Redefining the Challenges & Opportunities for Banks in LMI Neighborhoods Throughout Chicagoland: Results from Community Capacity Discussion Groups

by Emily Engel, Robin Newberger, and Jason Keller

(To view full article with figures, click here)

Bank lending in low- and moderate-income (LMI) neighborhoods in the Chicago area has remained well below levels that preceded the Great Recession in 2008. Mortgage loans originating in LMI neighborhoods fell from a high of 33 percent of originations in Cook County in 2006 to a low of 17 percent in 2010 (chart 1), followed by a gradual upward trend to roughly 20 percent in the most recent data. According to 2014 CRA small business lending data, small business originations in Cook County (for businesses earning less than $1 million) were still about 45 percent below peak levels in 2007.

This summer, the Community Development and Policy Studies (CDPS) department of the Federal Reserve Bank of Chicago partnered with the Chicago Metropolitan Agency for Planning (CMAP) [1] to bring together more than 20 bankers to share their perspectives on what drives lending and investment trends in their respective markets, and what local banks are doing to increase lending activity in LMI neighborhoods.

Chart 1.


Note: Includes all single family loans, including refinance, home improvement, VA and FHA

Industry analysts have put forward several explanations for why bank lending (both mortgage and small business lending) has not recovered to pre-recession levels in metropolitan areas around the country, including Chicago. These include fewer homebuyers entering the market, a decline in the value of real estate that collateralizes small business loans, soft sales at small firms, and an elevated level of supervisory stringency at banks, among other reasons. The bankers who participated in the roundtable discussions, including representatives from large and small banks, city and suburban institutions, as well as mission-focused, minority-owned banks, and community development banks, offered their own assessments of the factors that have constrained lending in LMI neighborhoods. This blog summarizes participants’ reflections on the challenges to financial inclusion following the Great Recession, and describes the approaches many have taken to promote outreach and services to diverse communities.

Conditions that impact lending in LMI neighborhoods

“Innovation used to be rewarded; now bank boards want to avoid risk.”

Many bankers who attended these sessions agreed that the financial crisis reframed their – or their boards’ – perceptions of product risk. Some bankers acknowledged that they have backed away from innovating products for non-traditional customers, such as second-chance transaction accounts and banking products for ITIN  holders, out of concern that examiners (as well as their own boards) may not take a positive view of the potential risks associated with these products. Other bankers have moved away from making smaller, higher-cost loans. Some banks have even begun to scale back on their conventional, single-family mortgage lending because of new mortgage regulations including the TILA-RESPA Integrated Disclosure rule,[2] which further establish that failure to comply could restrict banks from accessing the secondary market.

“We can talk about how great it is to make loans in these communities, but if borrowers don’t meet credit standards, there is nothing we can do about this.”

The bankers also noted that the risk profiles of many potential borrowers do not meet the credit standards of their institutions. As many banks have tightened underwriting standards since the Great Recession, mortgage lending has fallen for borrowers in the lower percentiles of the credit score distribution (chart 2). The same trends that are playing out at the national level are taking place within the Chicago metro as well.  According to focus group participants, the banks with a strong presence in LMI areas focus on borrowers “with strong balance sheets” who often do not live in the areas where they purchase and develop properties.

Chart 2.


In addition, bankers said that many income-constrained households are carrying greater amounts of student debt, which further impedes banks’ willingness to approve mortgage credit. A few of the business-oriented bankers also explained the decline in business lending due to small business owners undermining (often inadvertently) their own creditworthiness by underreporting earnings, or not organizing their financial paperwork in accordance with conventional  standards.

“Homeowners in many of these neighborhoods are underwater.”

Negative equity is another major obstacle that bankers feel has limited the supply of credit in LMI neighborhoods. Although home prices have returned to early-2000s levels in many neighborhoods in the Chicago metro area, in many others, including those on Chicago’s south and west sides, prices are as much as 30 percent below where they were in 2003 and 2004.[3] In turn, sagging home prices have reinforced trends of economic stagnation and decline. According to participants, negative equity prevents homeowners in certain neighborhoods from selling their homes, inhibiting churn in those markets, and further weakening home prices in those communities. When homeowners in these neighborhoods look to refinance their mortgages, bankers can do little to overcome high loan-to-value ratios, even with federal programs like the Home Affordable Modification Program (HAMP) that was designed to help struggling homeowners remain in their homes.  Negative equity also affects housing supply. If people are not selling their homes, the market in those neighborhoods is stuck because there are fewer homes for people to buy.

In addition, even with negative (home) pricing/valuation pressures, participants reported that homeownership remains unaffordable for many potential homebuyers in lower-priced neighborhoods, despite programs for facilitating the purchase of foreclosed and vacant properties. Although many programs exist for moving new homeowners into vacant properties, such as the Cook County Land Bank and the South Suburban Land Bank, municipalities that support these efforts often do not coordinate with their tax departments, putting so-called affordable properties out of reach for many families due to large outstanding property tax dues.

How bankers reach out to customers in LMI areas today

Increasing Transactional Opportunities

Bankers’ attempts to promote financial inclusion have emphasized the creation of more opportunities for transactional relationships with nontraditional customers. Some banks talked about offering “second chance” accounts that allow people who have been flagged for account mismanagement in the past to open a deposit account. Some banks use prepaid cards to market their institutions to people who customarily have not been comfortable with banks, and sometimes pair these cards with savings accounts. Some offer remittance products (often through third parties) as a way to incentivize people to utilize bank branches. Other banks have offered small loans, though bankers report greater demand for this product on the consumer side than on the business side.

Supporting Financial Education

Banks have also focused on improving customers’ overall preparedness to borrow money. Many banks see financial education as the key to broader financial inclusion since, in the view of many participants, a lack of financial sophistication hurt many borrowers during the financial crisis. Participants explained how they offer education on managing bank accounts, basic budgeting, and home-ownership, usually in conjunction with a community-based organization. The short-term goal of these classes and workshops, according to many of the bankers, is to build trust and relationships through partnerships with nonprofits and grassroots organizations. The longer-term goal is to prepare potential borrowers to qualify for mortgages, rate-reductions, or credits on their loans. For single-family mortgages, banks work with community partners or the public sector to offer down-payment assistance (in the form of grants and forgivable loans from third parties, some of which are place-specific), allowing people to have immediate equity.

Eyeing New Opportunities for the CRA

Some participants see greater potential to support LMI communities through activities outlined in the final revisions to the “Interagency Questions and Answers Regarding Community Reinvestment” (the Q’s and A’s) published in July 2016. This document, assembled by the federal bank regulatory agencies with responsibility for CRA rulemaking, clarifies and updates a broad set of CRA-eligible activities in addition to traditional mortgage and small business lending. For example, the new guidance offers examples of what is meant by economic development, innovation, and revitalization/stabilization as it is used in the CRA. Such examples include funding programs that (1) create or improve access to jobs or job training for LMI populations; (2) capitalize infrastructure projects, such as broadband internet service and flood control measures; or (3) back loans to finance projects that promote renewable energy or energy efficiency. Further, financial institutions that use alternative credit histories to evaluate credit worthiness, such as rent or utility payments, may also now be considered under the CRA. As these examples illustrate, the revised guidance is designed to reflect both current economic conditions and today’s regulatory landscape; and regulators continue to encourage financial institutions to be open to innovative practices that promote the adoption of bank services in all types of markets.


The impact of the Great Recession continues to influence current lending trends in the Chicago metro area and efforts to promote financial inclusion, according to bankers who participated in the CDPS and CMAP discussion groups. As banks adjust their policies and perceptions to address these challenges, the recently published Community Reinvestment “Q’s and A’s” has the potential to broaden the type of lending, investing and other services that banks provide to LMI communities. The revised guidelines make clear that bankers are valuable partners in responding to unmet market needs.


[1] CMAP is the official regional planning organization for the northeastern Illinois counties of Cook, DuPage, Kane, Kendall, Lake, McHenry, and Will, and as part of its comprehensive plan for the Chicago region, ON TO 2050 — the agency is exploring new policy directions for promoting inclusive economic growth.
[2] Truth in Lending Act (TILA) – Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure Rule, also known as TRID, became effective for most loans applied for on or after October 3, 2015. The rule changed the definition of an application, clarified responsibilities for providing forms, established tighter limits on fee spreads, and installed a three-day review period between the closing disclosure and consummation of the loan.
[3] See Institute of Housing Studies at DePaul University data at
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Highlights from the “Post-Secondary Education Option” panel at the Kansas City Federal Reserve Community Development Conference

Earlier this month, the Kansas City Federal Reserve hosted a community development conference: “Exploring Prominent Issues in Financial Resiliency and Mobility in Low- and Moderate-Income (LMI) Communities.” The conference took a fresh look at a variety of issues that affect the financial wellbeing of LMI communities, including health care, housing, jobs, education and consumer finance.  Around 200 people attended including community leaders, community development organizations and other non-profits, as well as representatives from the public sector, think tanks, and universities.

To further CDPS’ information sharing of how education and workforce development work together[1], we are highlighting the presentations from the workshop entitled “Post-Secondary Education Options.”

“Post-secondary education” is defined broadly to include traditional university education and alternative options. The goal of this session with Leigh Anne Taylor Knight from ThinkShift, William Elliott from University of Kansas, and Bernard Franklin from Kansas State University, was to understand how post-secondary options and outcomes may be different for LMI populations. For example, what particular issues or limitations do they face? Is the return on investment for post-secondary education different for LMI versus non-LMI populations? Is anything fundamentally different about post-secondary education and training for this cohort?

Dr. Leigh Anne Taylor Knight’s educational background includes serving as a K-12 assistant superintendent, advising learning institutions across the nation, and leading a bi-state consortium that provides tools for data-driven educational research to inform practice and policy. She noted that while college graduates are more likely to be employed and earn more money (see Chart 1 & Chart 2 below), a student’s particular course of study (major, principally) also impacts his or her return on investment.

Chart 1. Click to enlarge


Chart 2. Click to enlarge


Dr. Taylor Knight noted that chemical engineers made $70,000 annually as noted by the Federal Reserve Bank of New York, February 2016 Survey (other STEM majors had high starting salaries too), while majors in religion and theology that made under $30,000 annually, based on the same survey. Furthermore, she explained that a degree does not necessarily lead to a career in a related field, meaning that many college graduates get jobs in fields unrelated to their major. Dr. Taylor Knight further explained that companies are beginning to work with schools to create curricula for certain jobs that students can fill after graduation.

Dr. William Elliott furthered the conversation by discussing student debt and the life-long effects it can have on people, especially since students rely more heavily on loans today than ever before. Student debt burdens preclude or forestall major financial decisions, including: housing, saving for the future, and starting businesses. As illustrated by the chart below, student debt is the highest among the four categories of nonmortgage debt and it is steadily increasing.

Chart 3. Click to enlarge


Dr. Elliott suggested solution for student debt burdens is, Children’s Savings Accounts (CSAs) along with a Promise Program because together they are, “creating an asset empowered path to the American dream.” (An example of a promise program is the Kalamazoo Promise: Work hard in school. Graduate! Earn a Promise Scholarship. Be successful in life!)

While CSAs could potentially be a long-term solution, they will only help the students who are currently too young to even think about college. Therefore, a short-term solution is also needed. He suggested a bailout policy: “Less Debt, More Equity: Lowering Student Debt While Closing the Black-White Wealth Gap.”  Dr. Elliott argued that a progressive student bailout policy would dramatically reduce the racial wealth gap among low-wealth households. Furthermore, eliminating student debt among those making $50,000 or below reduces the black-white wealth disparity by nearly 37 percent among low-wealth households, and a policy that eliminates debt among those making $25,000 or less reduces the black-white wealth gap by over percent.

Dr. Bernard Franklin wrapped up the panel by describing a problem that exists throughout higher education: preparing students for a future we cannot clearly foresee. Many commonly understood job descriptions today did not exist even in the 1990s. This uncertainty, along with lower rates of enrollment that he projected after 2020, will likely cause institutions that rely on tuition dollars to change their financial structure, leading to increasing tuition rates above inflation rates (that has already happened at many institutions). Online education offerings may also proliferate due to their inherently lower cost structure, but online education may have negative implications that we cannot predict at this time.

The rest of Dr. Franklin’s presentation focused on issues of race and ethnicity in education. As indicated by the chart below, degree attainments for the black and Hispanic populations are significantly lower than for the white population.

Chart 4. Click to enlarge


Dr. Franklin also stated that only one in 10 low-income students complete college, leaving most saddled with debt but no degree. He went into detail describing how those populations do not get the education they need to succeed in life. Dr. Franklin referenced a program that helps both low-income and first-generation students increase college access called The Kansas State College Advising Corps. This program works in public high schools by placing “near-peers,” recent college graduates, in public high schools to provide the support that students need. This program is designed to help low-income and first-generation college students access (and complete) post-secondary education.

This brief summary of one panel identifies issues impacting LMI students aspiring to achieve a college education, and potential policy interventions to help the LMI population succeed. We plan to post blogs from some panelists that can offer additional detail and insights.  To see the activity and conversations started by the panel and conference, please check out #strongcommunities16 on Twitter.


[1] Two ProfitWise News and Views articles that discuss the topic: “Community Colleges and Industry: How Partnerships Address the Skills Gap” and “From Classroom to Career: An Overview of Current Workforce Development Trends, Issues and Initiative.”

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Two Examples of Mental Health Clinics in Chicago that Serve LMI Communities

by Marva Williams

Community Development departments in the Federal Reserve System work to understand and address barriers to economic mobility, and engage banks, government, and nonprofit intermediaries to channel financial and other resources to places in need of physical, economic, and other forms of community redevelopment. The Federal Reserve System began in 2009 to examine more closely the linkages between place and health. Places with thriving local economies, decent schools, (other) quality public amenities, and high civic engagement and employment levels, tend to have healthier, longer-lived populations, and less incidence of disease.

The Fed’s community development function now seeks to better understand the relationship between economic and physical health, and how community development oriented interventions related to housing, employment, credit access, and other areas, may impact both. We leave strictly health-oriented interventions–such as nutritional awareness and smoking cessation programs–to the public health field. But well-conceived development interventions and investment can mitigate ‘environmental’ factors as diverse as security/safety, pollutants (in and outside the home), and inadequate access to decent schools, fresh food, and recreational and healthcare facilities, all of which significantly impact stress levels and general wellbeing. Numerous Fed conferences including three to date in the Seventh District, coordinated with prominent, health-focused organizations such as the Robert Wood Johnson Foundation, have explored this relationship, as have various Fed (and outside) publications.

As a bank regulator, a core interest of the Fed is how investments by financial institutions fulfill CRA requirements and bring about meaningful change in neighborhoods, but the constraints of CRA and overarching lending risk guidelines limit the types of lending and investment in which banks can engage. Facilities that provide needed health services, and can support debt through a combination of subsidy, philanthropy, and user fees, represent one promising area for bank lending and investment, whether banks invest alone or in partnership with nonprofit financial organizations. Across Illinois, one of the most critical scarcities in healthcare is mental health professionals and facilities. Following are profiles of Cathedral Counseling Center and Trilogy, two mental health clinics in Chicago that serve lower-income individuals; the case studies include discussions of essential relationships with financial institutions.

Cathedral Counseling Center

Formed in 1974, Cathedral Counseling Center (CCC) is a non-profit organization that provides a comprehensive range of mental health services for low- and moderate-income adults and children. CCC offers individual therapy and psychiatric services for clients challenged with: alcohol and other drug abuse; anger and conflict; mental illnesses; and emotional trauma, among other issues. It also provides group counseling as well as premarital and couple counseling. Lastly, CCC has professional therapy education for clergy and mental health clinicians and supervision for mental health professionals.

CCC was founded by an Episcopal minister and funded by Episcopal Charities and Community Services, a Chicago based funder of programs in the diocese. Since its founding, CCC has grown into a major center, with offices in a downtown Chicago as well as Hyde Park and Evanston. In 2014, more than 1,000 clients were served at CCC. CCC does not work with indigent clients—patients must be able to pay at least a portion of their bills. In 2014, almost 40 percent of its clients had income below $10,000 and an additional 32 percent had incomes between over $10,000 to $29,999. The agency receives 75 percent of its income from client fees and insurance and 25 percent through fundraising.

Relationship with IFF

By 2005, CCC had outgrown its space in a Chicago Episcopal church, which limited its ability to expand therapeutic services. A board director of CCC referred the staff to IFF (formerly Illinois Facilities Fund) to conduct an analysis of their space needs and available options. IFF is a community development financial institution (CDFI) that provides loans for community facilities, such as charter schools, housing, grocery stores, primary care clinics, and recreation centers. Headquartered in Chicago, IFF has a 12-state service region, including all five Seventh District states: Illinois, Wisconsin, Iowa, Michigan, and Indiana. IFF also offers real estate development and facility consulting, a critical need for many service organizations, which may not have expertise on staff to determine overall facility feasibility, or even optimal use of space for service delivery and administrative functions. IFF receives funding from a variety of sources, including investments and grants from regulated financial institutions. In return, these financial institutions may receive CRA credit for IFF projects that benefit lower-income communities.

IFF completed a feasibility study for CCC on the purchase of office space, which was preferred by the CCC board of directors to renting space. The feasibility study resulted in a $1.8 million purchase of office condominium space in downtown Chicago in 2006. The project was financed by an $840,000 capital campaign and a $1 million loan from IFF. As CCC continued to grow, the board decided to expand to the entire floor of the building in 2013, resulting in a $1.4 million acquisition and construction project. The same development team was used for the 2013 project, including IFF as consultant. The expansion was financed by a capital campaign that netted over $175,000 and an additional IFF loan for approximately $1.2 million. The space allowed the organization to expand its counseling services and improve the office’s accessibility for people with disabilities.

The role of IFF for these projects was essential. CCC staff had no experience with real estate development or financing, and needed the expertise of IFF to affect the expansion. It was essential to have expertise in purchase negotiation, design oversight, contractor selection, and construction oversight to manage the project budget and development. In addition, CCC required a trusted partner that could advocate for its interests with the development team. Further, IFF carefully balanced the needs of CCC with its financial capacity to repay the loans that financed the purchase and rehabilitation.

Trilogy Behavioral Healthcare

Trilogy Behavioral Healthcare’s (Trilogy) mission is to promote recovery from serious mental illness. Founded in 1971, the agency provides counseling for people with mental health diagnoses. Trilogy’s services include individual and group therapy, case management, and medication management. It also has a linguistically and culturally competent therapy program for Latinos and a drop-in center that is open every day. Trilogy provides supportive services, such as housing, housing advocacy, employment counseling, and occupational therapy to help get people back to work. Their residential program offers a range of services from supportive housing to 24-hour residential assistance at three sites.

Trilogy partners with the state of Illinois to provide independent living opportunities for people who reside at nursing homes. A 2009 lawsuit alleged that the State of Illinois was violating the American with Disabilities Act (ADA) by only providing people with mental disabilities the option of living in nursing homes. In 2010, the US District Court found that people with mental illnesses have the right to choose to live in community-based settings. As a result, the state entered a consent decree that requires it to provide funding to Trilogy to pay for supportive services that enable people with mental illnesses to live more independently. The funding enabled Trilogy to create a team of eight new staff positions, which has since expanded to 10 teams of eight staff, to support alternative housing for people with a mental health diagnosis. The grant also pays for a client’s first month rent, rental deposit, and furniture. Trilogy staff train clients in independent living skills at ‘practice apartments’ and after the clients obtain their own apartments, a trained peer provides coaching and support through a home support program.

Trilogy also provides a range of other services. It works with police, and parole and probation staff to provide mental health services to incarcerated people with acute psychiatric symptoms. Trilogy also partners with several area hospitals and homeless shelters in Chicago and Evanston to provide homeless individuals with mental health services.

The organization promotes integrated mental and physical healthcare. It partners with the Heartland Alliance on a health clinic in Rogers Park that serves approximately 1,500 adults annually.

Over 90 percent of clients of Trilogy have low incomes and are eligible for Medicaid, a state and federal government supported health insurance system. The organization also provides services to the working poor with no health insurance at low or no cost.

The agency has grown significantly. Trilogy has 300 employees, up from 75 employees ten years ago. In addition, the agency budget increased by $5 million to nearly $12 million from 2006 to 2014. The organization now has four locations aside from its main facility in Rogers Park; the newer facilities opened in Lawndale, Uptown, South Shore, and Evanston. Trilogy raises funds through various private sources to assist its clients in meeting basic needs, including groceries, medicine, and housing.

Relationships with its Financial Institution

Trilogy has been a customer of a large national bank since 2012. The bank provides all the financial service accounts for the organization as well as a $3 million line of credit. This line of credit allows Trilogy to pay short-term bills, which is essential because with the exception to the consent decree, the state of Illinois is very slow making payments to the agency. The bank also made a loan to Trilogy to conduct maintenance and repairs to its Rogers Park headquarters. Further, a senior vice president at their bank was appointed to the Trilogy board of directors in 2016. In addition, the bank will consider an additional loan for a property in Lawndale that the agency would like to purchase in 2016.


CDPS will continue to explore the roles of banking institutions subject to CRA in bringing about neighborhood redevelopment and investment that impacts both socioeconomic conditions and general wellbeing.

For more information on CDPS explorations of community health, please see two articles in ProfitWise News and Views written by Susan Longworth:

“The Converging Visions of Public Health and Community Development” (December 2013)

“Exploring the Correlations between Health and Community Socioeconomic Status in Chicago” (Summer 2014)

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Revisiting the Promise and Problems of Inner City Economic Development: The Role of Industry Clusters

(To view full article with figures, click here)

by Robin Newberger and Maude Toussaint-Comeau

Last fall, Detroit provided an illustrative backdrop for a summit on economic advancement in distressed communities, sponsored by the Initiative for a Competitive Inner City, the Upjohn Institute, Sage Publications and the Federal Reserve Bank of Chicago. The May 2016 Special Issue of Economic Development Quarterly  makes available both the new research presented at the event, as well as a discussion paper highlighting research findings and practitioner perspectives on revitalizing inner cities.

One of the main topics of discussion at the summit was the effectiveness of cluster-based development strategies in inner cities.[1] Clusters are geographic concentrations of interconnected companies and institutions in a particular field including (1) linked industries and other entities, such as suppliers of specialized inputs and specialized infrastructure; (2) distribution channels and customers, manufacturers of complementary products, and companies related by skill sets, technologies, or common inputs; and (3) related institutions such as research organizations, universities, standard-setting organizations, training entities, and others (Porter, 1998). (See Figure 1 for an illustration of the industry clusters in the Detroit Metropolitan Area and their linkages).

Over the past few decades, research by Michael Porter and others has shown that large traded industry clusters spur innovation and enhance productivity; and are prevalent in locations that achieve better economic performance. (Traded industries are industries that are concentrated in a subset of geographic areas and sell to other regions and nations. Local clusters provide services or products mostly for the local market)[2] In the Detroit Metropolitan area, traded clusters accounted for more than 600,000 jobs as of 2013, according to the U.S. Cluster Mapping Project. Although the economic situation in the city of Detroit remains challenging, the automotive sector, despite its unusual recent history, illustrates the cluster concept (it is second in terms of number employed in the MSA only to ‘business services’). Automotive and auto supplier firms working in proximity benefit from both information networks and a local pool of engineers, designers, and workers. Other important traded clusters in the Detroit area include metalworking, marketing and design, and metal manufacturing (See Figure 2).

Local clusters in the Detroit MSA generate even more employment and accounted for more than 1 million jobs as of 2013 (Figure 3).

Figure 1. Click to enlarge


Source: Reproduced based on U.S. Cluster Mapping Project

Note:  Specialization is measured by the value of a cluster’s location quotient. A Location Quotient (LQ) is the ratio of an industry’s share of total state employment in a location relative to its share of total national employment. The LQ measures the specialization or concentration of a cluster in a particular location relative to the national average. An LQ > 1 indicates a higher than average cluster concentration in a location.  Additional explanations of legend methodology explanations can be viewed at

Figure 2. Click to enlarge


Figure 3. Click to enlarge


Public Policy Support for Clusters

Cluster strategies have gained traction in recent decades to the point of becoming a part of the basic toolkit for local economic development authorities throughout the country.  Cluster-based economic development policies involve identifying (e.g., through cluster analysis) an area’s sector strengths in order to be purposeful about the way resources are directed to expand economic opportunities. A good cluster-based development strategy involves creating an environment that bolsters cluster dynamics, which includes: encouraging related businesses to locate in ways that foster knowledge transfers; supporting science and technology infrastructure; fostering policies that improve education and workforce training; building specialized infrastructure; and promoting exports.

Additional Strategies for Practitioners to Support Clusters

Many of the practitioners who attended the summit support the thinking that industry and regional clusters are effective tools for the development of regions. But they also expressed concern as to whether cluster strategies can lead to strong economic development and growth for inner cities without more targeted support. Lower levels of educational attainment often impede inner-city residents from competing in emerging high-skill and high-wage sectors in many industry clusters. Institutional or historical obstacles also play a part in whether economic development benefits inner-city residents. For example, limited access to information resources and (commercial and financial) networks among black and Latino business owners often discourages participation in the financial system, which, in turn impedes business creation and development.

Realizing more fully the benefits of cluster industries in urban areas like Detroit requires economic development, training, and business development practitioners (and funders) to make some targeted refinements. Businesses that are pervasive in urban areas and that create jobs over a wide range of skills for inner-city residents could be singled out to receive greater investment. Additional investments could be directed at workforce training that connects trainees to businesses in inner cities and regional clusters. It may also be important to designate funding to organizations that not only upgrade the skills of workers, but can also provide greater case management for the social and personal challenges that many trainees face.

In addition, investments are needed to ensure that minority business owners are better connected to services that support local entrepreneurs. Training programs may need to focus on procurement and supply chains that connect minority business owners to both local and regional clusters. Programs may also be needed that construct resource networks for minority business owners, including accountants, attorneys and other professionals.  With respect to credit access, trainers may need to focus on financial literacy and recordkeeping to improve the capital-readiness of small businesses, and identify best-practices among financial institutions that encourage minority businesses to seek bank financing. Local regulations or other mechanisms may also be needed to ensure that resources reach traditionally disadvantaged groups.

If industry cluster-based development policies are to represent a promising means of revitalizing inner cities, these strategies must address a range of issues and barriers facing residents. A fuller set of interventions related to developing human capital, business owner preparedness, credit access, and other issues may be needed for inner cities to realize the benefits of clusters and regional growth.

Summary of Recommendations

We summarize the main takeaways from the summit for optimizing the employment prospects of clusters to revitalize inner cities in ways that are also inclusive of inner city residents, business owners, and workers.

Investing in cluster development in urban areas

  • Map the cluster composition of a region and identify which of these regional clusters also have representation in the city.
  • Develop business accelerator programs that connect businesses in the inner city to the rest of the region.
  • Coordinate cluster-building strategies between city and suburban communities.
  • Support businesses that are pervasive in urban areas and that can create jobs over a wide range of skills for inner city residents.

Expanding training for workers

  • Identify the human capital and employment skills that are needed by businesses and organizations in both inner-city and regional clusters.
  • Identify or designate new sources of funding for integrating minority workers.
  • Engage employers as training programs are developed, asking them for input on market trends and curriculum development.
  • Create programs that develop social networks and other connections between people in higher poverty areas and cluster-related employment opportunities.
  • Modify the terms stipulated by funding and reimbursement sources in order to (1) help cover the costs of skills remediation; (2) recognize that completion of remediation training is a successful outcome; and (3) include interventions that address the emotional and physical health of workers as part of job readiness training.

Supporting small and minority business owners

  • Connect entrepreneurial ecosystems to small and minority business owners.
  • Encourage small business training programs to use economic development tools (not just community development tools) to link small businesses to clusters, including training on procurement, supply chains, small manufacturing and logistics solutions.
  • Offer financial literacy and training in recordkeeping to improve the capital-readiness of small business owners.
  • Identify best practices within financial institutions that hire minority loan officers to focus on opportunities and encourage business owners to seek bank financing.
  • Support minority business owners who receive funding (loans, grants, etc.) with resource networks that include accountants, attorneys, and other professionals.


[1] In the United States, the term “inner city” often signifies lower-income residential districts in the city center and nearby areas, with the additional connotation of impoverished black and/or Hispanic neighborhoods. The Institute for Competitive Inner City (ICIC) offers a definition based on economic distress level, which has been adopted by many researchers. According to ICIC, inner cities are contiguous census tracts in central cities that have a poverty rate of 20 percent or higher, or have two of three other criteria: poverty rate of 1.5 times (or more) than the MSA; median household income of 50 percent or less of the MSA median; and unemployment rate is 1.5 times or more than the MSA rate.
[2] See


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An Innovative Mortgage Product for Detroit Homebuyers Enters the Market

By Emily Engel and Taz George

In a recent article, Community Development and Policy Studies (CDPS) highlighted mortgage innovations serving low- and moderate-income (LMI) potential homebuyers. While Detroit has shown promising signs of an economic comeback, its housing market continues to struggle with a high number of blighted and vacant properties, and very limited mortgage lending activity. This blog summarizes a recently introduced intervention, Detroit Home Mortgage (DHM), which is designed to boost the supply of credit for purchasing and rehabilitating housing in need of repair.

Residential mortgage lending is all but nonexistent in Detroit, with an annual average of just 356 new purchase mortgages from 2009 to 2014, compared to an annual average of 6,103 new mortgages from 2004 to 2008, according to Home Mortgage Disclosure Act data[1]. Cash transactions account for the vast majority of residential real estate sales, many of which involve corporate investors and municipal entities such as the city’s land bank.


The decline in lending is not unique to Detroit. Credit standards nationwide remain very tight relative to the early 2000s, but the state of Detroit’s housing stock make it particularly affected. For example, access to loans for low-cost housing has been especially limited, an issue for a city where the average home sale price was less than $40,000 in each month of 2015, according to Urban Institute calculations from CoreLogic data. Furthermore, Detroit leads the nation in its proportion of vacant properties, many in need of repair. The Motor City Mapping project’s 2014 survey found that roughly 1 in 3 residential or commercial properties was blighted, including 73,035 residential structures. The many properties requiring rehabilitation and high vacancy rates mean home values are very low, which in turn has made credit tighter where it is most needed: 80 percent of applications for home-improvement loans in Detroit from 2009 to 2013 were denied due to insufficient collateral, according to a Zillow analysis of records released under the Home Mortgage Disclosure Act. In other words, the cost of repair most often exceeds a home’s appraised value, creating a vicious cycle that further reduces home values. “The appraised values are based on a decimated housing stock,” says Colleen Schwarz, vice president of Affordable Housing Lending at Community Reinvestment Fund, USA (CRF), a nonprofit Community Development Financial Institution (CDFI) lender participating in the program.

Existing programs meant to provide credit for rehabilitating homes, such as the Federal Housing Administration’s (FHA) 203(k) insurance program, have gained little traction in Detroit due to the sheer scale and degree(s) of vacancy and disrepair. FHA 203(k), for instance, cannot insure a loan of greater than 110 percent of property value. For a home in disrepair that appraises at $50,000, this limit translates to a $55,000 budget for acquisition and repair[2], often far below what is needed homes which sat vacant for years, experiencing vandalism and deterioration.

With these challenges in mind, DHM’s collaborative partners designed a program that could sustainably extend credit to homebuyers to purchase and rehabilitate properties with depressed values and high repair costs. Eligible buyers include prospective owner-occupants who can meet credit history standards similar to those of an FHA loan, such as a minimum 3.5 percent down payment, mortgage payment expense to gross income ratio of 31 percent, and total credit obligation payments to gross income ratio of 43 percent. In essence, DHM provides financing to FHA conforming borrowers with non-FHA conforming properties. Five participating lenders in the Detroit area will provide loans for buyers to purchase the property, while CRF makes a second loan that covers the projected rehabilitation costs, and a roughly 15-20 percent contingency allowance. The second loan balance also covers the cost of a project manager to support the buyer in overseeing the rehabilitation. To ensure that buyers are aptly prepared for the potential risks and complications of purchasing a home in need of rehabilitation, buyers must complete special education on high combined (purchase and rehab) loan-to-value (CLTV) home financing and home rehabilitations. The education emphasizes staying within budget by prioritizing safety and livability during the construction process. Given the added complexity of DHM relative to a typical lending program, Schwarz believes that CRF’s significant experience in loan servicing and program management will be a key component of the program.

Launched in February of 2016, DHM is already working with prospective borrowers and hopes to close loans within the next 60 days, according to Schwarz. Initial interest has been high and the program has been advertised aggressively across the city. Not surprisingly, the time needed to approve an applicant and close their loan is longer than a typical loan due to some unique features of DHM, such as estimating construction costs and required borrower counseling. The process of rehabbing a home may be daunting to a perspective homebuyer, Schwarz said, but there are no other viable financing options that allow loan principal to exceed appraised value by up to $75,000 to make needed repairs, let alone one that provides education and construction support. Five lenders are participating in the program, and while they must retain the first mortgages in portfolio, they may stand to gain in the long-term from a healthier housing market and from potential CRA credit for serving low- and moderate-income communities. Funding from the Kresge Foundation supports operating costs, credit enhancement, and helps to allow a hardship exemption for borrowers facing an unexpected job loss. This means that in the case of life events (death of the borrower, divorce, major medical issues) that reduce family income, necessitating a sale, the CRF second mortgage may be forgiven.

If successful, DHM may serve as a model intervention for other cities struggling with a dilapidated housing stock and limited access to mortgage credit.

CDPS is committed to researching and understanding new innovations in mortgage lending as they emerge, and to encouraging dialogue among policymakers, community groups, action coalitions, and financial institutions working to improve access to residential mortgage credit.

[1] These figures include only owner-occupied, 1-4 unit, first lien, purchase originations.
[2] This total assumes a sale price equal to the appraised value of the home.
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CDPS Update

Every year, Community Development and Policy Studies (CDPS) researches issues that affect low- and moderate-income (LMI) communities in the Seventh District that relate to, among other topics, economic/worker mobility; access to competitively priced credit and financial services; small business development; health disparities by socioeconomic cohort; bank closure/consolidation; and affordable housing availability. Throughout 2016, CDPS will again engage individuals whose work in LMI communities can help us find ways to address the challenges faced by lower-income populations. A key tool in this endeavor is online surveys. This year, CDPS will again explore facets of various topics as they impact lower-income and lower-wealth populations including workforce development, student loan debt, small business and mortgage credit availability, and affordable rental housing, among others. Survey respondents represent a broad range of voices from the private and public sectors. This blog summarizes responses from the latest CDPS survey.

For the second survey of 2016, CDPS focused on two topics: (1) community bank closures/acquisitions and (2) student debt.

Smaller, locally-based banking institutions often have close ties to customers and communities. If the bank closes or changes hands, this can have significant ramifications on a community. Since the financial crisis, numerous community banks have been rendered insolvent and either closed or acquired by other banks.

As the chart below illustrates, close/acquire rates for all banks within the five states in the Seventh District have recently increased. The trend is more pronounced for banks with under 100 million in assets, which includes many community banks that serve remote, rural, or lower-income urban and suburban markets. FDIC Summary of Deposits data

CDPS wanted to get a sense of the perceptions of practitioners related to bank closings and consolidations. Some contacts noted that the transitioning or closing of banks had impacted the whole community. One contact summarized the economic impact for their whole community best: “Households and businesses don’t get the same kind of service from the large banks; they don’t get personalized attention (which they often need to succeed) from the large banks; and support for local foundations, charities, schools, and youth programs all decline because the big banks don’t support those initiatives the way that the local community banks did.” However, other contacts noted that closures or acquisitions have not happened in their communities or people have changed banking relationships with little to no impact.

For the second question, all respondents (who answered the question) agreed that an area of increasing concern among consumer advocates is the extent to which student debt burdens preclude or forestall major financial decisions for people in their communities.  The item that was mentioned most often is housing. Our contacts noted that student debt is impacting the whole housing market. It affects the rental market because people are living at home longer and impacts home sales because people do not want to take on more debt. Respondents also mentioned that student debt affects the loan underwriters because of GSE (i.e., Fannie Mae and Freddie Mac) policies regarding how to underwrite loans to people with outstanding student loans. Among other considerations, borrowers cannot get student loans discharged in bankruptcy under current law.

As illustrated by the chart below, student debt is the highest among the four categories of nonmortgage debt and it is steadily increasing.

A few contacts also mentioned that some for-profit colleges may not consider students’ interests their top priority. One respondent said: “People think they are investing in themselves but are actually making a poorly informed decision.” Sometimes students drop out of the school before they are finished and have debt but no degree, which is even more of a problem. One contact did point out that “efforts like the federal government has made to publish more data and factors about colleges is a great step to helping the student consumer make a prudent choice. It’s all about creating the savvy consumer and often people in low/mod neighborhoods are bombarded by advertising” (promoting mostly for-profit institutions).

One intervention mentioned by many survey participants was to refinance student loans at a lower rate. If this was ever an option, refinancing could help people lower their student debt payments and possibly invest in their communities, by buying property for instance, or starting a business.

The other issues impacted by student debt that contacts noted include saving for the future, starting businesses, getting married, and starting families.

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Making Chicago Greener

By Emily Engel and Mark O’Dell

In honor of Earth Day last week, and in light of the emphasis that CDPS places on workforce development, this blog will profile two programs helping the formerly incarcerated enter or re-enter the workforce while making Chicago “greener.”

According to various reports, the United States has the world’s highest incarceration rate. None of the world’s other 33 (as characterized by UNICEF) industrialized nations ranks in the top 20 countries (most of which are small island nations) with the highest proportion of their populations in jail or prison. While the societal ramifications and racial/ethnic disparities in rates of incarceration are of deep concern to many, the economic ramifications are also compelling. A 2010 Center for Economic and Policy Research paper determined that lost productivity from persistent unemployment among those formerly incarcerated amounted to roughly $60 billion annually. Further, barriers to employment faced by ex-incarcerated represent a long-standing community development issue – as economic mobility is predicated on living-wage jobs – and many, the data reveal, return to criminal activity. The Illinois Sentencing Policy Advisory Council recently found a 48 percent three-year criminal justice system recidivism rate and a 19 percent one-year recidivism rate in Illinois.

Growing Home and Sweet Beginnings are organizations whose mission is training and employing formerly incarcerated individuals. They also concentrate their efforts on employing people they serve in ‘green’ industries.

Since 2002, Growing Home, located in Englewood, has exemplified and promoted its philosophy that “everyone deserves to have a good job, and everyone deserves to eat well.” At Growing Home, an urban farm, workers are involved in every aspect of production, from planting to selling. In 2015, the organization produced 30,000 pounds of organic produce, helped 618 people from the community learn about healthy eating and farming through community events, and had 25 farm stands that sold produce at reduced prices to Englewood residents – including people using LINK and WIC government vouchers. Growing Home also sells produce at the Green City Market in Lincoln Park and The Logan Square Market.

Growing Home’s approach involves more than job training as clients must often embrace lifestyle changes to secure lasting employment. The organization provides clients 25 hours per week of in-house work experience, as well as job preparedness, placement, retention, and GED training. The program lasts 14 weeks, although some production assistants (PAs), as clients are called, find additional, outside work after as few as seven weeks in the program.

April Harrington, Growing Home’s development director, says that Growing Home is always looking for more employment partners, and that “more and more companies want to be socially conscious in some way.” Still, many employers need to be convinced that Growing Home’s graduates will be strong employees and fit into their workplace, and the organization takes care to develop their clients’ interpersonal skills too.

Growing Home is currently working with Philip Hong, a Loyola University Chicago professor in the School of Social Work, to provide a strong soft-skills curriculum to complement its hard-skills training and certification. The program, in addition to addressing criminal records, helps address outside factors that might impact anyone seeking steady employment, including child care, housing, and medical insurance and services. The ultimate goal is self-sufficiency: Growing Home collaborates with local food-focused businesses to place clients in full-time positions. Their program performance highlights for 2015 include: 82 percent program completion; 84 percent job placement; and four people who got their criminal records sealed or expunged with their partnership with Cabrini Green Legal Aid. In addition, 80 percent of graduates hold jobs one year after graduation, and recidivism rates are around 17 percent.

A key factor in Growing Home’s impact is the trust (stemming from a ‘high-touch’ and empathy-driven approach to clients) that builds among staff, PAs, and graduates. Ms. Harrington notes that one point differentiating Growing Home from other employee training programs is that Growing Home’s staff “gets to know each and every PA.” Some 40 different partner organizations around Chicago work with Growing Home to refer applicants, but one of the most important ways applicants learn about the program is through personal referral. Growing Home accepted 50 new PAs for this year’s program, and plans to expand the class to 60 next year. However, Growing Home receives nearly ten times more applicants than it can accept, illustrating the demand for this type of holistic job training program in Chicago.

Sweet Beginnings has a “triple bottom line mission”[1]: social, economic, and product (see their full mission statement below). In 2004, the program was launched through the North Lawndale Employment Network (NLEN) with the goal of creating jobs for people with significant barriers to entry, especially those with criminal backgrounds. Brenda Palms Barber, Sweet Beginnings’ president and the executive director of NLEN, likes to point out that NLEN “accepts anyone, no matter what their background,” into their U-Turn Permitted program. Sweet Beginnings takes pride in hiring candidates who face significant challenges in finding employment elsewhere. Since its inception, over 410 people have been employed making “beelove”™ products (both body care products and honey) by producing over 1,600 pounds of honey. The jobs created get people working around honeybees and hives, and also teach them the importance of honeybees in the natural food chain and the (manmade) food supply chain. In addition, Sweet Beginnings employees hired through the U-Turn Permitted program have a recidivism rate of one-tenth of Illinois’ statewide rate (i.e., 5 percent).

Like Growing Home, Sweet Beginnings works in partnership with other organizations to address a nationwide problem at a community level. Sweet Beginnings usually hires four to six U-Turn Permitted graduates at a time, and 135 graduates annually, while NLEN placed over 600 graduates with jobs last year. Both of these programs demonstrate the impact that local organizations can have, and provide a model for reducing the linked concerns of recidivism and unemployment for ex-offenders transitioning back to their communities.

[1]For an expanded discussion of Seventh District organizations providing workforce training services for difficult to employ populations, see
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Dairy Farming in the 21st Century

By: Steve Kuehl

On a recent tour of Spotted Cow Acres, LLC., located in Owen, Wisconsin, Jared and Justin Eloranta, brothers who own the farm, spent the morning demonstrating their new high-tech barn and robotic milking machines. With huge ceiling fans whirling over hundreds of cows, humans seemed totally out of place. A decades-long trend is that jobs in manufacturing and other industries have been replaced with robotic equipment and other automation; the trend toward automation on farms is more recent, and is in many ways redefining what it means to work on a farm. After their demonstration, the Eloranta brothers explained why it made sense for their 280-head dairy farm to make a big investment in a new state-of-the-art farm technology.

America’s Dairyland

Wisconsin has a well-earned reputation as America’s Dairyland, being home to more than 10,000 dairy farms – more than any other state – and 1.27 million cows.[1] The dairy industry itself contributes $43.5 billion annually to Wisconsin’s economy.[2] By comparison, citrus contributes $9 billion annually to Florida’s economy and potatoes, $6.7 billion annually to Idaho’s economy.[3],[4] The average number of dairy cows on a farm in Wisconsin is 124.[5] However dairy farms vary greatly in size. As figure 1 indicates, when Wisconsin dairy farms are analyzed by herd size, small farms (those with herds of 99 cows or less) comprise 8,277 farms or 75 percent of the total farms; mid-size farms (those with herds between 100 and 499 cows) comprise 2,399 farms or 22 percent of the total farms; and large farms (those with herds of 500 cows or more) comprise 387 farms or 3 percent of the total farms.[6],[7]

Figure 1:


Mid-sized Dairies are the Sweet Spot for Robotic Milkers

Spotted Cow Acres 280-herd is considered a mid-sized dairy. Discussions with dairy industry experts indicate that mid-sized dairy farms represent the entry point, size-wise, to realize the economies of scale to justify investment in robotic milkers; smaller farms cannot spread the costs over enough cows. Larger scale technologies, such as rotating milking parlors,[8] are available to bigger dairies and offer advantages beyond those of robotic milkers.

Transponders Control Milking Frequency

Despite grocery store milk containers depicting cattle lazily grazing in pastures sporting cowbells, today’s cow is more likely to be wearing a transponder around its neck. Whereas the old cowbell just let the farmer know a cow’s rough location, transponders convey individualized data on each cow. The transponder and the milking robot work together to enable the cow to be milked at will, day or night. Cows can be milked approximately four to six times per day, but the transponder controls the gates to the milking robot, which will not open if the last milking is too recent.

Robotic Milkers

Robotic milkers resemble car washes for cows, except the action occurs below rather than above. Separating each milker is a small control room situated about two feet below grade where the farmer can look out and observe each robot moving methodically about its herd.

The robot uses lasers to scan each cow’s udder and attaches itself without any human involvement. In addition to milking, it tracks an array of data about each cow including: individual milk yields; fat/protein/hormone and enzyme levels in each cow’s milk; whether the cow is ready to reproduce; and it automatically calculates the right feed levels for each cow. Further, it analyzes daily milk samples to ensure that the cow is in good health – long before any external signs of illness would be visible. This data is captured by software and is accessible in real time on smart phones.


Changing Roles

Robotic milkers have dispensed with the old rule of thumb that every 50 dairy cows required one human worker. Although the robots cost as much as $250,000, farmers with large enough herds look upon them as essentially prepaid labor with no overtime, sick days, or holidays. Farmers who installed the robots have commented they spend less time as a people manager and more time as a herd manager – looking after their cows. As robots take over more of the monotonous farm labor tasks, and barns get equipped with high technology, younger workers are taking renewed interest in new era farming careers.[9]

[1] Wisconsin Department of Agriculture, Trade and Consumer Protection, “Wisconsin Agriculture by the Numbers,” available at
[2] Ibid.
[3] Florida Citrus Mutual, “Citrus Statistics,” available at
[4] Taylor, Garth, Paul Patterson, Joe Guenthner, and Lindy Widner, 2007, “Contribution of the Potato Industry to Idaho’s Economy,” © University of Idaho, July (revised October 2007), available at
[5] Wisconsin Milk Marketing Board, “2016 Dairy Data: A Review of Wisconsin’s Dairy Industry,” available at
[6] Wisconsin Milk Marketing Board, “Wisconsin Dairy Farms by Herd Size, 2012,” available at
[7] Ibid. Note that the total number of farms in Wisconsin in 2012 was 11,063, while by 2015 that number had declined to 10,290. According to industry experts, the decline was due to industry consolidation. Further, 2012 was the most recently available breakdown of dairy farms by herd size.
[8] Rotating milking parlours bear some resemblance to merry-go-rounds. The cows walk onto a circular raised platform, allowing the farmer and/or robots to attach the milking machine from below. The platform rotates very slowly, and the cows eat while they are being milked, after which the machine is detached and the cows exit the platform. “What is a Rotary Milking Parlour?” available at
[9] The 2012 Census found a small increase in the number of farmers in the cohort between the ages of 25 and 34. While this modest increase is not substantial enough to offset the baby boom farmers reaching retirement age, it is a break in a former trend that does suggest more young people are seeking agriculture as a first career option. National Sustainable Agriculture Coalition blog, 2014, “2012 Census Drilldown: Beginning Farmers and Ranchers,” May 28, available at See also, Jeff Wuorio, 2015, “A younger generation of farmers gets in the dirt,” Deseret News National blog, September 1, available at For more information on younger tech-savvy workers taking a renewed interest in farming careers, see Jeannine Otto, 2014, “Young farmers deal with old challenges in new ways,” AGRINEWS blog, September 1, available at See also, Marie Lawrence, 2012, “Big Bots in Little Agriculture,” June 1, Slate blog, available at



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Community Development and Policy Studies (CDPS) Update

Every year, Community Development and Policy Studies (CDPS) researches issues that affect low- and moderate-income (LMI) communities in the Seventh District that relate to, among other topics, economic/worker mobility; access to competitively priced credit and financial services; small business development; health disparities by socio-economic cohort; bank closure/consolidation; and affordable housing availability. For example, in previous years survey respondents raised the issue of the mismatch between skills required by companies looking to hire and of prospective workers in their labor markets. Respondents also discussed local approaches by businesses and educational institutions to address these issues.  In 2016, CDPS will again engage individuals whose work in LMI communities can help to address the challenges faced by lower-wealth, lower-income populations. One way in which CDPS will accomplish this is through online surveys. Our surveys will address workforce development, student loan debt, small business credit availability, mortgage credit availability, and affordable rental housing, among other topics. Survey respondents represent a broad range of voices from private and public sectors. This blog summarizes responses from the latest CDPS survey.

The first survey of 2016 had two questions that related directly to credit availability for small businesses and for people with low credit scores seeking mortgage credit. Almost all respondents agreed that business owners in economically struggling communities presently have difficulty obtaining traditional small business loans, and that mortgage credit is not available to prospective home buyers with marginal/below prime credit scores.

In response to the first question, two contacts pointed to Community Development Financial Institutions as organizations that can help small businesses obtain loans at reasonable rates. Most of the other contacts noted that small businesses would have to pay higher rates for financing and consider nonbank lenders because their business would be considered too “risky.”

Last year, the Chicago Fed published an article, Measuring Small Business Financial Health, that identifies “key drivers that are associated with businesses in a state of strong or weak financial health.” The paper’s objective was to explore a set of reliable metrics to determine financial health of businesses and raise awareness of information resources for entrepreneurs. The research revealed three key characteristics of financially strong businesses: 1) thorough knowledge of financial products available to small ventures; 2) ready access to credit through either banks, vendors, or otherwise; and 3) (longer) tenure, (larger) size, and (degree of) planning expertise.

For the second question, most contacts agreed that prospective home buyers who have marginal credit scores are unable to find mortgage credit. However, one contact mentioned that there are some lenders catering to borrowers with lower credit scores. Varying reports from trade journals indicate that borrowers with lower FICO scores (620 is often the lower limit for many lenders) may be able to obtain FHA mortgages or work with niche lenders that offer mortgages to higher risk borrowers.

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Redefining Rustbelt: Cross-City Perspectives on Connecting Health and Community Development

(To view full article with figures, click here)

By Robin Newberger, Maude Toussaint-Comeau and Susan Longworth

On March 16, the Robert Wood Johnson Foundation released its 2016 County Health Rankings [1] showing a worsening of conditions in some “rustbelt” counties like Wayne County (Detroit), and Philadelphia County, ranking them lowest in their respective states in terms of the social and economic factors and physical environment that affect health. In order to improve economic and physical health in communities, especially in low-and-moderate income neighborhoods, the Federal Reserve Banks of Chicago-Detroit Branch, Cleveland and Philadelphia recently held a joint videoconference entitled Connecting Health and Community Developmentto share strategies for developing and investing in community assets. The conference’s focus on ‘healthy communities’ built upon broad efforts and initiatives undertaken by Federal Reserve community development units across the nation to convene public health and community development groups. These meetings have explored common objectives between the fields, the potential for community health needs assessments [2] to address built infrastructure (strategies) in addition to health/healthcare disparities, and facilitate communication across existing public and private funding sources, including community development banks and community development financial institutions. [3]

Chronically disinvested places in cities that line the nation’s ‘rustbelt’ such as Detroit, Cleveland and Philadelphia, lack many of the interconnected socioeconomic, physical, and environmental attributes that make for healthy communities, that is places with consistent investment in people and infrastructure. See Figure 1 for composite measure indicators of health factors, health outcomes, and socio-economic factors in the three cities. The health of residents in a neighborhood often has more to do with the community assets that shape their environment, such as access to recreation spaces, quality housing, and healthy foods, as it does with the presence of health care services. For decades, the public health field has documented correlations between negative health outcomes such as high incidence of asthma, obesity, and hospitalization, and socioeconomic factors such as low educational attainment, unemployment, and the physical and institutional make-up of neighborhoods.[4]

Figure 1.

Source: A Robert Wood Johnson Foundation Program and the University of Wisconsin Population Health Institute.
Note: Health factors are measured based on weighted scores for health behaviors (i.e., smoking, obesity, food environment index, physical environment, etc…), clinical care (i.e., lack of insurance, physician care), social and economic factors (i.e., graduation rate, unemployment rate, income inequality etc…). Z-Score = (Measure in county – Average of state counties)/(Standard Deviation). Scores rank between -3 and 3. The more positive the score the worse the conditions underlying these factors relative to average measure for counties in the respective state.

Traditionally, the public health and community development sectors have been viewed as operating in separate spheres. However, given the socioeconomic determinants of health and the connection between health and economic outcomes, it has become clear that the potential for improving conditions in underinvested and less healthy communities can increase if both sectors work together. At the videoconference, coalitions of public health leaders, community organizations, philanthropies, and others discussed ways in which they develop projects and test programs to address the substandard conditions and amenities in neighborhoods to improve both socioeconomic and health outcomes. This article presents some highlights of the discussion that took place at the videoconference. (See Table 1 for an overview of community partnerships that were highlighted during the videoconference discussion).

Improving Access to Healthy Food

Public health and community development organizations have long recognized the high value of improving access to fresh fruits and vegetables and encouraging healthy eating. Interventions have focused on increasing the availability of food, as CDCs and CDFIs locate and finance grocery stores and farmers markets in urban neighborhoods. Eastern Market Corporation in Detroit, in partnership with Goodwill Industries, recently inaugurated its Red Truck Fresh Produce project, which creates a mini-produce store within a popular meat market staffed by veterans returning to the workforce. To drive demand, Michigan’s Double Up Food Bucks doubles the amount of food assistance for purchases of state-grown fruits and vegetables. Ohio’s fresh food financing fund combines state funding with financing from a national CDFI. Philadelphia’s Food Trust is piloting a USDA Food Insecurity Nutrition Incentive (FINI) grant to allow patrons to get reimbursement when using EBT to buying produce at grocery stores as well as at farmers markets.

Addressing “Upstream” Health Risks through Data Analytics and Sharing

Partnerships in each of the cities have also emerged to address “upstream” determinants of health. The Health Improvement Partnership in Cuyahoga County (Cleveland) is a partner-led coalition that identified neighborhood-level social, economic, and environmental factors that contribute to community health, in order to develop a neighborhood health plan to address them. Likewise, the City of Cleveland public health and housing departments and Metro Health Hospital worked with a local community development corporation and others to address asthma and lead poisoning in city housing. By sharing data, the hospital and city housing department were able to identify families on both lists of asthma patients and households whose housing has been subject to code violations, in order to target interventions. In Detroit, with a similar goal of targeting interventions and using resources more efficiently, the Healthy Environments Partnership was formed in 2000 to identify factors linked with higher incidence of cardiovascular disease in the city including low physical activity, high stress, and poor access to healthy food. The goal of identifying and collecting data on these upstream factors is to develop community-responsive healthcare interventions and repair programs that keep people from living in unhealthy environments.

Funding Healthy Communities through New Partnerships

The Affordable Care Act (ACA), including the provision expanding Medicaid, provides a fresh opportunity to consider resources to promote community health and well-being. While federal money may be diminishing, non-profit hospitals and clinics are expanding their roles in transforming communities. The new ACA mandated Community Health Needs Assessments and Community Benefit Agreements compel these institutions to engage with their communities about disease prevention and general health improvement. Many are recognizing the importance of their economic impact toward these goals, and assuming more substantive roles in planning and financing built improvements and service delivery.

In addition, Medicaid expansion is shifting incentives around state health care spending. According to one participant in Cleveland, the expansion of Medicaid in Michigan, Ohio, and Pennsylvania has motivated new strategies for addressing the social determinants of health.  In Ohio, for example, the state is conditioning (withholding) one percent of its payments to managed care plans on realizing better health outcomes at lower costs. Another “pay-for-success” model in Detroit is based on the concept of “hot spotting.”  Several nonprofits have entered into contracts with an area hospital to receive a flat payment for three months of intervention with high-hospital users (to help coordinate their care), with the opportunity to share in half of the cost savings if health expenditures decline over the following year. These examples illustrate steps that health systems are taking to shift money into community development-type activities – that is, away from treatment and towards upstream prevention.

Foundations and local governments are also vital to hospital/community partnerships. Philanthropies are supporting coalitions both as funders and as neutral conveners. In Cleveland, county and city agencies, including the Cuyahoga Board of Health and the Cleveland planning commission, have worked with foundations and local nonprofits to develop Cuyahoga Place Matters a health improvement plan taking a ‘health in all policies’ approach to land use, education, agriculture, housing, transportation, and urban development.  Cities are also funding cross-departmental positions, as in Philadelphia where the planning and health departments are looking to integrate health impacts into plans for the whole city. In Detroit, the city council is developing incentives for businesses to invest in neighborhoods, approving zoning changes and sidewalk ordinances to encourage a built environment more conducive to health and well-being.

Some creative and nontraditional partnerships have formed as well. Neighborhood organizations in Cleveland have sponsored a series of community-based artist projects to provide an alternative channel for information focusing on exercise, healthy eating, and stemming domestic violence in order to reach overlooked audiences. Other unconventional participants include restaurant associations in Philadelphia working with the city to decrease the sodium content at restaurants that populate many poor neighborhoods; and CDFIs in Detroit which have created a fund to finance grassroots food businesses as a way to increase neighborhood investment and improve healthy food access.

Lessons Learned from Existing Partnerships and Takeaways from the Discussion

While cooperation between the community development and health sectors is in its early to intermediate stages, many cross-disciplinary, innovative, and inclusive coalitions operate in each of these cities, involving community developers, public health leaders, philanthropies, food-justice activists, and residential groups.  The videoconference was an opportunity to share information and strategies, as the experiences described in each city resonated with participants in other cities, and there was talk in the different sites to explore possibilities of working together, including collaborating on planning grants and sharing tips for applying for federal monies.

Policymakers, economic and community development professionals, and more recently hospital administrators charged with community engagement, are better understanding the interrelationship and confluence of factors that impact community well-being and (ultimately) health. For example, a fresh food market is an important community asset, but planners must consider city transportation infrastructure to insure that people can get to it safely and on a convenient schedule, and co-location or proximity with complementary businesses and service providers, such as a pharmacy, daycare provider, bank/credit union, etc. In addition, initiatives have to be constructed to meet the reality of neighborhood and home environments, as residents may not have the time, the money, or the tools to prepare fresh foods. According to some participants, operating affordable neighborhood groceries is only getting more difficult with cutbacks in public funding.

Despite the many successful programs and collaborations highlighted, participants noted persistent challenges. For example, some community development practitioners remain unaware of the ACA requirements for hospitals to conduct community health assessments, or the incentives for insurance companies to fund preventative programs. In addition, joint work by the public health and community development communities does not always mesh with philanthropic agendas. In Cleveland, for example, the hospital foundations ended up not funding what appeared to be an arts rather than a community health program. Engaging the community is also a challenge. According to videoconference participants, some coalitions of community development and health practitioners do not yet reflect the voices of neighborhood residents they seek to serve. In some cities, neighborhoods have not effectively organized to deliver a clear message about what quality of life looks like for them. Governments respond to organized interests, but cross-disciplinary coalitions cannot problem-solve without properly engaging the people whom they are trying to impact.

Finally, advances in health data analytics help to clarify the impacts of poor socioeconomic conditions and improve the efficiency of health-focused interventions, but participants noted the limited scope and small scale of many of the interventions thus far. A better understanding of these programs is needed to make them scalable and to identify preventative interventions that yield meaningful cost savings. Scaling the types of programs and collaborations highlighted in the videoconference discussion also requires a longer timeline for documenting and measuring their impacts. The long-term savings realized from preventative care and sound, safe neighborhoods and infrastructure, should be evaluated against the high costs of socioeconomic exclusion and remedial health care down the road.

Table 1. Selected Resources for Healthy Communities

Red Truck Fresh Produce
Creates mini-produce store within meat market staffed by veterans
Eastern Market
Manages farmers markets and improves food access throughout Detroit
Fresh Prescription
Provides pregnant women, families with young children, or people with chronic disease coupons to purchase fresh food and vegetables at farmers markets.
Healthy Environments Partnership
Examines and develops interventions to address aspects of the social and physical environment that contribute to racial and socioeconomic disparities in cardiovascular disease
Double Up Food Bucks
Doubles the funds available on SNAP Bridge Card when purchasing fresh fruits and vegetables grown in Michigan
Michigan Good Food Fund
Finances healthy food production, distribution, processing, and retail projects that benefit underserved communities throughout Michigan
Michigan Power to Thrive
Organizes a network of organizations in health, housing, education, transportation and other sectors to adopt a “health in all policies” approach
Fresh Food Financing Fund
Supports the development of new and existing grocery stores and other healthy food retail in underserved areas throughout Ohio
Health Improvement Partnership
Cuyahoga County
Creates project to share data between the hospital and the housing departments
Place Matters
Cuyahoga County
Engages policy makers and community members to develop policies that create conditions for optimal health and reduce inequities
Redlining and Health Equity
Examines history of race, redlining and their relationship to health equity
HEAL Report
Tests the feasibility of a community-led approach for healthy eating and active living
The Arts and Healthy Living
Funds creative projects to spur new conversations about community health and preventative care
Edwin’s Restaurant
Works towards reducing community stresses related to post-incarceration
Food Trust Healthy Corner Store Initiative
Increases the availability and awareness of healthy foods in corner stores in Philadelphia.
Philly Food Bucks
Supports projects to increase the purchase of fruits and vegetables among low-income consumers participating in the Supplemental Nutrition Assistance Program (SNAP)
Delaware Valley Health Communities Task Force
Brings together public health, planning, and related professionals to integrate planning and public health sectors
Health, Recreation and Literacy Center
Provides healthcare, literacy and recreational services under one roof for children and families in South Philadelphia
[1] See
[2] See CDC description of CHNAs at:
[3] See
[4] See, “Socio, Economic and Environmental Determinants of Health”, Chapter 4. Durham County Community Health Assessment retrieved at
Also see
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