Chicago Fed Insights

Begin with Your Block: Challenges and Prospects for Chicago’s Minority Middle Neighborhoods

August 3, 2020

The Chicago Fed’s Project Hometown initiative hosted a panel discussion on Wednesday, July 29, that brought together practitioners and researchers to explore the challenges faced by Chicago’s minority neighborhoods. Panelists discussed how these communities can recover from both long-standing inequities as well as the current pandemic, restoring their status as vital and vibrant communities on Chicago’s south and west sides.

Moderator Maude Toussaint-Comeau, senior policy economist at the Federal Reserve Bank of Chicago, described how historically Chicago’s minority “middle” neighborhoods have been attractive places to live, with a large base of middle- and working-class residents, active business corridors, affordable housing, and proximity to the city’s center. “They are great places to nurture and support African-American families. They support social cohesion… and [offer] a respite from the structural racism that is so embedded in our society,” panelist Nedra Sims Fears, executive director of the Greater Chatham Initiative, explained.

Over the past 40 years, however, the disappearance of manufacturing jobs, discriminatory housing policies, and disinvestment have left minority middle neighborhoods particularly vulnerable to economic shocks, such as the one caused by the current coronavirus pandemic, noted panelist Alex Bartik, assistant professor at the University of Illinois at Urbana–Champaign. This shock has impacted almost every facet of economic life in these neighborhoods.

Perhaps the most obvious distress is among small businesses, which experienced a rapid and widespread decline in employment. Bartik presented data showing that the numbers of hours worked at small businesses fell by 70% between January and April 2020. The effect of the downturn was particularly acute among minority-owned businesses, which on average have 20% less cash-on-hand than nonminority-owned businesses. Their limited resources mean that 82% of minority-owned small businesses have or expect to miss a rent payment because of Covid-19, Bartik’s research shows.

This data highlights an important economic divide between minority and nonminority-owned businesses: The former have fewer resources than the latter, as Fears pointed out. This reflects disparities in wealth and access to financing between the two communities. Panelist Stacie Young, director of The Preservation Compact, concurred, noting that many minority owners have more difficulty raising equity for their business than nonminority owners and as a result, they face a significant risk of going bankrupt during the current crisis.

The loss of small businesses hurts minority middle neighborhoods not only because they become less attractive places to live but also because these businesses employ local residents, many of whom are people of color making less than the average wage, Bartik noted. That 70% reduction in hours worked translates into real wages lost, which in turn affects the housing landscape. “We can’t let this health crisis turn into a housing crisis,” Young stated, noting that people working in job sectors affected by Covid-19 are more likely to be renters and people of color; not surprisingly, rent collections are lowest where affected workers live. This inability to pay rent has at least two consequences.

One, it might force families to move, which disrupts children’s education. As Fears described, schools in minority middle neighborhoods see much higher turnover in their student bodies than schools in White neighborhoods. When families move neighborhoods, children must change schools, and this disruption to their education puts them at a disadvantage compared to their White peers.

Renters’ inability to pay also puts stress on landlords. In many low- to moderate-income neighborhoods, landlords are not faceless corporations but rather are small business owners who live in the neighborhoods themselves. Indeed, 50% of borrowers at the Community Investment Corporation, a not-for-profit mortgage lender for multi-family housing, are minority-owned businesses. As Young described, these owners know their buildings and their neighborhoods; they provide jobs; they purchase from local vendors; and they provide housing—in other words, they are anchors in their communities. When tenants cannot pay their rent, landlords cannot pay their mortgages or invest in their properties. “These businesses have thin margins and fragile infrastructure. And if the landlords are vulnerable, the buildings are vulnerable. When those buildings start to fail, blocks and neighborhoods could easily follow,” Young stated.

The economic stress of the coronavirus crisis on minority middle neighborhoods is compounded by the digital divide. The ability of businesses to pivot to online sales and the ability of students to pivot to online education depends on access to broadband and familiarity with necessary software, Fears pointed out. However, in Chicago’s Greater Chatham communities, 40% of families lack this necessary access, she said.

Preserving these important neighborhoods is both simple and complex. In the near term, Jahmal Cole, founder of My Block My Hood My City, is making a difference by asking the question, “What’s something simple I can do to have a positive impact on my block?” This philosophy has inspired programs such as one that hired teenagers to assist elderly neighbors by visiting them, getting them personal protective equipment, food, and medicine, and connecting them with primary medical care. Cole’s organization has also responded to the recent riots by raising money to help small businesses remove graffiti, replace glass, and make the repairs needed to reopen and once again serve their communities.

In the medium term, both Fears and Young stressed the need for grant programs to assist small businesses, renters, and home owners. As Fears noted, it is critical that these programs be grants and not loans; owners of small businesses are already heavily leveraged and do not want to take on more loans. Grant programs have the potential to make a deep impact, Young believes: “Help tenants pay rent, then owners can pay expenses, then communities stay strong.”

In the long term, panelists described the importance of investing in social networks and social capital, which enhances collective efficacy. This is what Cole does with his Explorers program, which takes teens from under-resourced communities on fieldtrips to experience different cultures and professions. Academic research confirms that social organizations such as churches and Cole’s My Block My Hood My City can improve labor market networks for neighborhoods, Bartik noted. Efforts such as these also contribute to a neighborhood’s self-narrative, which influences residents’ decisions about whether to stay or go.

Due to both longstanding inequities and the current crisis, Chicago’s minority middle neighborhoods are in a precarious position. However, the day’s conversation identified specific investments to address the impact of the pandemic on small businesses and essential workers. These include policies to safeguard the housing market, including rental assistance, improving access to broadband to keep communities connected, and creating opportunities to build social capital. These efforts to stabilize Chicago’s minority middle neighborhoods are some of the steps that it will take to preserve them as great places to live for the next generation.

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.

Subscribe to NFCI

To sign up for updates or to access your subscriber preferences, please enter your contact information below.

Find Publications By:
Find Publications By:
Publication Date

Find or Reset
Having trouble accessing something on this page? Please send us an email and we will get back to you as quickly as we can.

Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, Illinois 60604-1413, USA. Tel. (312) 322-5322

Copyright © 2024. All rights reserved.

Please review our Privacy Policy | Legal Notices