sources, including federal and state agencies, and private sector philanthropic foundations which usually defined how the funds should be used. Often this created controversy in the local communities among grassroots leaders who thought CDCs should focus on advancing community-defined needs. Although goals of funders and local communities were not always mutually exclusive, successful CDC leaders finely tailored local projects to satisfy both constituencies. In time, some CDCs found ways to diversify their funding streams, which gave them greater independence and creative options for advancing economic development in their communities.