I’m starting work with a member of our Neighborhood Economics cohort with his Christian liberal arts college in Chicago looking at preventing gentrification-caused displacement; poor people being forced to move as affluent white folks move in.
Preserving resilient home ownership through intergenerational wealth creation and business ownership in a community is the north star, and all the things that effect it.
There will be both a first year class and a senior project class. We are looking at micro certification of neighborhood economics practitioners as a possible outcome. They are designing the curriculum. I am helping point them at some places to examine and make sense of. These are some first thoughts on where to focus first.
So to start out, I am suggesting we look first at redlining as foundational as a long term neighborhood scale net value detractor; destroying community resilience and making it more subject to displacement.
Redlining creates places where home appraisals and valuations get on a vicious downward cycle and houses, rather than being an appreciating intergenerational asset, they lose value over time. So the houses are more at risk, and it’s harder to get a second mortgage to pay for college or fund a startup, etc. That reduces the value of businesses, families and communities.
Black banks are directly correlated to black wealth and ability to get loans at good rates, borrow for business growth, etc. But Chicago lost its last black bank a few years ago. Black banks have faced extraordinary barriers from regulators that caused many to go under. The book The Color of Money by Mehrsa Beradaran is an eye opening read.
White lenders see more risk in black borrowers than exists due to premature cognitive commitment; they see what they already believe, not what is in front of them. Black financial institutions understand how to assess risk rationally in black borrowers. In Jackson MS, Tougaloo a 100 year old plus HBCU was turned down for a ppp loan by white banks but was given one by Hope Credit Union,
Because there are no black financial institutions in Chicago, more African Americans are forced to go to Payday lenders when they need an emergency loan for a hospital bill or emergency home or car repair. Payday lending is predatory and puts homeownership at risk, making gentrification more possible.
That’s why we are creating Rebirth Credit Union, a network anchored in black churches with Hope, a high performing black credit union with a sterling national reputation as the anchor for the church credit union network. With Hope the network can bring top quality black banking to places where black banks don’t exist. Pre covid, Hope’s default rate on character-based emergency loans was a remarkably low 2.5 %.
The first node of the Rebirth network has started with a black church and Community Development Corporation (CDC) in Allentown, PA that had $1.2m annual revenues, and never been late on any payment which couldn’t get a PPP federal relief loan. The pastor realized other black churches, non profits and businesses in town had the same problem. Nationally it’s been documented that black businesses were discriminated against in PPP loans.
Self Help national credit union is one of the best groups fighting payday lending. They advocate nationally and take action in California. They bought struggling credit unions in Chicago during the recession but don’t seem to have advocacy action on that in Chicago. Rebirth’s credit union loans in the church network backstopped by Hope will combat payday lending by providing $500 to $2,500 emergency loans for hospital bills, car repair, emergency home repair, death bed plane flights etc. those are actually less risky, within the social capital of a church than business or consumer loans.
Black neighborhood businesses are also at risk from real estate hedge funds buying up and flipping the strip malls and store fronts where they operated. The Community Investment Trust, first launched in Portland and now being replicated in Atlanta and Seattle lets people buy into and support their local businesses preservation. It’s getting attention from the likes of Brookings and the media. Lyneir Richardson is doing something similar in Chicago.
But business creation is the single clearest way to address the racial wealth gap. The wealth gap between white and black families shrinks from12x to 3x if a black family owns a business. Education does not provide the same class mobility; if they are qualified they don’t get hired or they get paid less. Entrepreneurship is over indicated at the path to wealth because of institutionalized racism makes education relatively less valuable as a path upward financially.
Those assets are most often not stored only in single family wealth; the business owner becomes a source of emergency loans and gifts/grants in the community. When we looked in Cincinnati more than 85 % of black owned businesses had less than two employees. They don’t have the two years clean financials to access the new wave of minority entrepreneurship focused loan funds.
That’s why we created the Community Equity Fund to provide friends and family funding for entrepreneurs who don’t have a business owning aunt or uncle. It could pay for, for example trade certification to enable them to respond to RFP’s from a city or hospital, if that’s how they wanted to use the money. We are talking in two weeks with three new (two new, one reelected) progressive county commissioners here in Buncombe County that I supported. The city and the county have made a commitment to reparations focused on intergenerational wealth creation and black businesses in the city get 0.5% of the city’s business.
There is a “silver tsunami” happening of boomers retiring whose children don’t want to take over the business. Groups like Project Equity are working with business owners to make it easy for them to sell their businesses to their employees, which creates wealth throughout the workforce, rather than just in the business owners.
The Democracy Collaborative’s 50 by 50 campaign is attempting to build a movement to grow the employee ownership and is raising a fund to enable employee buyouts of business owners.
Anchor institutions, mostly hospitals, but now universities, are making a difference at scale because they can think long term about community health. Reducing the load on the ER is a prime financial cost saving motivator; if people are not as sick and also have a physician they don’t come into the er which costs them $12-20k a time because has to be ready for gunshot trauma. Helping people with chronic diseases like type 2 diabetes or PTSD go to a clinic instead of the ER is a big win for the hospital. Making communities healthier helps their bottom line.
There is a strong peer network of anchor institution hospitals, started by Kaiser. They’ve been investing in their procurement supply in local businesses in a lot of places. In many places black businesses don’t qualify as vendors because they lack plumbing, lighting, etc certification. But the hospitals are concerned broadly with social determinants of health and the link between good housing and health is recognized as a prime factor.
There is a node of the anchor hospital network in Chicago. The Chicago Fed is looking at how anchor hospitals can link up with banks community reinvestment act requirement to invest in places they avoid lending. There has been a lot of research and emerging best practices on creating healthy places linking real estate development and anchor hospitals.
On housing, for immigrant communities and others who have a cultural norm, such as savings circles of investing in their neighbors, an innovation like starfinancialsolutions.co can be an answer. 100 pay $2,500 and join a hybrid coop, buy a house and a neighbor pays them back, with a profit but without interest (no usury, which is a sin for Muslims (who remember Moses said it was a sin) over 15 years.
Neighbors investing in their neighbors’ mortgages also works in other immigrant communities but is more quickly profitable in Muslim communities because people who can afford a house don’t, in order to be true to their faith, so they can pay a larger down payment.
In Minneapolis, they changed the zoning rules so that single family homes are not the default standard; making it easier to tiny houses on your home’s lot, called Accessory Dwelling Units (ADUs). The Ven foundation there is offering below market program related investments (PRIs) to enable them. Ven thinks this is a growth market and has registered to offer them in all 50 states. ADUs bring in extra income to enable people to remain in their home as property values increase. affordable-housing-pri-adu
We haven’t begun to look at child care, transportation, schools, or civic infrastructure, etc. in under invested neighborhoods, nor at overall health stats by neighborhood in Chicago, but it’s been shown than your zip code is a greater determiner of your health and your life span than your genetic code.
Our north star is stopping internalized displacement/gentrification, by focusing on enabling resilient home ownership in communities built on intergenerational wealth through home and business ownership and the jobs those businesses create.