Jesse M. Keenan
Disasters such as wildfires and flooding are becoming more frequent and more intense as annual weather pattern variability increases. Driven by the rise in global average temperatures, communities across the United States are seeing higher human and economic costs associated with climate-related impacts, according to the National Climate Assessment.
Low-income people are often the most vulnerable to the impacts of climate change and disasters, and they typically have limited access to resources for resilience and recovery.
Many of the institutions addressing disasters focus on short-term recovery. For example, most state and federal programs, as well as charitable efforts, for disaster recovery are set up to respond to immediate humanitarian needs in the weeks and months after a disaster. In addition to this important work, it is becoming increasingly critical to increase the resilience and adaptive capacity of communities, both before a disaster and in the long run.
As the costs of disasters to people and the economy increase, many in the community development field are thinking about how to increase the resilience of low-to-moderate income populations and to make disaster spending more equitable. A key component of these efforts center on pre-disaster mitigation investments. Research has shown that federal investment in infrastructure and other measures that mitigate disaster impacts on safety and property can save six or more dollars in recovery spending for every dollar spent, while at the same time creating jobs and supporting local economies.
We also know that there are many approaches to increasing the resilience of communities, but no two communities have the same needs or the same resources.
A new report from the SF Fed Community Development team explores the potential for Community Reinvestment Act (CRA) investment in low-to-moderate income areas to be part of a proactive stance towards disasters that helps build community resilience. Financial institutions already invest in community development and disaster activities in eligible low income communities. Consistent with the CRA, these efforts could benefit from greater coordination and advance planning.
Community groups, financial institutions, and local government can increase the reach of CRA investment by planning ahead to determine what kinds of CRA-compatible disaster recovery activities they want to see happen should a disaster strike. CRA investments also have the potential to focus on reducing the vulnerability of low-income people where there has been no disaster declaration. For example, increasing building energy efficiency in homes helps protect low-income people from the financial and health risks of extreme temperatures, a slow-moving disaster.
The report shows significant geographical overlap between disaster-impacted areas and low-income, CRA-eligible communities over the past two decades:
- Over half (57 percent) of counties with disaster declarations have CRA-eligible tracts.
- 28 percent of all populations subject to a disaster declaration live in a CRA-eligible tract.
- Looking at only those counties with both CRA-eligible tracts and disaster declarations, nearly half (49 percent) of people living in these counties live in CRA-eligible tracts.
The report also surveys past disaster responses that have involved partnerships with financial institutions, community and philanthropic organizations, and the public sector. Building on these examples, it puts forward ideas for how these types of efforts could be replicated to advance climate adaptation, community resilience and disaster risk reduction activities.
Climate-related impacts are increasing risks and exacerbating existing community development challenges for low-income people. The slow increase in home energy costs or the rapid loss of available housing after a disaster creates difficult tradeoffs for individuals and communities.
Mitigating climate-related risk for low-income communities helps increase economic stability and minimize disruption in urban and rural regions. A well-coordinated disaster response, for example, helps businesses reopen and helps people get back to work faster after a disaster. Having sufficient savings helps families withstand shocks and stresses associated with the varying impacts of climate-related risks.
There are existing structures that support different sectors working together to address disasters, but there is room for better coordination of investment in community resilience and climate adaptation in low-income and disaster-prone areas.
For more, read Climate Adaptation Investment and the Community Reinvestment Act.
Related Content
Climate Change and the Federal Reserve
Q&A: Climate Adaptation and Resilience from a Community Development Perspective
New Data on Small Business Recovery after Natural Disasters
Resources
Climate Adaptation Finance and Investment in California
Weathering the Storm: A Framework for Meeting CRA Obligations
The Community Reinvestment Act and Disaster Recovery
Understanding Community Development Needs through the CRA Performance Context
The views expressed here do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco or of the Board of Governors of the Federal Reserve System.