Tools toward Market Restoration: Where Growth and Opportunity Converge
Please join the Federal Reserve Bank of Chicago and the American Bankers Association for a conversation about places experiencing chronic market failure that was, in some cases, exacerbated by the Great Recession.
Tools toward Market Restoration: Where Growth and Opportunity Converge will delve into how policies and practices impact place-based inequality. The conference will:
- Share new insights to support equitable growth;
- Understand ‘success’ in the context of re-emerging markets; and
- Explore factors needed to achieve inclusive growth.
We will discuss the concept that “growth is not enough” in the context(s) of housing, employment, and capital. The conference will pair policy experts with leading practitioners who will share knowledge derived from current research, innovative programs, and interventions.
In this groundbreaking history of the modern American metropolis, Richard Rothstein, a leading authority on housing policy, explores the myth that America’s cities came to be racially divided through de facto segregation―that is, through individual prejudices, income differences, or the actions of private institutions like banks and real estate agencies. Rather, The Color of Law incontrovertibly makes clear that it was de jure segregation―the laws and policy decisions passed by local, state, and federal governments―that actually promoted the discriminatory patterns that continue to this day.” Copies of The Color of Law will be provided to all attendees
Policy relating to housing, employment, and access to capital has lasting consequences. Our understanding of the enduring effects of decades-old policies continues to evolve. This opening session will explore the powerful impact of federal policy on shaping the urban landscape and the lives of residents.
Research: The Effects of the 1930s HOLC “Redlining” Maps (Working Paper)
Abstract: In the wake of the Great Depression, the Federal government created new institutions such as the Home Owners’ Loan Corporation (HOLC) to stabilize housing markets. As part of that effort, the HOLC created residential security maps for over 200 cities to grade the riskiness of lending to neighborhoods. We trace out the effects of these maps over the course of the 20th and into the early 21st century by linking geocoded HOLC maps to both Census and modern credit bureau data. Our analysis looks at the difference in outcomes between residents living on a lower graded side versus a higher graded side of an HOLC boundary within highly close proximity to one another. We compare these differences to “counterfactual” boundaries using propensity score and other weighting procedures. In addition, we exploit borders that are least likely to have been endogenously drawn. We find that areas which were the lower graded side of HOLC boundaries in the 1930s experienced a marked increase in racial segregation in subsequent decades that peaked around 1970 before beginning to decline. We also find evidence of a long-run decline in home ownership, house values, and credit scores along the lower graded side of HOLC borders that persists today. We document similar long-run patterns among both “redlined” and non-redlined neighborhoods and, in some important outcomes, show larger and more lasting effects among the latter. Our results provide strongly suggestive evidence that the HOLC maps had a causal and persistent effect on the development of neighborhoods through credit access.
A stalled single-family mortgage market requires a multi-faceted intervention targeting both supply and demand factors. However, financing products for low-value, difficult-to-appraise properties are often missing. Emerging research focuses on the critical role of small-dollar mortgage loans and the consequences of the lack of a functional market, such as land contracting. Panelists will respond to research with innovations from the field.
Research: Small Dollar Housing Credit for Affordable Single-Family Residential Properties
Across the country, there is a clear lack of financing for small balance homes, which we define and homes valued under $70,000. Although these homes make up a significant share of the housing stock in both urban and rural communities across the county, these home sales are rarely financed by a mortgage. Credit for small dollar purchases is hard to come by, and has become even harder in recent years. Our research presents a wealth of information on borrower characteristics, loan characteristics and production channels, and the geographic distribution of low balance homes. Through this detailed analysis, we determine that expansion of small dollar housing credit, or SDHC, can put homeownership within reach for much of the lower income population across the US.
Attracting corporations into the central business district is a strategy often aimed at attracting highly educated, young(er) workers. It is a strategy that frequently comes with a high price tag of incentives and subsidies. How can such deals benefit existing residents ensuring that the benefits of job creation are distributed equitably? What are the policies that can enhance competitiveness?
Research: Meet the out-of-work: Local profiles of jobless adults and strategies to connect them to employment. Meet the out-of-work uses a novel approach to better understand who is out of work at the local level, and to support local officials in tailoring appropriate solutions to connect residents to skill-building opportunities and employment. The paper examines out of work adults aged 25-64 in each of 130 large cities and counties across the United States, and segments them into different groups based likely to benefit from similar types of workforce assistance, based on factors such as educational attainment, age, work history, English language proficiency. The report also provides information on effective workforce development practices that may be appropriate for these groups.
The media plays a vital role in shaping urban narratives and advancing thinking around what can and should be done to address place-based inequities. At the same time they are uniquely positioned to reflect on the impact of policies on people and places and expand the conversation. Panelists approach these issues from a variety of local and national perspectives.
Reversing the effects of policies to restrict capital into targeted areas has required decades of multi-faceted interventions. However, legacy barriers remain. Research will highlight recent findings; respondents will discuss what remains to be done.
Research: Mission-oriented financing—capital that seeks a double bottom line of financial and social return—has been growing in prominence as a meaningful part of the solution for economic and social vitality in disinvested urban and rural communities. And while difficult to quantify, the public sector (local, state, and federal) continues to play an important role in connecting businesses, developers, and households with capital they would otherwise struggle to access it. Drawing from case studies in Detroit, Baltimore, and the Twin Cities, as well as a national scan of capital flows, this research talk informs where capital is flowing locally, from what sources, and the roles of both mission-oriented investors and public sector programs.
Equity: Is it a Lens or is it a Mirror? The definition of equity carries with it the notion of justness and fairness. But what is fair is not always equal. As a result, the notion of equity is complex and nuanced. This panel of elected leaders will describe efforts to bring equity to the populations they serve, and the role of policy, therein. The discussion will be anchored by a presentation of the Cost of Segregation in the context of Chicago.
Research: The Cost of Segregation
For many U.S. metropolitan regions, historical and ongoing systemic racism has blurred the lines between racial and economic segregation; today, the poorest residents are disproportionately people of color living in communities of concentrated poverty. While the disadvantages of living in concentrated poverty have been well documented, there is less evidence of the disadvantages of segregation to all of a region's residents. Using metropolitan Chicago as a case study, the Metropolitan Planning Council and Urban Institute study rests on the premise that not only low-income people and communities pay the price, but that segregation hampers the economy and quality of life for everyone living in the region.