Community Development Working Papers

Community development credit unions (CDCUs) have a long history of serving low-income and minority markets. They played an important role in the founding and leadership of the Community Development Financial Institutions (CDFI) Coalition, which successfully advocated for the establishment of the CDFI Fund and has monitored and supported the CDFI Fund throughout its history. Yet, the role of credit unions in the CDFI movement is often overlooked. The term, “CDFI” is frequently understood by researchers and policymakers to mean CDFI loan funds, the unregulated institutions that dominate the ranks of institutions certified by the CDFI Fund. This working paper explains the critical role that CDCUs play in community development and examines their financial performance through the Great Recession.

The Federal Reserve Bank of San Francisco, the Take Charge America Institute at the University of Arizona, and the Federal Reserve Bank of Minneapolis invited a small group of researchers and practitioners to discuss how to improve the evaluation and metrics of youth financial education programs. The meeting focused specifically on youth — which we defined as individuals under the age of 25 – in an effort to distinguish this effort from others that have discussed financial education research more broadly. The goal for the meeting was to help create a research agenda that would move the field towards the development of clearly defined outcomes for youth financial education, metrics for capturing ROI, and quality standards for curriculum and delivery that would serve as “best practices” for educators seeking to offer effective financial education interventions.

There is a steady call for policies and programs to help small business lead the charge in hiring more workers and helping to restore prosperity to areas that have been hurt by the recession. To be successful, however, it is time for academics, policymakers, investors, community leaders, and business owners to have a more fruitful discussion about what small business actually needs. Such a discussion is imperative now, during a time of financial crisis, but it is also necessary if we are to help move the sector forward in the coming years. In this paper, we are proposing that we adopt a common language based on a new small business taxonomy that can make this conversation more productive by bridging the communication gaps between various stakeholders. In an effort to create that common language, support policy creation, and enhance future discussions, this paper lays out a a system of policies and programs – a support structure – for small business using a simple taxonomy of small-business categories based on revenue. Ideally, this will lead to more efficient models for small business growth, including much needed job growth as the nation emerges from the recession.

Increased urbanization has also led to many challenges for urban residents. In the United States, land use and zoning, transportation and infrastructure, lack of affordable housing, and disinvestment have severely affected the quality of life of poor urban populations. Despite these challenges, opportunities do exist to make economically disadvantaged urban communities more sustainable, livable, and healthy. This working paper discusses the challenges facing urban communities and then considers the opportunities that exist to develop sustainable urban communities given our current economic climate.

This paper uses seven short case studies of nonprofit housing and community development organizations to explore three different collaborative strategies that increase their efficiency and impact. These case studies include both recent and long-standing partnerships in affordable housing, community development finance, neighborhood stabilization, and transit-oriented development. It concludes with recommendations based on the examples, including effective strategies for successful innovation, collaboration, and partnership formation.

This paper seeks to explore urban hospital policy, its history, and, in particular, the contradictions, challenges, and opportunities that it poses for community development in U.S. cities. Are urban hospitals a largely overlooked resource for urban economic development that can provide a ladder of long-term upward mobility for impoverished inner-city communities? Or are urban hospitals an anchor that has been dropped into sand, and that may be swept away by the winds of the healthcare crisis that has begun to storm across the United States?

This research paper explores how mortgage market channels interacted with localized social networks to shape loan outcomes for historically disadvantaged borrowers. How did borrowers decide on their choice of lender? What loan products were they offered, and how knowledgeable were they about their loan terms? Were loans in lower-income and minority communities “sold or sought?” To answer these questions, the paper relies on in-depth interviews, local data on mortgage lending and foreclosures, and analysis of the institutions and marketing practices in two communities that represent the two faces of the mortgage crisis in California: an older, predominantly minority neighborhood with an older housing stock (Oakland), and a fast growing suburban area characterized by new construction (Stockton). This research can inform the policy debate around consumer protection regulations and fair lending laws, as well as help local practitioners such as homeownership counselors understand how borrowers access and make decisions about mortgage credit.

Loan modifications offer one strategy to prevent mortgage foreclosures by lowering interest rates, extending loan terms and/or reducing principal balance owed. Yet we know very little about who receives loan modifications and/or the terms of the modification. This paper uses data from a sample of subprime loans made in 2005 to examine the incidence of loan modifications among borrowers in California, Oregon and Washington. The results suggest although loan modifications remain a rarely used option among the servicers in these data, there is no evidence that minority borrowers are less likely to receive a modification or less aggressive modification than white borrowers. Most modifications involve reductions in the loan’s interest rate, and an increase in principal balance. We also find that modifications reduce the likelihood of subsequent default, particularly for minority borrowers.

This working paper considers how two existing policy tools–investment tax credits and charter schools–could be combined to raise operating funds for charter schools that successfully close the poverty-related academic achievement gap. Some charter schools have succeeded in dramatically improving low-income student performance (those run by KIPP, Achievement First, and the Harlem Children’s Zone, for example). However, these successful schools differ significantly in type and approach. As a result, it is difficult to identify a single, or combination of variables in any one charter that, if replicated, would produce the same results across the public school system. This working paper acknowledges the difficulty of so-called “silver bullet” school reform replication and considers an alternative: cultivating a diverse array of education approaches using tools developed by the community development finance industry over the last 30 years.

Over the last three years, the financial crisis and ensuing recession have led to tectonic shifts in the availability of credit, especially for small businesses. Data show that the number of loans to small businesses has dropped from 5.2 million loans in 2007 to 1.6 million in 2009. This trend is of significant concern to policy-makers, particularly given the important role that small businesses play in the US economy. Making credit accessible to small businesses, therefore, is seen as a critical component of economic recovery. Despite this policy focus, however, few studies have documented recent trends in small business lending, and even fewer have focused attention on the implications of the reduction in credit for small businesses in low- and moderate-income neighborhoods. In this paper, we seek to address this gap by examining trends in small business lending in low- and moderate-income (LMI) neighborhoods by large banks regulated under the Community Reinvestment Act (CRA). We find that there is a strong relationship between the boom and bust housing market cycle and patterns in small business lending, both over time and over space. While small business lending expanded rapidly between 2003 and 2007, this expansion was uneven, and neither LMI communities nor neighborhoods with a high percentage of African American residents appear to have benefited as much as other areas from the boom. Since 2007, small business lending has contracted significantly, particularly in areas that have also seen contractions in the housing sector. Our results show significant spillover effects of the mortgage crisis into small business lending—for the economy as a whole as well as for LMI areas in particular. Our findings suggest that in order to reverse the cycle of disinvestment in neighborhoods hit hard by foreclosures, we need to address the small business sector as well as housing.