The Disparities In Investment Found Across One City’s Neighborhoods
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A new study highlights sharp differences in capital flowing to poor and wealthy and minority and white areas in Chicago.
It may come as little surprise to some that lower levels of investment—ranging from home mortgages to business loans—have flowed to poor and minority neighborhoods in Chicago in recent years, compared to what was seen in parts of the city that are wealthier and whiter.
But new research out this week from the Urban Institute offers some figures that help gauge the degree to which this is the case. Researchers with the think tank analyzed different types of investments across census tracts in the city between 2011 and 2017.
To control for outlier neighborhoods, like areas with heavy investment in downtown Chicago, they compared the different neighborhood classifications that they looked at, high-poverty versus low-poverty for instance, based on median investment values.
One of their main findings was that the median majority-white neighborhood in Chicago received 4.6 times more private investment per household than the median majority-black neighborhood and 2.6 times more than predominantly majority Latino tracts.
Private investment here includes things like mortgages, business loans, and real estate development.
“It's showing the really quite large disparity in the neighborhood access to capital,” said Brady Meixell, one of the study’s authors.
Meixell explained that going into the study he anticipated that there’d be gaps in the access that minority neighborhoods had to capital. “But I think just putting those numbers to it, that it’s 4.6 times, is much larger than we might've expected,” he said.
The differences in capital investment across wealthier and poorer neighborhoods showed similar trends. The typical low-poverty neighborhood received 4.3 times as much private investment per household, compared to the typical high-poverty census tract.
Prior Urban Institute reports have looked at similar metrics for other cities, and the researchers say their latest findings are not altogether different from what’s seen in Baltimore and Detroit.
As part of the Chicago study, the researchers also examined the flow of capital from certain federal programs, such as Community Development Block Grants, and “mission” driven organizations, like Community Development Financial Institutions.
Here they find that more of these types of dollars are going to higher-poverty and majority-nonwhite census tracts. But the report notes that these investments are much smaller than the sums of capital flowing from the private market in the city.
Market sources of investment provided at least $67 billion of lending capital over the timeframe the researchers looked at, compared to just $4 billion of “mission lending” over the same period.
“It’s just such a small slice of the pie,” Meixell said, referring to government and mission driven investments.
He said a takeaway here for policymakers seeking to address disparities in neighborhood investment is that, “you have to figure out ways to leverage private capital.”
The recently created Opportunity Zones program provides tax breaks that are designed to lure private investment toward low-income neighborhoods. But how far it’ll go toward achieving this goal in places like Chicago is an open question.
In their report, the Urban researchers devote a section to Opportunity Zones.
They say that in Chicago census tracts that are eligible for the program show “symptoms of a lack of access to capital” compared to their ineligible counterparts. Ineligible tracts, they add, have received anywhere from 1.3 to 6 times more private investment than eligible areas depending on the investment variable that’s studied.
A full copy of the report can be found here.
Bill Lucia is a Senior Reporter for Route Fifty and is based in Olympia, Washington.
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