Investment Not Flowing Equally To All Chicago's Neighborhoods
Chicago has seen a number of political earthquakes in the past year or so, and much of the change was driven by fears the city was splitting into two sections — one increasingly wealthy and flush with investment, and the other increasingly abandoned and starved for capital.
Although this debate is frequently framed as downtown vs. the neighborhoods, a new study by The Urban Institute shows the disparities are much broader, and could increasingly leave behind whole sections of the city, making it unlikely they will truly recover from the lasting impacts of the Great Recession.
"In many cities, including Chicago, we are continuing to find growing inequities, in terms of neighborhoods' access to capital," Urban Institute Senior Fellow Brett Theodos said. "The disparities are really stark."
Overall, the research team found majority-white neighborhoods, along with low-poverty neighborhoods, were receiving nearly three times as much investment as majority-black areas and mostly low-income neighborhoods.
Although many researchers have historically studied the amount of investment that goes into Chicago’s single-family housing, the institute’s researchers went deep, looking at everything from loans, sales and construction and rehab activity in the multifamily, single-family, commercial and industrial sectors, as well as small-business lending, activity by community development financial institutions, socially motivated investors and federal community development programs such as HUD housing subsidies and Community Development Block Grants.
The researchers also examined whether a dearth of neighborhood investment stemmed from a lack of employment or a lack of a certain type of real estate. They compared, for example, small-business loan dollars per small-business employees, or single-family loan dollars per owner-occupied households.
“In this way, our analysis can be thought of more as a study of capital gaps than just capital flows,” the report said.
And after studying capital flows throughout the city between 2011 and 2017, Urban Institute found that the majority-white neighborhoods receive 2.9 times as much investment per household as majority-black neighborhoods, and low-poverty neighborhoods receive 2.6 times the investment of high-poverty neighborhoods.
The researchers did find that community development and mission driven dollars are flowing to the most-needy areas. In the years studied, public and mission-driven actors invested 10 times more per household in high-poverty neighborhoods than in low-poverty neighborhoods, according to the institute.
"That investment helps ameliorate the problem, but it doesn't get us anywhere near the finish line," Theodos said.
Community and mission-driven groups invested a total of about $4B from 2011 to 2017. In the same years, market sources provided $67B of lending capital, including commercial, industrial and multifamily real estate loans and CRA small business and Home Mortgage Disclosure Act-reported single-family lending, the researchers found.
And the city’s poorer neighborhoods only get a small share. According to the Urban Institute, the median low-poverty neighborhood receives 4.3 times as much market investment per household as the median high-poverty neighborhood.
In a city with such monumental fiscal problems, bridging the investment gap won't be easy, Theodos said.
Bloomberg reported last week that the latest calculations show Mayor Lori Lightfoot will face a deficit of around $700M in the next fiscal year, about $200M more than was originally anticipated.
Theodos said he knows of no magic elixir, but with funds so scarce, he believes city leaders will have to direct resources to areas where private investors are also willing to work.
He pointed to the city's more than 130 federal opportunity zones, most of which are in low-income areas in dire need of more investment, as neighborhoods that may attract more private dollars in the future.
The city also doesn't necessarily need to make direct investments. It could bolter the federal tax incentives meant to bring in investors with incentives of its own, or provide loan guarantees that will help preserve or create new affordable housing or other needed infrastructure.
"It's going to have to be very strategic."