Modern-Day Redlining in Communities of Color

By Elisabeth Risch and Jackie Hutchinson

This column was originally published by the St. Louis Post-Dispatch on August 18th, 2016. To view the original article, click here.

Elisabeth Risch

Elisabeth Risch

Elisabeth Risch is the Director of Research and Education at the Metropolitan St. Louis Equal Housing and Opportunity Council. She is the Co-Chair of the St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA), where she works directly with banks to increase investment and services to low-income communities and communities of color. She holds a Bachelor’s Degree in Sociology from Calvin College and Master’s Degree in Social Work from Washington University in St. Louis. She is a board member of the National Community Reinvestment Coalition.

Jacqueline Hutchinson is VP of Operations for People’s Community Action Corporation in St. Louis. She is actively involved in policy and advocacy issues that affect low-income consumers in the St. Louis region. Jackie is Co-Chair of SLEHCRA, where she works to increase investment in LMI communities; serves as board chair for Missouri Consumers Council; and is a member of the Unbanked Task Force. She has a Master’s Degree in Policy Analysis from Southern Illinois University and a Bachelor’s Degree in Business from Washington University in St. Louis.

Jackie Hutchinson

Jackie Hutchinson

SLEHCRA is a coalition of non-profit and community based organizations working to increase investment in low- and moderate-income communities, regardless of race, and in minority communities, regardless of income. SLEHCRA ensures that banks are meeting their obligations under the Community Reinvestment Act and fair lending laws.

In St. Louis, it is harder to get a loan in communities of color. That’s what a new report by the National Community Reinvestment Coalition (NCRC) found. The report looks at mortgage lending data in the St. Louis region over the last few years and finds extensive disparities in communities of color.

The data and the maps in this report help to visualize what many of us already know and experience. Lending is concentrated in white areas and scarce in black neighborhoods. Certain neighborhoods have poor access to banking resources, and many households are unbanked or underbanked, particularly African-American households. In the entire St. Louis metropolitan area, median family income of the neighborhood is the best predictor of home loan activity. However, in the City of St. Louis, the racial composition of a neighborhood is also a strong predictor of mortgage activity. In hyper-segregated neighborhoods in which the population is over 75 percent black, less than one percent of homes received a home purchase loan in the 2012-2014 period. Most problematic: the lack of lending in high minority areas is not fully explained by income differences. Credit is still available to white neighborhoods with the same income level.

Isolation from financial services further concentrates poverty and perpetuates the cycle of disinvestment seen in black neighborhoods all around us. If our city hopes to rebuild and revitalize long-neglected neighborhoods, we must break this pattern that hurts individual homeowners, families and our entire region. Housing values have plummeted in those neighborhoods, and there are few comparable sales in the area to fuel the market. To find a cash buyer, families in black neighborhoods must often sell their homes for thousands less than if their neighborhood had equal access to credit. Homes sit vacant and fall into further disrepair. For many families, buying a home builds equity and increases wealth, plus will often cost less in the monthly mortgage than what they pay for rent in these same neighborhoods. Lack of credit access prevents families from building wealth in home equity and savings.

Since 2009, the St. Louis Equal Housing and Community Reinvestment Alliance (SLEHCRA) has worked with banks in our region to improve access to banking and improvements have been made. During this time, banks have opened new branches, created new products, and increased outreach and investment in communities of color. More banks are participating in collaborative efforts to address unbanked and underbanked households, as well as financial education programs.

But this report shows that we have a long way to go. Decades of discriminatory practices will take many years to reverse. We call for more banks to develop quality products—including innovative loan products and checking and savings accounts—and to actively seek opportunities to develop partnerships that create investment in communities of color. New partnerships can also lead to more bank branches opening in banking deserts. We ask banks to increase support to financial empowerment centers and nonprofits providing financial education. We ask banks to discontinue the practice of providing credit to those payday loan businesses whose interest rates are predatory debt traps that strip wealth from communities, especially communities of color.

We urge community members to join with SLEHCRA in our efforts assure equity in financial services in all communities; to support strong payday lending reforms proposed on a local, state and national level; and to support efforts to strengthen and update the Community Reinvestment Act to better reflect today’s financial system.

Finally, we echo the calls in the Ferguson Commission’s report to Build Equity through Enhanced Access to Banking and to Promote Asset Building. Ultimately, we must work collaboratively—as community members, organizations, banks, regulators, and local governments—to ensure that all neighborhoods, including black neighborhoods, have equal access to credit and the opportunity to build stable and healthy communities.

Articles in “From the Field” represent the opinions of the author only and do not represent the views of the Community Builders Network of Metro St. Louis or the University of Missouri-St. Louis.