A Local Initiative that is Following Up on the National Discussion of Gentrification

By Desiree Hatcher

Redeveloping communities across the country are facing gentrification and displacement pressures that threaten the well-being of low- and moderate-income residents.  The pattern of gentrification and displacement is not always the same.  Experts indicate that velocity is a key component. Once it is perceived that and area is an up and coming neighborhood, the velocity can be so rapid that it precludes efforts to manage change and forestall displacement. Effective strategies are being used to stabilize turnaround neighborhoods, promote economic inclusion, and preserve affordable housing.  However, these tools are most effective in the early stages of change, when there is enough time to align resources to create a balanced mixed-income community.  Early knowledge of neighborhood change is vital, however the most commonly-used publicly available indicators of neighborhood change, such as the American Community Survey, are updated with significant lag, and often not available until displacement and other negative effects have already occurred. Fortunately, a new initiative is addressing this issue.

Turning the Corner (TTC) is a multi-city initiative led by the Urban Institute’s National Neighborhood Indicator Partnership (NNIP), the Funders’ Network’s Federal Reserve Philanthropy Initiative, and the Kresge Foundation to help communities identify more timely patterns of neighborhood change through quantitative and qualitative research.  Data Driven Detroit (D3) is the local partner on the project. The goal of the TTC initiative is to help communities identify and track neighborhood change closer to real time, and provide the information to people who can take action to intercede.

D3 conducted work to develop a quantitative model with the input of community members and partners, and conducted interviews and focus groups with residents to better understand how neighborhood change impacts a community. TTC focused on neighborhoods with the potential for transformational redevelopment, which is the type of neighborhood change that results in displacement by altering the structure of the community, the lives and culture of the people who live there, and housing affordability. To ensure that all blocks in the data set are blocks with the potential for transformational change, D3 created the following criteria to remove blocks from the sample: Blocks with/where:

  • fewer than five residential structures
  • fewer than 25% of parcels have a residential structure
  • the median home value exceeds $150,000

Of the 15,935 blocks in Detroit, 6,491 were removed from the sample using these criteria.  The remaining 9,444 blocks were analyzed based on the following Index variables that were then combined into a Neighborhood Change Index Score:

  • Housing market stability and resident transiency
  • Reported criminal activity
  • Social measures that could contribute to higher turnover rates, such as tax foreclosure, blight violations, and water shutoffs
  • Business investment opportunities
  • Protective activities such as investments in construction permits for improvements and alarm systems that aim to protect the owner from liability and indicate a level of disposable income to reinvest into properties

Neighborhood Change Index Score, 2017

Using the interactive map, once a census block is identified in the Neighborhood Change Index as having conditions conducive to transformational neighborhood change, the individual indices provide a method for drilling down deeper into the area to better understand what factors may be most likely to affect change (and create potential for displacement).  For example, census blocks with high or highest susceptibility to potential change show favorable scores in many or all of the five indices.  In addition, the tool provides the user with information regarding variables influencing the score, such as: the number of blight violations, utility and water shutoffs on the social advantage scores; levels of commercial activity on the business index scores; and the impact of resident turnover and speculator-owned properties on the housing stability index scores.

The Neighborhood Change Index can help identify the types of action that may be most helpful in addressing the negative impacts of transformational neighborhood change. For example, if a neighborhood is identified as having the highest likelihood for potential change, local efforts to prevent displacement can begin sooner.  Communities near high-income or rapidly changing neighborhoods can be alerted of early warning flags for vulnerability to displacement (particularly in connection with large investments).  This index could also help efforts to deploy neighborhood stabilization and block grant funds more effectively in distressed neighborhoods facing redevelopment.  Further, using the NCI, community organizations and affordable housing advocates can identify specific factors that may be affecting at-risk neighborhoods, allowing them to strategize policy actions to address the possibility of displacement.  The results of the analysis also can help communities that are not at immediate risk for rapid change to further understand what areas of investment could have the greatest impact on the long-term sustainability of their neighborhoods.

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Revitalizing the Greater Chatham Housing Market

By Maude Toussaint-Comeau and Robin Newberger

Greater Chatham is a 15-square-mile area in the city of Chicago that includes the neighborhoods of Avalon Park, Auburn Gresham, Greater Grand Crossing and Chatham.  For decades, the area has been an African-American middle-class neighborhood known for its attractive and quality homes built between 1920s and 1950s as part of Chicago’s “bungalow belt.”  However, like many other neighborhoods in Chicago and across the country, the Chatham area was hit hard by the 2008 recession and saw its median home value decline by more than 50 percent between 2007 and 2011 (Figure 1).[1] While home prices in Chatham have ticked upwards in recent years, price recovery in Chatham and many other predominantly black communities of Chicago continue to trail the gains in many other neighborhoods of the city. In this blog, we trace recent trends in the housing market which highlight opportunities for the Greater Chatham community to build upon, but also point to some challenges that affect both the supply and demand for housing in these neighborhoods.

Between 2016 and 2017, median values for both single-family and multi-family units increased in most of the neighborhoods that comprise Greater Chatham (Table 1).  Moreover, a micro housing market analysis by the DePaul Institute for Housing Studies (IHS) shows properties selling at a wide range of prices. The west ends of Auburn Gresham and Avalon Park, and the central and south ends of Chatham, have been labeled “hot spots” in so far as properties in these parts of the community are selling above the median per-square-foot price of the Greater Chatham area as a whole (Figure 2).[2]

A number of challenges remain, however.  As of 2017, the housing price index for the Greater Chatham community was still more than 25 percent below its 2007 peak. In addition, the homeownership rate has remained flat. Various pockets with concentrations of long-term vacancies and boarded up homes present aesthetic and safety issues, diminishing demand and property values.[3]

Housing Market Characteristics

While distributed unevenly, single-family homes make up about 40 percent of the Greater Chatham area’s housing stock. Avalon Park is primarily residential and has more than 65 percent single-family homes, while in Greater Grand Crossing single-family homes make up just below 30 percent of the housing stock (Table 2). About a quarter of the housing stock in Chatham, and nearly 40 percent of the housing stock in Auburn Gresham, is comprised of 2 to 4 unit buildings.  Housing with two or more units have historically been owner occupied with renters in extra units.

Indeed, one of the defining features of the Greater Chatham housing market in recent years has been the shift in housing tenure from owner- to renter-occupied units (Table 3).  Between 2000 and 2015, the homeownership rate in Auburn Gresham fell from 53 percent to 44 percent, and in Avalon Park, from 74 percent to 66 percent. These shifts reflect a confluence of factors, including a loss of population and declining incomes.[4]  During and after the recession, as lenders foreclosed on owners of small residential properties (one-to-four-unit buildings) throughout the South and West sides of Chicago, many homes fell out of the hands of traditional owner-occupants.[5]  According to Chicago Housing Authority data, between 2001 and 2014 the number of housing choice voucher holders in Greater Chatham grew by almost 50 percent.[6]  A significant share of formerly owner-occupied properties have thus become entirely rentals, with voucher-holders occupying about 10 percent of the housing stock.

Greater Chatham’s housing market has also attracted institutional/small-scale investors and cash buyers. In 2016 and 2017, more than 60 percent of both single- and multi-unit (2-4) homes sales in Greater Chatham were sold by businesses/institutional investors to individuals and other businesses, compared to 39 percent and 46 percent for 1-unit and 2-4 units, respectively, in the city (Table 4). In this same timeframe, the increase in 1-unit homes sold by businesses was higher than for the city as a whole (Table 4), and nearly 25 percent of the houses sold in the Chatham neighborhood itself were recent rehabs, typically owned and sold by contractors and investors. This represents a far higher proportion than in other South and West Side neighborhoods, which were also hit hard by the recession. Rehab sales were fewer, for example, in nearby South Shore (15 percent), Park Manor and South Chicago (both 17 percent).[7]

Opportunities and Challenges

The wave of recent rehabs from small developers has helped stabilize the Greater Chatham housing market.[8] Homes sold by investors to individuals or other businesses (that were most likely rehab) increased in price by more than those sold by individuals to individuals (Table 5), suggesting that the overall uptick in home prices in Greater Chatham derives from investor activity. Relatedly, declining days-on-the-market among higher-priced home listings suggests that Greater Chatham is still an attractive place for buyers seeking move-in-condition housing, including single-family homes (Table 6). Thus while some investors may be turning to renters to fill their units, others that secure the resources for rehabbing and upgrading these homes to a “resilient” standard are able to sell at higher prices.[9]

Many challenges remain. Communities in the Greater Chatham area still have twice or higher the rate of vacancy than the city. These vacancies are largely concentrated in discrete pockets, and thus affect submarkets of the community (Figure 3a and 3b). In these submarkets, conditions likely contribute to more uncertainty with respect to appraisals or the future direction of home values. Moreover, the foreclosure rate, which has dropped precipitously since 2012, still stands at about three times the rate (3.6 percent as of December 2017) as compared to Cook County as a whole (1.3 percent) (Figure 4).  Consistent with the slower housing market price recovery in the area, some homes are still underwater which limits the ability to rehab, sell or refinance. [10]   Finally, a tight mortgage credit market in general (Figure 5 a, b, c),[11] and low availability of rehab loans in particular, (Figure 6 a, b)  give room for cash buyers (often from outside of the community), keep some would-be less wealthy resident owner/investors from purchasing 2-4 unit properties, and potentially work to constrain the availability of more desirable homes. [12]

Going forward, revitalizing concentrations of troubled (long-term vacant) properties through priority investment strategies and neighborhood stabilization programs may help jumpstart some of the more distressed areas, and create a more resilient community of choice.[13]  Efforts to ensure access to credit and creative financing for rehab purchasers[14] may help balance the share of renters and homeowners in the Greater Chatham area, and uphold the preservation of homeownership in this traditionally middle-class community.


Note: Communities are represented by Public Use Microdata Areas (PUMAs) as defined by the U.S. Census. PUMAs represent relatively homogeneous areas. There are 33 PUMAs in Cook County, 14 of which encompass suburban communities; the remaining 19 comprise city communities. The PUMAs areas are named after the most prominent central municipality or Chicago community area that they contain.
Source: DePaul Institute for Housing Studies Data Clearing House. https://www.housingstudies.org/data/ihs-price-index/cook-county-house-price-index-second-quarter-2017. Reproduced from Toussaint-Comeau, M and J.M. Lee, 2018, “Determinants of Housing Values and Variations in Home Prices Across Neighborhoods in Cook County”. https://www.chicagofed.org/publications/profitwise-news-and-views/2018/determinants-of-housing-values-and-variations-in-home-prices-across-neighborhoods-in-cook-county


[1] For an analysis of the housing markets in Cook County neighborhoods see,  http://www.chicagobusiness.com/section/housing-crash-numbers
For an example of an article on another south side of the city of Chicago black neighborhood, Woodlawn, see, https://chicago.curbed.com/2017/3/21/14999014/obama-library-chicago-south-side-development
For an article on an example of revitalization activities in another black neighborhood on the south side of Chicago, Pullman, see, https://chicago.suntimes.com/news/how-historic-pullman-became-a-national-model-for-community-revitalization/
[2] For interactive maps of property transactions in recent years see,  https://instituteforhousingstudies.carto.com/builder/0fe582f2-1fb5-11e7-8171-0e233c30368f/embed
[4] https://www.chicagofed.org/publications/profitwise-news-and-views/2018/determinants-of-housing-values-and-variations-in-home-prices-across-neighborhoods-in-cook-county
[5] See https://www.jpmorganchase.com/corporate/Corporate-Responsibility/document/chicago-case-study-2017.pdf
[6] The majority of voucher holders in the city of Chicago are settled in low-income neighborhoods on the West and South sides, according to data obtained from the CHA, as reported in an article in the Chicago Tribune. There are large concentrations of vouchers holders in Auburn Gresham, with 1,652; Greater Grand Crossing, with 1,284; and Chatham, with 1,302. http://www.chicagotribune.com/news/ct-cha-vouchers-choice-met-20140925-story.html
[7] http://www.chicagobusiness.com/realestate/20170815/CRED0701/170819926/rehabs-stabilizing-market-in-this-south-side-neighborhood
[8] http://www.chicagobusiness.com/article/20170815/CRED0701/170819926/rehabs-stabilizing-chatham-s-housing-market.
[9] Another reason why high-quality rehab is important to Chatham is to protect against damage from flooding.  Chatham is susceptible to flooding, and homes damaged by flooding are linked to decreased quality of life, vacancies and divestment.  Initiatives are currently underway to help developers rehab properties to a “resilient” standard that attracts middle-income professional residents, including reducing flood risks prior to sale. (See report by the Center for Neighborhood Technology https://www.cnt.org/sites/default/files/publications/RainReady%20Plan%20-%20Chatham%20Online.pdf).
[10] https://www.chicagobusiness.com/article/20170111/CRED0701/170119974/underwater-homeownership-more-common-in-chicago-s-minority-neighborhoods
[11] The low availability of loans relates particularly to small-dollar mortgages. An Urban Institute study discusses issues contributing to the lack of small-dollar mortgages and explains how small-dollar mortgages can help in the home improvement market.  See https://www.urban.org/sites/default/files/publication/98261/small_dollar_mortgages_for_single_family_residential_properties_0.pdf
[12] Low property values in depressed neighborhoods often make it difficult for small-scale investors to get loans for any substantial amount of money. See https://www.jpmorganchase.com/corporate/Corporate-Responsibility/document/chicago-case-study-2017.pdf)
[13] Several city and other public/ and private sector programs have been created to help stabilize neighborhoods in Chicago.  The city of Chicago’s Micro Market Recovery Program provides incentives to  purchasers and rehabbers of formerly vacant properties (see https://www.cityofchicago.org/city/en/depts/dcd/supp_info/micro_market_recoveryprogram.html). The five-year Home Buyer Assistance Program in 2014 aimed to invest $1.3 billion in home construction, rehabilitation and preservation (see https://www.cityofchicago.org/city/en/depts/mayor/supp_info/home_buyer_program.html). Also see information on the City of Chicago Neighborhood Stabilization Program which provided funds to communities that were affected by foreclosure (https://www.cityofchicago.org/city/en/depts/dcd/supp_info/neighborhood_stabilizationprogram.html). For an example of a private sector initiative see the University of Chicago’s Employer-Assisted housing program (https://humanresources.uchicago.edu/benefits/retirefinancial/EAHP-FAQ_final_11%2030%2015.pdf. Also see LISC/Chicago’s New Communities Program (http://www.newcommunities.org/).
[14] See for example a creative funding initiative to small-scale investors for rehab of 1-4 units by the Chicago CDFI Collaborative, funded by JP Morgan Chase bank. https://www.jpmorganchase.com/corporate/Corporate-Responsibility/document/chicago-case-study-2017.pdf
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Community Development Finance in Smaller Markets

By Garvester Kelley and Josie Link

There is a role for Community Development Financial Institution (CDFI) presence and activity in smaller markets, where the needs of low- and moderate-income (LMI) communities are often no different than those in larger markets. With a mandate to understand the credit needs of all communities across the Seventh District, the Community Development and Policy Studies division of the Federal Reserve Bank of Chicago will host events focusing on increasing awareness about the potential role of CDFIs in smaller markets. The most recent gathering was held in Merrillville, Indiana, on June 14, 2018, along with the Federal Deposit Insurance Corporation, the Office of the Comptroller for the Currency, and the Legacy Foundation, the community foundation of Lake County, Indiana.

About CDFIs

CDFIs are mission-driven organizations that provide needed capital to underserved or disadvantaged communities. CDFIs function as banks, credit unions, loan funds, microloan funds, and venture capital providers. Currently more than 1,000 CDFIs have been certified by the CDFI Fund of the U.S. Department of the Treasury and serve communities across the nation.

Demonstrating CDFI ability to deploy capital in disadvantaged communities, a recent Urban Institute study[1] highlights that CDFIs lent more than $34B from 2011 to 2015 with 64 percent of lending activity in census tracts with one or more low- or moderate-income (LMI) indicators, including:

  • 10 percent or higher unemployment;
  • Poverty rate of 20 percent or higher;
  • 50 percent or more of residents earning less than 200 percent of the federal poverty level; or
  • A population with at least half non-white residents

Since inception in 1994, the CDFI Fund has provided nearly $2.1B in Financial and Technical Assistance awards to CDFIs driving capital and support services into distressed communities[2] particularly in and around large urban centers. However, smaller urban and rural markets may not benefit from the CDFI community for a variety of reasons, including, but not limited to, a lack of:

  • Local community development capital (civic, human, financial);
  • Network of investors (banks, foundations);
  • Knowledge and awareness about CDFIs; and
  • What is sometimes referred to as “capital absorption capacity” or the capacity of an entity to apply for, deploy, and manage CDFI funds.

Community Development Finance in Smaller Markets explored the role, varying types, and benefits of CDFIs working in communities where conventional financing mechanisms may not meet the complex development and financing needs of a community or region. The event sought to:

  • Better understand the community/economic development needs of Northwest Indiana;
  • Hear how local and regional CDFIs work with community and financial institutions to achieve positive, measurable impact, as well as the ecosystem necessary to support this work; and
  • Introduce the CDFI Friendly City™ Model created by Mark Pinsky of FiveFour Advisors and utilized in Bloomington, Indiana, led by Mayor John Hamilton and Tina Peterson of the Community Foundation of Bloomington and Monroe County.

Sixty-nine individuals representing 53 organizations from academia, advisory services, CDFI, community/economic development, philanthropy, financial institutions, municipal/federal legislative, and regulatory communities participated in the half-day meeting with a long-term goal of increasing community development finance activity in Northwest Indiana.

Northwest Indiana (NWI) presents an interesting case study for the potential of CDFIs in smaller markets. Although Indiana is home to 11 CDFIs, only two of them (Federal Credit Unions)[3] are located in or directly serve the NWI region. And, although the region benefits from services extended by CDFIs working in the Chicago metro area, it is lacking an organization dedicated to meeting the unique needs of a landscape that is both industrial and rural, populated by small communities – some with significant economic challenges.

Table 1 illustrates a sample of these challenges drawing on data from the Federal Reserve Bank of Chicago’s Peer City Identification Tool (PCIT).[4] In this example, three primary cities in NWI exhibit strong signs of distress (declining populations, low incomes, and high unemployment), which compare unfavorably with the median of PCIT database. CDFIs are well positioned to catalyze such communities by providing capital for small businesses, affordable housing, and a broad range of community facilities.

Table 1

Community Development Finance in Smaller Markets -Table 1

The Federal Reserve Bank of Chicago will continue to host meetings across the Seventh District to inform stakeholders about the benefits and challenges of community development finance in smaller markets, including rural communities, with an eye towards identifying models that demonstrate success meeting community and economic development needs and discussing the ecosystem of investors, intermediaries, and service providers necessary to ensure capital is deployed and absorbed by communities.

The next Community Development Finance in Smaller Markets convening is scheduled for October 23, 2018 in South Bend, Indiana.


[1] Theodos, Brett, and Eric Hangen, “Expanding Community Development Financial Institutions,” Urban Institute, available at https://www.urban.org/research/publication/expanding-community-development-financial-institutions.
[2] CDFI Fund, A Year of Impact: FY 2017 Year in Review, United States Department of Treasury, available at https://www.cdfifund.gov/Documents/CDFI_FY%202017%20Annual%20Report.pdf.
[3] ProFinance Federal Credit Union, Merrillville, and REGIONAL Federal Credit Union, Hammond.
[4] Peer Cities Identification Tool, Federal Reserve Bank of Chicago, available at https://www.chicagofed.org/region/community-development/data/pcit.
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Data Driven Supervision and Fair Lending Risk Management: Updates from a Wisconsin Economic Development Forum

By Aaron Brown, Steve Kuehl, and Josie Link

The Federal Reserve Bank of Chicago’s Community Development division regularly holds economic development forums around the Seventh District that provide both a general economic overview and focus on topics of interest to stakeholders. On May 23rd, the topic was “Updates on the Midwest Economy & Data Driven Supervision and Fair Lending Risk Management.”

Bill Testa, Vice President and Director of Regional Programs at the Federal Reserve Bank of Chicago, made the following key points regarding the current state of both the U.S. and Wisconsin’s economy:

  • The U.S. economy is on a strong trajectory for the remainder of 2018 and into 2019. First quarter growth will likely be weak as consumer spending took a partial pause following a very strong fourth quarter 2017. Upward revision to Q4 2017 GDP estimate together with strengthening business and consumer optimism has led to high economic expectations for 2018. The consumer sector shows sign of rebound as consumer sentiment increased to 14-year high in April, aided by rising wages and strength in the labor markets. Business activity (Investment and Export Recovery) remains strong especially in manufacturing, though the prospect of a high tariff environment has added to market volatility and business uncertainty.
  • Strengthening in both the global economy and the pace of business investment activity domestically has translated into a healthy pace of expansion in much of the Midwest. Manufacturing in the region is leading the expansion (see Chart 1). Auto production remains at high levels while traditional capital goods and materials industries are growing. Production agriculture has dampened farm income, however, as commodity  prices have fallen.
  • Wisconsin’s economy has regained momentum along with Midwest manufacturing and U.S. export activity. Tight labor markets and demand for skilled workers are causing concerns among many Wisconsin employers. Such concerns extend far into the future as well. Migration from Midwest to the Sunbelt has accelerated. Meanwhile, falling rates of working age population and limits on immigration are expected to keep labor markets tight into the coming decades, especially outside of large cities.
  • In the large scheme of things, and following nine years of expansion, the U.S. economy is running close to its potential as labor markets tighten. Wage and price growth are firming while inflation (and expectations) have closed in on the Fed’s two-percent long-term objective (Chart 2).
  • Many forecasts of the U.S. economy have been revised higher for this year and next year due to the added fiscal stimulus attendant fromt tax cuts and expanded federal spending. The downside is that fiscal actions have likely added to future federal government deficits and debt levels, which will require repayment in later years.

Scott Grotewold, Fair Lending Risk Specialist at the Federal Reserve Bank of Chicago, made the following key points regarding data driven supervision and fair lending risk management:

  • Bank examiners can approach fair lending oversight with data-driven supervision through a variety of resources, including Home Mortgage Disclosure Act (HMDA) and Community Reinvestment Act (CRA) data, ALERT/Loan Trial, branching information, marketing/outreach/community development activities, exception/override logs maintained by the financial institution, complaints, and acquisitions/mergers. While “data-driven” usually is synonymous with numbers, the wide range of information sources illustrate how compliance officers use many different types of tools at their disposal.
  • The collection of publicly available data, such as HMDA data or CRA exam reports, has expanded recently. New HMDA rules, effective January 1, 2018, added 25 new data elements, while modifying and expanding other elements. Certain of the new elements, such as debt-to-income ratio (DTI), the combined loan-to-value ratio (CLTV), credit score, and automated underwriting system (AUS) results, will provide regulators and enforcement agencies information about lending practices that is currently only available in a loan file-by-loan file review. Thus, the expanded dataset gives examination staff the ability to assess the data quickly. Examiners can also assess fair lending risk through volume/trends, the nature of pricing and underwriting, assessment/market areas, control environment, and quality of the Fair Lending Program.
  • A successful fair lending program includes board and management oversight, as well as, a clear compliance program. Board and management oversight should include change management, risk management, and self-identification/corrective action. The compliance program should contain clear policies and procedures, consistent training, active monitoring, and complaint resolution. To mitigate fair lending risk around the bank’s delineated assessment area, examiners should monitor demographics, assessment area changes, lending, branch or loan production office locations, and marketing/outreach.

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Reinventing Our Communities – Investing in Opportunity

Web Banner: Reinventing Our Communities - Investing in Opportunity

By Jason Keller

Investing in people, places, and communities can produce positive returns and increase access to resources that create economic growth and prosperity. With this set of principles in mind, the Federal Reserve Bank of Chicago is cosponsoring “Reinventing Our Communities – Investing in Opportunity” a 2.5 day conference in Baltimore, Maryland from October 1-3, 2018.

Through a combination of plenaries and workshops, attendees at this year’s event will learn about effective strategies for building and mobilizing four forms of capital — financial, human, physical, and social — to create opportunity in communities. Best-selling author, Wes Moore, will deliver a keynote on the topic of investing in opportunity, drawing on his experience as chief executive officer of the Robin Hood Foundation, as well as themes explored in his New York Times bestseller, The Other Wes Moore.

In addition to panels on a diverse range of topics affecting communities – urban and rural – the conference will offer learning labs on the Community Reinvestment Act and economic inclusion to help participants put ideas into practice. In addition, a selection of four tours are offered to explore the diversity of Baltimore’s neighborhoods.

Organized by the Federal Reserve Bank of Philadelphia since 2004, this event has become a must-attend biennial event for experts, thought leaders, and policymakers in community and economic development. This year, the conference is co-hosted by the Federal Reserve Banks of Philadelphia and Richmond and the Johns Hopkins 21st Century Initiative. Other co-sponsors include, the Federal Reserve Banks of Atlanta, Cleveland, Minneapolis, New York, and St. Louis as well as the Annie E. Casey Foundation, Enterprise Community Partners, The Federal Home Loan Bank of Pittsburgh, and the Joseph and Harvey Meyerhoff Family Charitable Funds.

For more details and to see the full lineup of plenaries and workshops and to learn how investing in our communities can create resources that foster economic growth, social cohesiveness, and neighborhood stability, visit the conference website. Reserve your spot today!

To follow the conference on Twitter and to get conference updates, use
@philfedcomdev Twitter logo #Reinventing18. For additional questions, send a message to cdpsevents@chi.frb.org.

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A Summary of Seventh District Community Development Responses to the Low- and Moderate-income (LMI) Conditions Survey

By Emily Engel and Mark O’Dell

For the past four years, the Federal Reserve Bank of Chicago has distributed the Kansas City Federal Reserve’s LMI survey to Seventh District constituents engaged in community development. Recipients of the emailed survey are active in the fields of real estate development, finance, financial counseling, economic development, banking, consumer advocacy, small business development, philanthropy, law, higher education, agriculture, manufacturing, and human services. The survey asks the same questions each year in order to track trends affecting demand for services; jobs and affordable housing availability; financial well-being; and access to credit and capital, specifically for LMI communities and people.

With four years of survey results in hand, we can observe changes in the survey respondents’ outlook over time, which represent each state in the district, providing an opportunity to look at both the most recent responses and potential emerging trends in LMI communities over time.[1]

Demand for Services

Survey respondents reported that demand for community development services continues to rise, with 54 percent saying that their organization faced a greater demand for its services in LMI communities than during the same period a year ago. This number is close to the 2017 results, when 51 percent reported a year-over-year increase in demand for services. In each of the past four years, more than half of survey respondents reported rising demand for services in the LMI communities they serve.

Chat 1: How did the demand for your services change during the past quarter compared to the same period one year ago?

Job availability

According to respondents, the availability of jobs for LMI individuals has improved consistently since 2015. In the latest version of the survey, 48 percent say that they believe the availability of jobs has increased in the past year, while only 11 percent believe there has been a decrease in job availability. The chart below reflects minor changes in these responses since 2017 (i.e., prior year’s) and a generally mixed trend over the past four years regarding job availability in LMI communities.

Chart 2: How has the availability of jobs for low- and moderate-income people changed during the past quarter compared with the same period one year ago?

Affordable housing

However, respondents indicated that affordable housing challenges remain for LMI communities. Respondents noted poor housing availability for many LMI individuals, according to our 2018 responses. In the 2018 survey, 36 percent of respondents say that the availability of affordable housing has decreased from the previous year, while just 18 percent say affordable housing availability has increased. This is an increase from the 2017 survey, when only 32 percent saw a decrease in affordable housing availability and 25 percent believed that the availability of affordable housing had increased. In comparison to the 2015, 2016, and 2018 surveys, 2017 was an outlier in terms of optimism about the availability of affordable housing; typically almost twice as many survey respondents saw declines in affordable housing availability, compared with those who believed that the affordable housing supply is improving for LMI individuals.

Chart 3: How has the availability of affordable housing for low- and moderate-income people changed during the past quarter compared with the same period one year ago?

Financial well-being

According to our survey respondents, residents of LMI communities face continued financial challenges.  In 2018, responses are mixed, with 31 percent stating that the financial well-being of LMI individuals has declined since 2017 and 24 percent seeing an improvement from the previous year. The number of survey respondents reporting that LMI financial well-being declined reached a four-year low, although even fewer respondents report that LMI financial well-being is increasing. In 2017, 40 percent of respondents believed the financial well-being of LMI individuals was worse than in the previous year; in 2016 that figure was 41 percent and in 2015 it was 40 percent.

Chart 4: How has the financial well-being of low- and moderate-income people changed during the previous quarter compared with the same period one year ago?

Access to credit

In 2018, for LMI individuals and communities, 22 percent of survey respondents say access to credit is better than it was a year ago, while only 4 percent say it is worse. While the vast majority say credit availability is about the same as it was a year ago, 2018 marks the first year since 2015 that more respondents suggest that access to credit is increasing rather than decreasing. In 2017, only 16 percent said access to credit was improving, while 18 percent thought it was decreasing, and in 2016, only 9 percent said credit access had improved.

Chart 5: How has access to credit for low- and moderate-income people changed during the past quarter compared with the same period one year ago?


Results from the Seventh District LMI survey confirm what many community development professionals and others suspect: that the recovery from the Great Recession, while evident in broad economic data, is not being felt consistently in LMI communities. Mixed results regarding job availability and ongoing challenges around housing affordability can undermine a general sense of financial well-being and potentially contribute to a slight uptick in demand for social services. A bright spot is the apparent increase of credit availability to these communities, as reported by survey respondents.  However, that this turnaround did not appear until this year, may be indicative of the lag experienced by LMI communities during times of economic expansion. Results in 2019 and beyond will add further nuance to these findings. See below for further information about the survey and how to participate.

Analyses of previous survey responses were featured in ProfitWise News and Views and in the CDPS Blog.

Is your organization interested in participating? Please read the FAQs below and reach out to Emily Engel in Community Development and Policy Studies at Emily.Engel@chi.frb.org.


Who can participate?
Representatives of organizations that directly provide services to LMI communities.

What does the survey ask?
Based on seven indicators, the point-and-click survey asks how the financial health of your LMI constituents and your organization compares with the past quarter and past year. You also will be asked what you expect to happen to these indicators in the following quarter.

How often will I be surveyed?
Twice a year, you will receive an email from Community Development and Policy Studies each survey period with a link to a secure survey webpage, currently administered through Qualtrics.

How long does the survey take to complete?
A few minutes.

What happens to my responses?
Aggregate results are sporadically published in Community Development and Policy Studies ProfitWise News and Views as well as our blogs. Additionally, the results have also been highlighted by the Kansas City Federal Reserve. This information offers service providers, policymakers and others a gauge to assess changes in the economic conditions of the LMI population over time.

Will my organization be identified?
All identifying information is kept confidential.

[1] There has been a continued sufficient participation, approximately 10%, in the poll to report the data as a non-scientific poll.
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Introducing a comprehensive source of community development news from the Federal Reserve Bank of Chicago

This month we are launching a new e-newsletter to create a comprehensive source for Community Development and Policy Studies news. This monthly email will highlight the latest community development publications (including ProfitWise News and Views), blogs, and upcoming events from the Federal Reserve Bank of Chicago and across the Federal Reserve System.

Our intent with this new communications platform is to make our content and resources more accessible, and reduce our email flow while expanding information flow. We welcome feedback from users on this new platform and suggestions about other ways we can stay connected with you.

Subscribe to the e-newsletter now

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Small Business Credit Survey (SBCS) – 2017 Results for the Seventh District

By Emily Engel and Mark O’Dell

Thanks to the participation of over a thousand businesses across Illinois, Indiana, Iowa, Michigan and Wisconsin, the latest round of the nationwide SBCS [1] provides fresh information about small business economic trends in the area served by the Federal Reserve Seventh District. One of the most notable findings is the predominance of older firms among survey respondents and the small number of newer firms relative to the country as a whole. Other factors measured and summarized below for businesses in the Seventh District (relative to the country as a whole) include adequate access to capital, and the number of firms producing large revenues, and widespread optimism concerning future revenues and employment growth. Another important set of data gathered from the survey addresses debt and credit use. Both credit use and business dynamism are central to the overall business environment, so we will take advantage of the Small Business Survey’s comprehensiveness to examine these results in greater detail.

Age of Firm

Nationally, 34 percent of firms were less than five years old. In the Seventh District, however, only 29 percent of firms fall into this category. At the state level, results ranged from 27 percent of businesses being under five years old in Wisconsin and Iowa, to 32 percent in Illinois. Indiana and Michigan came in at 29 percent – the average across the Seventh District. In all five states older firms were more prevalent than in the nation overall, with 28 percent of firms in the Chicago Fed’s District in business for at least 21 years. The national average for businesses that are at least on their third decade is only 23 percent.

This young firm-old firm dynamic in the Seventh District may be partly explained by the region’s lower population growth. Nationally, the places with the largest fraction of younger businesses have rapid population growth, including Florida with 40 percent of businesses under five years old and Texas with 38 percent. Another likely factor is the state-level fiscal and regulatory environment, while the industry composition of regional economies also may play a role in the proportion of younger businesses appearing in the survey.

Firms Exceeding $10M in Revenue

Along the same lines, according to the SBCS, the Seventh District includes a larger proportion of high-revenue small businesses than the country as a whole. In Seventh District states, 6 percent of firms reported more than $10 million in revenue during the previous year. This rate is higher than the 4 percent reported nationally, and led by the 7 percent of Wisconsin firms reporting at least $10 million in revenue. Other states above the national average at 5 percent in Illinois and 6 percent in Indiana, Iowa and Michigan. When comparing Seventh District states with the rest of the country in lower revenue divisions, the differences are less striking; 17 percent of firms in the Seventh District earned $100,000 or less in revenue during the previous year, versus 18 percent nationally. Both nationally and in the Seventh District, 51 percent of firms earned between $100,000 and $1 million in revenue, and 26 percent of Seventh District firms earned between $1 million and $10 million, while 27 percent reached that revenue range nationally.

Broadly speaking, businesses in the Seventh District report similar challenges and levels of financial health compared with businesses around the country. In the country as a whole 29 percent of businesses surveyed said they were growing, while 28 percent of businesses in the Seventh District reported growth. Michigan firms were standouts in growth within the Seventh District, with 33 percent reporting growing, while 27 percent of Wisconsin firms, 28 percent of Iowa firms and 26 percent of both Indiana and Illinois firms reported growth. Forty percent of firms in the Seventh District did not report financial challenges in the past year, better than the 36 percent reporting no financial challenges nationally. Both nationwide and in the Seventh district, the number one financial challenge was paying operating expenses and wages, with 37 percent of businesses in the Seventh District calling it a challenge; 40 percent of businesses nationally agreed. Fewer Midwest businesses faced challenges with inventory purchases than the national average, with only 14 percent of Seventh District firms considering it a challenge while 18 percent of firms nationwide considered inventory and materials to be a financial challenge. One very important distinction for firms in the Seventh District was in credit access, with only 25 percent reporting that credit availability was a challenge compared with 30 percent of businesses nationally.

Financial Challenges Experienced in the Past 12 Months

The survey found that the states served by the Seventh District ranged from 36 percent of businesses reporting no financial challenges in Illinois, to 46 percent of businesses reporting no financial challenges in Wisconsin. In between, 37 percent of Michigan firms, 38 percent of Indiana firms, and 41 percent of Iowa firms reported no financial challenges. While in all states, operating expenses and wages were the most common source of financial challenges, about a third (33 percent) of businesses in Indiana reported that credit availability was a challenge. This contrasts with the other states in the Seventh District, particularly Iowa (22 percent) and Illinois (24 percent), but also Michigan (28 percent) and Wisconsin (27 percent). The only other widely reported financial challenges in any of the five states were debt payments; debt was named as a challenge by 20 percent of firms in Wisconsin and 24 percent of firms in Illinois.

More than two-thirds (68 percent) of small businesses in the Seventh District reported prior outstanding debt; this matched the national rate. Around two in five firms in the Seventh District applied for additional credit in the past year. A majority (55 percent) of these credit applicants went to small banks; this ratio is a notably higher than the national average of 47 percent. In contrast, only 38 percent of Seventh District credit-seeking firms sought loans or lines of credit from large banks, and only 18 percent used an online lender. These rates are significantly lower than the national averages. In addition, 4 percent of Seventh District credit seekers applied with community development financial institutions (CDFIs); 10 percent applied with credit unions; and 15 percent sought some other source of funding.

Application rate by source of loan, line of credit, or cash advance

For Seventh District firms that did not seek additional financing in the past year, a majority (55 percent) already reported sufficient financing. Fifty percent already used a small bank for financing needs, again exceeding the national rate. This indicates that small banks, while important around the country, are an even more central part of the financing of small business in the Midwest. This finding is consistent with the prevalence of community banks in states of the Seventh District. For example, in 2017 fully 47.5 percent of bank branches in Illinois, Indiana, Iowa, Michigan and Wisconsin were owned by banks with under $3 billion in assets. Nationwide banks with under $3 billion in assets only owned 30.3 percent of branches.[2]

Overall, the 2017 SBCS results suggest that the state of small business in the Seventh District largely mirrors that of the rest of the country, with a few important distinctions. First, the states of the Seventh District contain an elevated number of older firms and high-revenue firms relative to the rest of the country; this again is likely linked with the industrial makeup of the Seventh District and the flat population growth of the region. Seventh District small businesses face many of the same challenges as businesses around the country, but fewer of them consider credit availability to be a major challenge, and many small businesses already consider themselves to have sufficient financing. For those businesses seeking new financing, the prevalence of small banks of the Seventh District has meant they play a larger role in providing access to credit than the national average. Finally, firms in the Seventh district vary widely in their recent profitability growth, but match the rest of the country with cautious optimism for future revenue and employment growth.

To learn more about the SBCS and see all the most recent releases, please visit the Fed Small Business homepage.


[1] The SBCS is a convenience sample. Since the sample is not selected randomly, the survey may be subject to biases that are not present in randomly-selected samples of firms.  To control for potential biases, the results are weighted using U.S. Census Data to reflect the full population of businesses along the dimensions of industry, age, employee size, and geography.
[2] Summary of Deposits, Federal Deposit Insurance Corporation, 2017.
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Community Advisory Council (CAC) Nominations are Now Open

By Jason Keller

The Federal Reserve Board of Governors (the Board) announced on April 16, 2018, that it is accepting applications from individuals who wish to be considered for membership on the Community Advisory Council (CAC). Community Development and Policies Studies (CDPS) – a division of the Economic Research Department of the Federal Reserve Bank of Chicago–is working with the Board to source candidates for the CAC from the Seventh District, which consists of Iowa as well as portions of Illinois, Indiana, Michigan, and Wisconsin.

Formed in 2015, the CAC advises the Board on issues affecting consumers and communities. The CAC serves as a mechanism to gather feedback and perspectives on a wide range of policy matters and emerging issues of interest to the Board as well as the 12 Federal Reserve Banks. The CAC is made up of a diverse group of experts representing interests including, but not limited to: affordable housing, community and economic development, employment and labor, financial services and related technology, wealth building, and small business.  Two current CAC members are from the Seventh District and were highlighted last year on the CDPS blog: Bethany Sanchez and Rodrick Miller.

The CAC meets semi-annually with members of the Board in Washington, DC, and consists of 15 members. Its purpose is to provide a range of perspectives on the economic circumstances of consumers and communities, with a focus on the concerns of low- and moderate-income populations. It complements two of the Board’s other advisory councils – the Federal Advisory Council and the Community Depository Institutions Advisory Council – whose members represent depository institutions.

The Board is interested in candidates with knowledge of the aforementioned fields who serve (in some part) economically disadvantaged populations. Candidates do not have to be experts on all topics, but they should have some knowledge of these areas and related issues, and preferably a particular area of related expertise or knowledge. In appointing members to the CAC, the Board will consider a number of factors, including diversity in terms of subject matter expertise, geographic representation, and the representation of women and minority groups. In this application cycle, the Board welcomes applications from all geographies and areas of expertise, but is keenly interested in gaining perspectives of individuals involved in civil rights work, as well as labor-related topics and labor unions.

The Board will select six members in the fall of 2018 to replace current members whose terms will expire on December 31, 2018. The newly appointed members will serve three-year terms that will begin on January 1, 2019. If a member vacates the CAC before the end of the three-year term, a replacement member will be appointed to fill the unexpired term. CAC members must be willing and able to make the necessary time commitment to participate in organizational conference calls and prepare for and attend meetings two times per year (usually for two days). The meetings will be held in Washington, DC. The Board will provide a nominal honorarium and will reimburse CAC members for their travel expenses (subject to Board policy).

Candidates may submit applications by one of three options:

Additional information about the selection process, including instructions for submitting an application, can be found in the Federal Register notice.

For Further Information, contact:

Jennifer Fernandez (for questions nationally)
Community Development Analyst
Federal Reserve Board of Governors

Emily Engel (for questions from Illinois, Iowa, Indiana, Michigan, and Wisconsin)
Business Economist
Federal Reserve Bank of Chicago

The Board will accept applications through 11:59 PM EDT on June 15, 2018.

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Federal Reserve Banks Launch the New Website “Fed Small Business”

In conjunction with National Small Business Week, the 12 Reserve Banks of the Federal Reserve System today launched a new website: Fed Small Business. This site will serve as a hub for the Reserve Banks’ small business research, analysis and thought leadership.

Fed Small Business includes content from the annual Small Business Credit Survey (SBCS), a national survey of small business owners that provides insight into firms’ financing needs and experiences. The website launched today brings together SBCS reports, along with their associated underlying data and questionnaires, in a single resource. It also maintains information on how community and business groups can partner with the SBCS to further understanding of the unique small business sector.

The site aims to inform efforts to help small firms, by making small business insight from the 12 Reserve Banks easily accessible to policymakers, community leaders and service providers. Going forward, Fed Small Business will be expanded to include additional SBCS work and a wide breadth of other small business research.

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