Between 2011 and 2017, Chicago homebuyers in areas with low rates of poverty received mortgage loans that, when combined, are worth nearly six times more than those in areas with high rates of poverty, according to a new report from the Urban Institute. During the same period, single-family home loans flowing to majority-white neighborhoods were worth eight times more than those flowing to majority-black neighborhoods, and four times more than the investment in majority-Latino neighborhoods. Similar disparities could be found in multifamily housing investments, the report finds.
Overall, according to the report, patterns of racial and economic segregation in Chicago have been reinforced over the last half-decade by the flow of investment in housing, commercial real estate, and small business. And while public and “mission-driven” investments are generally directed more to higher-poverty neighborhoods and majority-black census tracts, the overall pool of investment is much smaller than the private sector, and not great enough to offset its disparities.
“We have been motivated to understand how communities function — how they develop — and an important way of understanding the health of communities is how they’re able to access capital to invest in real estate and infrastructure and the residents that are living there,” says Brett Theodos, a senior fellow at the Urban Institute and lead author of the report. “… What we ended up finding, and we’ve found this in Baltimore as well, and Detroit, and a few other older industrial cities, is deep inequalities in how able neighborhoods are to access investment.”
In Detroit and Baltimore, there’s a much smaller pocket of wealth and less economic activity overall, Theodos says. Chicago is larger and more diverse, but the patterns of investment are similar, he says.
“When we look at the spatial trends, we still see predominantly black and Latino neighborhoods getting much less investment than majority-white neighborhoods and the same dynamics with poverty,” Theodos says.
Those trends mean fewer opportunities for people to access housing in high-poverty areas and majority-black and majority-Latino neighborhoods. And of course, low-income people already struggle to find housing they can afford in many cities in America, and the racial segregation of urban neighborhoods is common.
“Black homeownership rates have regressed to the level of the 1960s, so we are back to the level we were at before the civil rights movement,” Theodos says. “So is [single-family housing] a luxury good? No, I think that’s too far. … But is it challenging to access and to maintain a home? It is in many neighborhoods.”
Chicago is still recovering from the 2008 housing collapse, and in some neighborhoods, housing costs are still very low.
“Chicago is not like D.C. or Seattle which are facing, if you will, whole-city gentrification,” Theodos says. “It’s got a few closer-in neighborhoods that are appreciating, but it’s still got a lot of affordability in the city, so on the scale of problems, Chicago is still facing more disinvestment than it is rapid investment.”
The difference in volume between private market investment and mission-driven investment is vast: $67 billion versus $4 billion between 2011 and 2017, according to the report. And Chicago’s real estate market presents challenges for mission-based groups that want to invest in neighborhoods with a lack of private capital.
The group Neighborhood Housing Services of Chicago helps people buy or repair their homes in low- and moderate-income neighborhoods in the city and in southern Cook County, says Kristin Faust, the group’s president. In some areas, the group can help a resident buy a home for $100,000, and invest another $100,000 into repairs, and the house will only appraise at $160,000 after repairs, she says. When weighing whether its investments are working in neighborhoods, the group looks for modest year-to-year increases in property values, but not big spikes, Faust says.
“You’re not trying to get it heated, up you’re just trying to get a functioning housing market,” Faust says. “That’s what we try to do.”
Chicago has a lot of neighborhoods that need investment in housing stock, but banks won’t make loans there, she says. Neighborhood Housing Services is in the fourth year of a four-year investment plan that included a goal of investing $100 million, and the group is on track to spend all of that. Every three years the organization raises money from banks to fund its work; during the last round, it raised $39 million, and its goal in the next round is to raise $75 million, Faust says.
“We have the skill and expertise, but we need that capital,” Faust says.
Faust says the report from the Urban Institute will help reinforce the need for more public and mission-driven investment in low-income neighborhoods at a time when Chicago’s new mayor, Lori Lightfoot, is bringing a new focus to neighborhood equity. The report concludes that mission investment needs to be bolstered by additional federal and state support, but that “mainstream capital must also be drawn into a broader set of Chicago neighborhoods.”
“Chicago has in many ways an incredible community development infrastructure, and yet it needs to be five times if not ten times in size to be able to really ameliorate the challenges we see around capital access spread through the city,” Theodos says.
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Jared Brey is Next City's housing correspondent, based in Philadelphia. He is a former staff writer at Philadelphia magazine and PlanPhilly, and his work has appeared in Columbia Journalism Review, Landscape Architecture Magazine, U.S. News & World Report, Philadelphia Weekly, and other publications.