Community Development

Consumer Complaints against Banks: A Look at the Numbers

William Dowling, Research Associate, Community Development
Federal Reserve Bank of San Francisco

Consumer input has long been an important part of the free market system. It allows businesses to change and adapt products and services based on what individuals want and need at the time. If the speakers on your new laptop break a few weeks after you bought it, you might go online and leave a negative review of the laptop. Ideally, this would cause the manufacturer to look into the issue and ensure that future laptops don’t have the same problem. If the Italian restaurant you went to last week had terrible service, you might give the place a poor rating. Hopefully, this would cause the restaurant to retrain its server staff so that future customers would have better experiences.

Consumer input is just as important to banks as it is to other types of businesses. Financial institutions want to ensure that their customers are treated with fairness and respect and government regulators want to ensure the same thing. With this in mind, the federal bank regulators set up a consumer help center where individuals can file complaints against banks if they feel that they have been mistreated in any way. These complaints will be officially investigated by a federal regulator, and the appropriate action will be taken. While most regulators don’t make data on complaints publicly available, the Consumer Financial Protection Bureau (CFPB), in an effort to promote transparency and accountability, published its consumer complaint database in 2012. In 2015, the CFPB added a feature where consumers could share the details of their complaints with others. This database provides information on certain consumer complaints against the nation’s largest financial institutions. Let’s take a look at some of the numbers.

As seen below, consumer complaints increased in a relatively consistent manner from late 2011 (the earliest data released by the CFPB) to the later part of 2015. The CFPB received the most complaints in July 2015, when 15,900 grievances were filed. 

Monthly Consumer Complaints
December 2011-September 2015

Monthly Consumer Complaints: 
December 2011-September 2015

Since December 2011, 464,476 total complaints have been filed to the CFPB. The products identified most often in the complaints are outlined in the chart below.

Type of Product Identified in Complaint
December 2011- September 2015

Type of Product Identified in Complaint: December 2011- September 2015

Issues with mortgages were identified most often, comprising 35 percent of total complaints, with issues over debt collection and credit reporting following, comprising 18 percent and 15 percent of total complaints, respectively. The “other” category mostly represents complaints that have to do with student or consumer loans. When a complaint is submitted to the CFPB, the agency forwards it to the financial institution identified in the complaint. After the financial institution receives the complaint, it has 15 days to respond to the CFPB and the person who filed the complaint. Institutions are expected to close all but the most complicated complaints within 60 days. The individual who filed the complaint will be able to view the institution’s response to his or her complaint and give the CFPB feedback on that response.

While the number of complaints submitted to the CFPB is high, 98 percent of complaints received a timely response. Of these responses, 78 percent were not disputed by the consumer, while 22 percent were.1 As use of this database becomes more widespread, it will be interesting to see whether other federal regulators follow the CFPB’s model of publicizing complaints. The consumer complaint system is by no means perfect, but it is a promising step forward in building trusting relationships between consumers, banks, and regulators. 

1. 337,000, or 78 percent, of consumers did not dispute the financial institution’s response, while 95,000, or 22 percent, did. 31,700 consumers of consumer who submitted a complaint did not provide an answer to this question, and these consumers were not factored into the percentages.

What’s Next for U.S. Community Investing?

Noelle Baldini
Federal Reserve Bank of Philadelphia

Amanda Sheldon Roberts
Federal Reserve Board of Governors

The field of impact investing is growing in both size and sophistication, and it is important to consider how this activity might add value to the field of U.S. community development. Abundant opportunities exist for investors to channel their investments abroad through entities such as sophisticated microfinance institutions or fair trade groups. Additionally, many environmentally-focused funds have strong track records of performance and are easily accessible to a wide array of investors. But as impact investing activities increase, why is more of this mission-oriented capital not flowing to low-income cities and communities in the United States? Although domestic community investment has been around for decades, it is increasingly apparent that the necessary infrastructure to channel capital from traditional capital markets to community development organizations is lacking.

On October 2, the Federal Reserve Banks of New York and Philadelphia and the Federal Reserve Board of Governors convened a group of stakeholders in New York to hear insights from a new report by the Global Impact Investing Network (GIIN) and the Carsey School of Public Policy at the University of New Hampshire. The report, “Scaling U.S. Community Investing: The Investor-Product Interface,” provides a comprehensive overview of the existing U.S. Community Investing (USCI) landscape, including the types of intermediary organizations raising investments, the range of available investment products and the types of investors active in the space. The report also offers recommendations on how to scale the field.

Several key themes from the report were discussed by attendees at the event:

  • While mismatch between investor demands and product realities is a fundamental barrier to scaling USCI, investors show appetite for a substantial range of USCI products.
  • One of the greatest weaknesses of USCI products appears to be their lack of liquidity, causing many investors—and in turn product managers—to focus on short-term products.
  • Many of the most sophisticated USCI funds tend to be constrained by their balance sheets and need equity to continue to scale investment. In turn, liquidity limitations have greatly increased the challenge to raising equity.
  • The USCI field has struggled to benchmark investment performance on risk and return, although some leading practitioners have been able to obtain investment ratings.
  • Individual investors are a potential game-changer in the space, but reaching them involves solving unique challenges.

One organization that has been able to overcome some of those unique challenges is the Calvert Foundation. Justin Conway, Vice President of Investment Partnerships, spoke about the organization’s Community Investment Note, a fixed income security designed as an intermediary product to channel investment capital from traditional capital markets to sophisticated community development practitioners working in low-income communities throughout the country. Investors can invest as little as $20 through an online platform or can electronically purchase more sizable investments that are held within managed portfolios similar to more traditional fixed-income products. Justin discussed the challenges of accessing mainstream capital markets, including regulatory hurdles such as securities registration requirements, risk-management, capitalization requirements, access to distribution channels, and compliance issues. Liz Sessler, Vice President of Client Engagement at ImpactUS, introduced a new platform, which will launch in early 2016. ImpactUS will provide another form of intermediation to channel more capital from traditional sources to practitioners working on the ground in communities.

The GIIN USCI report contains two major recommendations which were explored through breakout conversations at the October 2nd meeting.

Further initiatives to develop investment platforms. The first conversation sought to answer the question, “How can we encourage more standardization of USCI investment products/platforms to reduce inefficiencies in the capital raising process?” Though Calvert Foundation’s note and the forthcoming platform from ImpactUS are promising examples of overcoming some of the inefficiencies presented, the group discussed additional barriers and opportunities. For example, with limited liquidity in the USCI market, most investors are short-term oriented. Community development efforts need patient, flexible capital, but most investors do not have an appetite for providing this type of capital. The group explored whether a mechanism to create a secondary market could lead to the attraction of much needed longer-term capital in the USCI space. Ratings were also discussed. While Aeris (formerly CARS) is currently the industry standard, with a deep understanding of the unique nature of Community Development Financial Institutions (CDFIs), some participants felt that mainstream investors will prefer more traditional ratings such as S&P, which recently rated three CDFIs. Ratings could be one way to overcome the need for more standardization of CDFI financials and provide performance track-records that would allow for benchmarking.

A coordinated marketing and investor engagement effort. The second conversation sought to answer, “How can we promote comprehensive efforts for marketing, communications and investor engagement for USCI?” This conversation acknowledged that even with strong, accessible products, platforms, and intermediation, the USCI field would still be lacking the investor and financial advisor education necessary to drive more capital to domestic community development. Strategies to engage investors and advisors would need very different approaches, and the group felt that focusing on investors would be more effective since this would be a “pull” rather than a “push” strategy that would play to the values of the individual investor. As more wealth is being transferred to women and millennials, demand for impact investing products is projected to increase, which means that it will be important to make these new investors aware of USCI opportunities.

The conversations at this event just scratched the surface of the issues, challenges, and opportunities currently facing the USCI industry. In order to further the conversation, and invite increased participation, a national webinar will be held November 19, 2015, to continue exploring strategies for scaling USCI. Join us for Bringing Community Investing to Scale to learn about the growing field of U.S. Community Investing (USCI) and discuss key recommendations. Learn more and register at the Federal Reserve’s Connecting Communities® website.

We Need to Prove Impact Investing Makes a Difference

Originally posted by “The Chronicle of Philanthropy” on July 29, 2015

“I’d heard Egypt was doing really well according to all the metrics that we pay attention to at the World Bank,” said Aleem Walji of the World Bank Institute at a Federal Reserve conference in 2011.

“Investment was up, returns were good, we were investing in all the right sectors, or so we thought.”

Then the Arab Spring happened. Clearly, the World Bank’s metrics had not captured the deep frustration of Egyptian youth, who were cut out of the supposedly expanding economy there.

Around the same time, the Latin American Youth Center, a Washington charity, was running a parenting program that included a few new sessions on preventing domestic violence. According to most measures, the center was successful: It was serving more than 4,000 individuals each year.

But when Isaac Castillo, who was then the center’s director of learning and evaluation, reviewed participants’ tests before and after the classes, he realized something had gone terribly wrong. The domestic-violence sessions were changing participants’ attitudes in the wrong direction: More young parents were leaving the program believing that domestic violence was an acceptable expression of love.

These two very different cases highlight the importance of looking beyond the usual metrics — whether they are return on investments or numbers of program participants — to prevent disastrous outcomes. While human beings are complicated, messy, and unpredictable, metrics and systems that are supposed to measure and manage impact are often not dynamic enough to reflect all that human complexity.

Yet investors, grant makers, and nonprofit organizations need to have some way to assess, manage, and communicate their real impact. This can be especially difficult when the two worlds of investing and philanthropy get mixed together as an impact investment, which is meant to achieve a measurable social or environmental impact alongside a financial return.

In a new report I wrote for the Money Management Institute titled “Bringing Impact Investing Down to Earth: Insights for Making Sense, Managing Outcomes, and Meeting Client Demand,” we argue that it’s time for people interested in impact investing to adopt the ideas nonprofits are using to track progress.

Many of the venture philanthropists who started making grants in the 1990s and early 2000s understood the limitations of simple measures like the number of houses built. They focused instead on what they wanted to achieve, such as helping low-income people achieve the financial stability they needed to stay in those houses for a long time.

Such investors wanted a way of measuring every social program to determine whether it was meeting long-term goals the program was created to address.

This kind of focus on outcomes is what helped the Latin American Youth Center realize that its sessions on domestic violence had backfired. “In a very real sense, our program caused harm to our participants, despite the best of intentions,” Mr. Castillo wrote in the book Leap of Reason.

The nonprofit was able to respond quickly to the problem not only because it had a system in place to track performance but also because everyone at the organization — from the board to the direct service providers — understood the value of collecting and reviewing data about the programs and participants every week.

The changes the youth center made worked, including splitting the classes into separate rooms for men and women so that each could feel more comfortable expressing their feelings.

Impact investments need to be similarly assessed to ensure they are making the social or environmental impact they promise. Making and managing investments that aim to build communities or preserve the environment while still generating a financial return presents a complicated proposition for the financial-services industry. The industry is measuring the financial behavior of an investment while also dipping its toes into the realm of the nonprofit world, where outcomes-centered measurement is still a difficult calculus that’s never fully solved.

There are some tools to help impact investors measure the nonfinancial performance of their investments and even compare investments by the social good they achieve. Among them are sustainability-reporting guidelines like the Global Reporting Initiative; impact and sustainability metrics like the Impact Reporting and Investment Standards; and the Sustainability Accounting Standards Board.

There are also ratings and analytical tools like the Global Impact Investing Rating System, B Impact Assessments, B Analytics, and B Corporation certification. But these systems still don’t take into account things like place, organizational performance, or type and timing of capital deployed. Instead, they still focus on numbers, devoid of context.

Neglecting this context leaves the door open for fund managers to slap a few vague metrics on an investment fund just to market it as an impact investment.

For example, an impact fund manager was criticized for a 2014 deal to finance a South African textile importer. Critics said the investment could actually have a negative impact on the local textile industry; that it might not be a good thing for locals, who often purchase clothing on debt; and that there would be a negative environmental impact since importing cheap goods from Asia would result in a larger carbon footprint than producing textiles locally with the ready supply of labor in South Africa. We must learn how to capture the right data to ensure that funds calling themselves “impact investments” are legitimate.

It’s not only good practice for impact investors to measure real outcomes the way nonprofits do — or try to — it’s also an effective and efficient way to solve social problems. Take the Bill & Melinda Gates Foundation, which came under fire in 2007 when the Los Angeles Times exposed that some of the investments the foundation was making on behalf of its endowment were actually causing the very afflictions the foundation had set out to combat as part of its grant making.

Among the concerns: The foundation was funding vaccinations to prevent illnesses affecting people in the Niger Delta while its endowment was invested in companies like Royal Dutch Shell and Exxon Mobil, which were largely responsible for the pollution that was covering the delta and causing poor health in the first place. The foundation has since made moves to align its charitable mission with its endowment investing, something all foundations should consider.

Impact investing has the potential to make an indifferent economy more humane, but only if we come up with a way to measure investments so that we understand their effects on the people, the environments, and the communities they touch.

To move toward that goal, nonprofits and foundations must be open to partnerships with the financial-services industry to share their knowledge and strategies for outcomes measurement. The financial services industry, in turn, must be open to using the tools and firms that nonprofits rely on to evaluate their programs and communicate outcomes.

Impact investing can be a deeply rooted force for social progress. Now all of us can help prove it.

William Burckart is a consultant on impact-investing analytics and strategy. He serves on the Global Advisory Council of Cornerstone Capital Group and is a visiting scholar at the Federal Reserve Bank of San Francisco.

Why the Fed Cares about Reentry of Ex-Offenders: Leveraging AB 109

Lena Robinson, Regional Manager, Community Development
Federal Reserve Bank of San Francisco

In 2011, Governor Jerry Brown of California signed the Public Safety Realignment Act (AB109) – (a.k.a. “realignment”) designed to reduce overcrowding in California’s 33 state prisons and provide alternative forms of supervision for low-level offenders. The legislation places greater responsibility on county governments to supervise this population and provides discretionary funding to these counties for implementation. The average budget allocation for realignment for the entire state has been roughly $6.25 billion annually. Since the first year of the realignment process, approximately 80,000 inmates have been released to complete their sentence under community supervision and begin the process of reintegration. One important question is what level of resources and conditions will these former inmates be returning to?

Realignment is the Mandate, Reentry is the First Step, Reintegration is the Goal

The successful reintegration of formerly incarcerated men and women is one of the most significant challenges facing not only California, but the entire country. It is an issue that disproportionately impacts the most socially and economically disadvantaged communities, often contributing to a cycle of poverty and incarceration in future generations. A 2003 report from the Bureau of Justice Statistics notes that inmates from homes without two parents or with an incarcerated parent were less likely to have completed high school, and 47 percent of inmates had at some point lived in public housing or received welfare.

Successful reintegration largely depends on a person’s ability to gain access to housing, employment, transportation and other services that have been shown to minimize the risks that may lead to committing another criminal offense or violating probation. The tragedy is that many of those being released to community supervision are returning to communities that do not have adequate resources for successful reentry. For the lucky ones, reunification with family or supportive networks with the resources to provide a safety net will offer a smoother transition.

The discretionary funding provided to counties under AB109 presents a tremendous opportunity to invest in reentry services that can rebuild the lives of men and women who desperately want a shot at success. Certainly not every dollar can be used for reentry services as there will always be a need for jail facilities and law enforcement. The challenge is finding the right balance for public safety and human capital rehabilitation. This is the challenge that criminal justice is grappling with in 58 counties, where some are further along in their efforts than others.

Realignment is a Community Development Opportunity

The landscape of programs and organizations that can facilitate successful reintegration varies by county. Many of the community development program providers that are engaged with improving opportunities for low-income people are now stretching to extend these services to formerly incarcerated individuals. Housing and employment are the two areas where collective investments and support from public, private and philanthropic partners are needed the most. These investments will not only benefit individuals, but also their families and the communities to which they return.

The correlation between incarceration, poverty and place are too strong to overlook. Race, zip code and educational attainment are the three strongest predictors of a person’s financial and social stability. These three factors are also the strongest predictors of who will spend time behind bars and who will not. An investment in reentry services is a way to address a system that disproportionately impacts certain racial groups and communities.

President Obama’s recent visit to El Reno prison, his commutations of excessively long prison sentences, and the frequent incidents of the disparate exposure of African Americans to law enforcement have intensified the spotlight on the criminal justice system and on mass incarceration and its long term detrimental consequences.

A Holistic Strategy: Place, People, Programs

The complexity of crime, punishment, and social disadvantage is impervious to fast fixes and simple solutions. Social Impact Bonds (SIBs) are increasingly being promoted as a way to attract large capital investments to reduce recidivism. One of the challenges of these “pay for success” structures is that they typically address only one point of intervention that falls within a convergence of multiple issues. For example, the Goldman Sachs Riker Island SIB focused primarily on cognitive behavior therapy–evidenced based–when the challenge of rehabilitation is so much more complicated.

Successful reintegration of formerly incarcerated men and women is not one size fits all. Every person and community is unique which complicates the challenge of developing programs and addressing the multiple issues that this population faces. The notion that an individual can thrive and avoid recidivism in an economically fragile and socially impacted neighborhood is naïve. Social and public investments in reentry services must be made at a level commensurate with the challenge and coordinated to create communities where the formerly incarcerated have a shot at success.

Reentry Solutions for Success is a conference with and for formerly incarcerated people; it is a conference about investable opportunities that will allow men and women, many of whom are mothers and fathers, to live healthier and more productive lives. We invite you to participate in this conference to find new opportunities for investments, funding, research and partnerships.

Setting Our Sights on Systems Change

Don Schwarz, Robert Wood Johnson Foundation

Last year, the Robert Wood Johnson Foundation (RWJF) Commission to Build a Healthier America called for a broad range of sectors—including community development, public health, health care, education, transportation, urban planning, business, and others—to work together to create healthier communities. The Commission’s call for this level of collaboration was groundbreaking, and its recommendations are critical to achieving RWJF’s central aim: to build a Culture of Health that enables all of us to live longer, healthier, and more productive lives.

We’re exploring the question, how can we best stimulate the big, broad-scale changes and “seismic shift” to integrate health-improving strategies into communities urged by the Commission?

We’re not alone in asking. A growing number of community revitalization initiatives have been launched by some of the nation’s most innovative funders, with two general schools of thought on the way forward: long-term, placed-based “replication” models and “systems change” approaches to creating impact on a broad scale. To learn more, download the new working paper Pathways to System Change: The Design of Multisite, Cross-Sector Initiatives.

Replication and System Change Chart: Benefits and Challenges

The first approach is to fund a specific project, program, or set of services to address a complex problem in a single neighborhood or community through locally tailored activities. Often, such an initiative is intended to test whether resources deployed in a single place is effective in addressing specific challenges. If successful in one place, the intention is to achieve scale through repeated, locally relevant implementation, usually with long-term support. In contrast, systems change focuses on creating policy shifts and changing how public and private dollars flow into communities to promote more equitable outcomes. In other words, a “systems change” approach to helping ex-offenders re-enter society could include changing education, employment, and housing policies that pose obstacles rather creating a program for a small subset of ex-offenders, testing it and copying it elsewhere through replication. Both types of approaches are meaningful, and all funders should carefully consider the advantages and challenges of each. 

To be better informed about how we should spend our grant dollars, RWJF set out to learn from the successes and missteps of initiatives that have pursued cross-sector strategies through both of these approaches. With the Federal Reserve Bank of San Francisco, we hosted a roundtable of experts on the development of multi-site community change initiatives. And we commissioned new research from Mt. Auburn Associates that is being released this week. In looking at that research—along with our own history of support for better policy-making, planning, practice reform, improved knowledge and data resources, and human capital development—we’ve recognized the opportunity that a systems change approach offers a quiet revolution in our work in scaling up community improvements.

What does systems change look like on the ground? In the late 1990s, the city of Philadelphia—where I later served as Health Commissioner and Deputy Mayor for Health and Opportunity—had the second lowest number of supermarkets per capita among major cities in the nation. To tackle the challenge, city, state, and private sector leaders created the Fresh Food Financing Initiative, bringing together the supermarket industry, public health officials, and economic development professionals. Public agencies agreed to provide supportive services (policing, public transport) and financial incentives (through tax concessions or construction subsidies) to assist the private sector in undertaking what would otherwise be rejected as too risky or not profitable. In fewer than 10 years, the Initiative created 70 supermarkets in 27 Pennsylvania counties, increasing access to fresh food, creating jobs, and attracting additional development in low-income neighborhoods by changing the incentives for the supermarket industry. The model demonstrated sustainable business models for grocery stores in distressed communities and has since been implemented nationwide as the federal Healthy Food Financing Initiative. 

This is just one example of systems change. Several others are featured in the new Mt. Auburn Associates report. We see it as a valuable resource for philanthropy—and especially state and local funders—along with public-sector agencies, community development practitioners, financial institutions, and other funders that are seeking to improve communities and the lives of their residents.

Download the new working paper Pathways to System Change: The Design of Multisite, Cross-Sector Initiatives.

Donald Schwarz is a director leading the Robert Wood Johnson Foundation’s efforts to catalyze public demand for healthier people and the places in which they live, learn, work, and play. He oversees the RWJF effort to identify, support, and spread the word about individual and community actions that promote lifelong health for all Americans. Previously, Schwarz served as Deputy Mayor for Health and Opportunity and Health Commissioner for the City of Philadelphia.

How Can Native American Veterans Gain Access to a Benefit They Earned?

Craig Nolte, Regional Manager, Community Development
Federal Reserve Bank of San Francisco

A federal program exists to provide more homeownership opportunities for Native Americans veterans on Indian reservations, yet less than one in six of the over 570 federally-recognized tribes have accessed the program.  This is a program that Native American Veterans have earned but relatively few are able to enjoy the benefit.

The U.S. Department of Veterans Affairs offers a Native American Direct Loan (NADL) program for eligible tribal members whose tribe has signed a Memorandum of Understanding (MOU) with the agency.  The program offers several advantages over conventional and other government lending programs, making the program attractive to tribal members who are Veterans. 

Many tribal members living on Indian reservations continue to lack access to mortgage loans, which may contribute to the comparatively low homeownership rate of 54% on Indian reservations versus the 65% national average.  Homes on Indian reservations are also three times as likely to be overcrowded, and 11 times as likely to have insufficient plumbing, as homes situated off reservations, according to the U.S. Census Bureau.

While the VA’s Home Loan Guaranty benefit is available to all Veterans, the NADL Program is a homeownership option designed specifically for Native American Veterans living on trust land. The program does not require a down payment or private mortgage insurance, has a low fixed interest rate, low closing costs, and borrowing limits  up to $417,000 in most areas, and can be used more than once during a Veteran’s lifetime.  A tribal member may use the program to purchase, build, or improve a home located on Federal trust land.  They may also refinance a direct loan already made under this program to lower their interest rate. 

Native Americans served in the military before they were granted US citizenship in 1924.  Between 1917 and 1918 approximately 10,000 Native Americans enlisted into the military to serve in World War I.  Today, approximately 20,000 Native Americans, Alaska Natives and Pacific Islanders serve in the military, and while the Native American/Alaska Native population represents less than one percent of the population of the United States, they make up about 1.6 percent of the armed forces.  Many tribes have a much higher enlistment percentage.

This Spring, the Federal Reserve Bank of San Francisco and its agency partners met with tribal council members and tribal staff throughout the Northwest to discuss common challenges to homeownership on Indian reservations.  Participants at the meetings compared different loan programs, including the NADL program, and discussed other ways to increase access to homeownership on Indian reservations.

How can Native American Veterans gain access to the NADL program?

  • Help ensure that tribes, as sovereign governments, have sufficient information to discuss any challenges to entering into an MOU with the VA to allow their eligible Veteran tribal members access to the program.
  • Heighten awareness of the program to tribal members through homeownership workshops, Veteran activities, tribal newsletters and other local media.
  • Maintain information on the NADL program at appropriate tribal government departments.

Craig Nolte is a regional manager in the Federal Reserve Bank of San Francisco’s Community Development Department. He leads community and economic development initiatives primarily in Washington, Oregon, Idaho, Alaska, Hawaii, Guam and the Pacific Islands. He also serves a national point-of-contact for the Federal Reserve System regarding the needs of Native Communities, including Native Americans, Alaska Natives, Native Hawaiians and Chamarros, and is engaged in national efforts to assist those communities.

Community Context Matters: Unpacking Common Trends in Community Development across the West

Gabriella Chiarenza, Research Associate, Community Development
Federal Reserve Bank of San Francisco

If you’ve been on the hunt for a reasonably-priced apartment lately in San Diego, Portland, Phoenix, or Las Vegas, you are probably well aware that housing costs are through the roof.  A new study reveals in stark terms, however, just how severe the housing crunch has become for the region’s extremely-low income (ELI) renters, or those earning less than 30 percent of median household income. Over 3.5 million households in the Federal Reserve’s 12th District fall into the ELI category.1 The National Low Income Housing Coalition (NLIHC)’s March 2015 issue of Housing Spotlight shows that four western states – Nevada, California, Oregon, and Arizona – now have the fewest units in the country affordable and available2 to their population of ELI renters. For every 100 ELI households in Nevada, the state with the most significant unit shortage, just 15 housing units were affordable and available to ELI renters in 20133, and the deficit throughout the rest of the West is not far behind.

Units Affordable and Available Per 100 Renter Households with Incomes of No More than 30% AMI, 2013

Units Affordable and Available Per 100 Renter Households with Incomes of No More than 30% AMI, 2013

Source: NLIHC Tabulations of 2013 ACS PUMS data
Map courtesy of the National Low Income Housing Coalition

What is driving this pattern of extreme unaffordability in the western states? While the trend of too-high rents and too few units is consistent across our region, the factors behind the trend vary considerably depending on the location. Community practitioner responses from an ongoing Federal Reserve Bank of San Francisco survey shed light on specific drivers of the affordable housing shortage particular to each area. 

The responses come from Vantage Point, the Federal Reserve Bank of San Francisco’s annual community indicators survey, which we have been retooling since late last year as an ongoing pilot. In phase one of the pilot, we distributed a data profile for each of twenty select counties along with a survey to community stakeholders in the selected counties. Each profile contains charts and maps on measures such as the percentage of households with a housing cost burden, median rents and home prices, and the availability of subsidized housing units across each county, among many other indicators. We asked our community respondents in phase one of the pilot to reflect on the data when answering questions about housing, employment, household financial stability and other community issues affecting low- and moderate-income (LMI) residents in their county and explain to us why we are seeing the numbers that we do for their area. The narratives they provided expose the nuances behind the numbers for each county and can help us understand what drives the housing trends reported by NLIHC.

For instance, the structure of the local economy appears to play a key role in the housing crunch, particularly in places where jobs are concentrated in just a few industries, such as gaming in Las Vegas and Reno and agricultural work in California’s Central Valley. In Clark County, Nevada – where Las Vegas is located – over half of job opportunities are in service and sales industries, with the largest concentration of nearly 250,000 jobs in accommodation and food service, often part-time work, with an average annual income in that county of $32,678.4 A respondent from Clark County explained that this employment concentration directly impacts housing: “Affordability of housing is affected by earnings – having a part-time or on-call job makes it difficult for people to know how much they can afford and for how long.”

In other areas, respondents noted that growing income gaps and an influx of a more affluent population are bigger problems, with LMI renters often pushed out by other groups: higher-income newcomers in trendy neighborhoods, absentee buyers in prime vacation areas, or students in college towns. Our respondents’ comments help us to see these trends, which otherwise can be obscured by quantitative data points that suggest growing prosperity for residents in a given area. For example, in San Francisco’s Mission District, U.S. Census data shows a median household income of nearly $120,000 per year. A respondent working with LMI households in the Mission noted, however, that “speculators are displacing low-income families from their housing through informal and formal eviction processes. The incomes in our neighborhood are relatively high compared to the city median, [but] this is not because our low- to moderate-income families have increased income and wealth over time. Instead it is from their displacement by higher income earning individuals.” In Honolulu, the median home value of $594,000 is over three times the median value for the United States, and the median rent of $2,357 is more than twice the U.S. median.5 Yet our survey respondents from Honolulu County noted that these figures are heavily influenced by a large number of absentee buyers and vacation renters, putting pressure on the area’s housing market and driving home prices and rents out of reach for LMI residents who live and work on the island year-round. 

Respondents in hot markets like San Francisco, Seattle, and Portland have also observed an increase in the construction of market-rate and high-end properties, which they fear are being prioritized over more affordable units. In King County, Washington, where the median rent is nearly $700 more per month than the U.S. median6, respondents have seen an increasing number of formerly affordable housing properties be converted to market-rate units once their affordability contracts tied to housing subsidy programs expire. Our survey takers in Maricopa County (Arizona) and Multnomah County (Oregon) also inform us that while multifamily housing construction has been on the rise there in recent years, many of these new developments are luxury housing properties, leaving LMI residents with fewer and fewer affordable options. Indeed, NLIHC found that only 11 units in metropolitan Portland and 12 units in metropolitan Phoenix were affordable and available for every 100 households in the lowest-income category in 2013, and 95 percent of these renters in Portland and 96 percent in Phoenix faced severe housing cost burdens.7

In other communities – often isolated rural areas or neglected urban neighborhoods – problems stemming from a limited supply of affordable housing are compounded by the low quality of units that are available. Several respondents in areas as widespread as Pima County, Arizona; Alameda County, California; Salt Lake County, Utah; Riverside County and Tulare County, California; and Anchorage Borough, Alaska emphasized that many LMI households are living in aging and deteriorating housing stock due to landlord neglect, unaffordable repairs, and/or a remote location. In some rural communities in western and central Pima County, for instance, nearly ten percent of housing units lack complete plumbing and kitchen facilities, compared to fewer than one percent of all units in the U.S.8 In Oakland, California, where respondents noted that residents contend with peeling lead paint and deferred maintenance, nearly 40 percent of the housing stock is over 75 years old.9 Similar issues are at play in Salt Lake County, Utah, where one respondent noted, “older units are often neglected and in unacceptable condition for LMI folks. Landlords won’t fix and maintain them without passing through the cost of improvements to the tenants who are already unable to pay the expected rent without doubling up with friends.”  In rural communities in Riverside County’s Eastern Coachella Valley region, over half of households live in mobile homes, and the majority of these households spend more than 30 percent of their income on housing costs.10 Respondents from the area highlighted the effect of very poor housing conditions on very-low income farmworker households in particular, with one respondent explaining that “most live in overcrowded substandard rental housing, often near toxic waste sites. They live in small, privately-owned mobile home parks, many of which are in serious disrepair and are 25-40 years old. Few of the parks have utilities or the infrastructure to bring water to the units.” In similarly rural Tulare County, California, respondents emphasized poor or lacking water and sewer systems in lower-income communities as a major hurdle to housing improvement and that the state’s drought conditions are increasingly compounding the problem of securing safe water supplies for these remote communities. 

Finally, in certain markets, lower-income residents are finding themselves stuck in an overheated rental market due to either personal finance problems or a lack of resources that might otherwise allow them to access homeownership. In Pima County, Arizona, one respondent points out that “median home prices are lower [but] low wages, lack of savings, [and] bad credit are barriers to homeownership.” This observation was echoed by a Multnomah County respondent, who said that “while more families are now renters, if they were mortgage-ready, they could possibly lower their housing expenses, as rents are currently higher than mortgage payments in many cases.” For some communities, needed homeownership assistance resources are falling short, as a Tulare County, California, respondent observes: “Families in our area depend on housing assistance loans provided by cities to make homeownership possible. Some cities in our county don’t offer these programs or the money doesn’t go far enough, which makes it difficult for low- to moderate-income families to qualify for mortgages.”

All of these responses reinforce the reality that quantitative data alone can’t tell the whole story about what is going on in a community. Gathering input from those working on the ground – those who have the best understanding of their own communities – helps us to more quickly and effectively identify the diverse nature of the problems that communities face and refine ideas about appropriate program and policy responses. The responses featured here are just a small selection of the wealth of locally-specific comments on a wide range of topics that community stakeholders shared with us in the pilot of our new Vantage Point approach; some of the input we received is already being put to use to inform other Federal Reserve Bank of San Francisco activities, such as Community Reinvestment Act exams

We are currently scaling up our Vantage Point pilot project for the second phase, to include the original 20 counties from phase one along with 46 additional counties and 33 cities. We will provide a more detailed data profile for each county and city in phase two, featuring a wider range of indicators and geographies based on input about the pilot design received from respondents in the first round of the pilot survey. The second round survey will be distributed to community respondents in mid-June 2015. As detailed in this blog post, the qualitative data we receive through this project from the survey responses of community stakeholders across the West provides invaluable local context for the quantitative data we have compiled in the profiles for each county.

Provide Your Insights

If you work with or represent LMI communities in the Federal Reserve’s 12th District (Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah, and Washington), we need your observations about conditions in your area to give us a first-hand look at what is happening on the ground and help inform where and in what ways community investments could have the greatest impact. To participate in the second phase of our Vantage Point pilot, please send your name, organizational affiliation, and email address to the Vantage Point project coordinator, Gabriella Chiarenza.

For more information or to participate in the Vantage Point survey, please contact Gabriella Chiarenza.


1. U.S. Census Bureau, American Community Survey, 2009-2013 5-year estimates.

2. NLIHC defines “affordable and available units” as those that are vacant and being offered at rent levels affordable to ELI renters or those currently occupied by ELI households.

3. Ibid.

4. U.S. Bureau of Labor Statistics, Quarterly Census of Employment and Wages, 2013.

5. Zillow, 2014

6. Zillow, 2014.

7. NLIHC, “Housing Spotlight,” Volume 5, Issue 1, March 2015.

8. ACS, 2013.

9. Ibid.

10. Ibid.

Building a National Equitable TOD Network

John Moon, District Manager, Community Development
Federal Reserve Bank of San Francisco

Local Initiatives Support Corporation published a version of this post 2/12/15.

In just a few short years, the idea of pursuing community development in tandem with transit development has gone from being a novel and ambitious notion to conventional wisdom. What we now call “equitable transit-oriented development,” or ETOD, has evolved remarkably since 2008, when CDFI and transit sector leaders first gathered to explore how to finance such opportunities. But those of us working to make this a widespread reality know there are many challenges to creating smart, sustainable ETOD. This has been an important focus at the Federal Reserve Bank of San Francisco, where we are trying to make it possible for ETOD to revitalize neighborhoods and increase mobility and access for all residents.

The Challenge

The pace of change is outpacing our response. Private market developers are capitalizing on transit-oriented development (TOD) and have put strong displacement pressure on longtime residents, especially in low- to moderate-income communities that exist along new transit lines. The rate of change in these communities has been breathtaking. Dwindling funding for affordable housing, as with the elimination of the California Redevelopment Agencies, has exacerbated this trend. In many cities, such as San Francisco, Seattle, Chicago, and Boston, maintaining the supply of even moderate-income housing is now a challenge.

But despite this, there are bright spots. The city of Portland, for instance, has created a mapping system to identify communities that are at risk of gentrification in order to funnel resources toward preservation. The greater Austin, Texas area is developing an ambitious strategy to create 48,000 affordable housing units for people earning $25,000 or less per year.

Getting the word out. Convincing regional leaders such as elected officials, agency heads and funders/investors to adopt goals around equity is imperative but tricky, especially if they hold opposing political views. One set of effective tools for communicating the benefits of ETOD is data and analysis of ridership and housing market trends. Stephanie Pollack, Massachusetts’s Department of Transportation secretary, explains that such information can bolster the argument that good TOD benefits everyone.

Pollack’s research, in fact, demonstrates that core transit riders are primarily low- to moderate-income residents. Setting goals to ensure these riders have ongoing access to transit can be a compelling argument—one based on demand for transit accessibility—rather than one based on the more general idea of equity. Engaging low- to moderate-income residents is also a critical part of the equitable development strategy. As Scott Spencer of the Annie E. Casey Foundation has pointed out, bringing these commuters to the table is a key step in the process of building consensus among the providers and users of transit.

Looking Ahead

Building new alliances. This pioneering work requires forging new partnerships, especially between institutions and sectors that have little experience working together. Transit agencies, businesses, funders, community-based organizations, and government agencies all have a stake in major urban development projects. It means building a common vision together and creating cultural and institutional bridges such as the Great Communities Collaborative in San Francisco, a network of institutions dedicated to creating an affordable and thriving Bay Area, linked by transit.

Many regions, such as Minneapolis, Boston, Denver and Seattle, have seen how creating a formal multi-sector collaborative can catalyze these working partnerships. These forums also create a “safe place” for participants to shift from a “doing” mentality to a “learning” and “creating” mentality. In fact, these forums are where many transit agencies have come to embrace the view of community, making it possible to envision more complete and sustainable transit neighborhoods.

Share lessons, improve collaboration and push innovation. Finally, practitioners involved in ETOD need a more robust toolbox. They need a means to share data and analysis, and they require greater access to funding and investing models, and more effective ways to engage the community. We also need to help regional and national networks share lessons, improve collaboration and push innovation. The Federal Reserve Banks and our partners—LISC, Enterprise, and the Low Income Investment Fund—want to foster this community and use the principles of ETOD as an effective guide for good, sustainable transit communities. We made a great start at the most recent Rail~Volution conference in the Twin Cities, where many of the above insights emerged at this first-ever national meeting to enhance collaboration across sites.

Despite the daunting challenges and the dizzying pace of change, ETOD leaders have emerged in a very short period of time, from a small group to a national network that is realizing the potential to have a profound impact on the built environment and on the lives of low-income residents.

We invite anyone looking to develop ETOD expertise and interested in being part of the national ETOD network to join us at our second symposium at the 2015 Rail~Volution conference in Dallas, October 25-28.

For more information, please contact John Moon.

A Loan in the Dark: The Difficulty of Determining Local Small Business Credit Needs

William Dowling, Research Associate, Community Development
Federal Reserve Bank of San Francisco

It should come as no surprise that small businesses play an important role in the U.S. economy. There are 28 million small businesses operating throughout the country, and they are responsible for nearly half of all private-sector employment and 63 percent of new private-sector jobs. Therefore, maintaining an atmosphere in which these businesses can thrive is essential to the health of the economy.

Unfortunately, many small businesses were particularly hard hit by the Great Recession and are still recovering. As with any community development issue, understanding the data behind the problem is essential to formulating an effective solution. While we have access to robust, national data on small business lending, the local data on this topic are much more limited. Currently, there are two main sources of small business lending data:

  • Call reports, which are essentially a bank’s financial statements, include information on business loans under a $1 million but only at the national or institutional level.
  • Community Reinvestment Act data, which some banks are required to report pursuant to regulatory requirements, contain information on small business loans at the county and census tract levels but only for institutions with assets over $1.2 billion.

Although small businesses employ a variety of credit sources, the majority use bank loans as at least one of those sources, so understanding these trends gives us a valuable look into the overall health of small businesses. By cobbling these data along with Small Business Administration statistics together, we can get a rough view of local small business lending trends. Nevertheless, the supply-side of the picture is still incomplete, and unfortunately, we know even less about the demand side. Regionally, publicly available data on the demand for loans is essentially non-existent. Even if we were to speculate, based on the available data, that the number of loans issued in a given geography is down, how can we say whether this is due to banks not issuing loans versus businesses not applying for them?

From a community development standpoint, answering this question is especially important when we consider the vital role small businesses play in lower-income communities; compared to large corporations, they employ a higher percentage of people on public assistance and those with lower education levels. Small businesses also help to promote local economic development and revitalize neighborhoods by operating in areas where large corporations may choose not to.

Despite these local limitations, on a national level, the data is more reliable. We know that there was a significant decline in the total volume of bank loans of less of than $1 million during the Great Recession. These loans, which can serve as a proxy for small business lending, are reflected in the graph below.

U.S. Total Volume of Small Business Loans (Millions)1

U.S. Total Volume of Small Business Loans (Millions)

Federal Deposit Insurance Corporation, 2005-2014

This decline in small dollar loans was due, in large part, to a tightening of lending standards among banks and lower demand among small businesses . While conditions among small businesses have improved recently and loan standards are easing, lending levels remain considerably below their prerecession heights. These factors have led to the passage of a number of new pieces of legislation, like the Small Business Jobs Act, designed to get small businesses back on track.

Nevertheless, because all economies are different, national programs are only so effective on a regional level. To formulate locally-based solutions that support small business development, we need more data and we need better data. Banks, non-profits, and government agencies often collect data on small businesses lending independently, but by sharing our information, we can maximize our impact. The recently released What Counts: Harnessing Data for America’s Communities proffers many innovative strategies to bring different players to the table as we strive to democratize data and work collaboratively to make informed decisions. Ultimately, many of the pieces required to gain a better understanding of small business credit needs may already exist; we just have to figure out how to best put them together.


1. All data shown are from June 30 of the respective year and reflect commercial and industrial and nonfarm nonresidential loans of less than $1 million.

Building a Cross-Sector Coalition: Sustainable Communities for All and CA’s Cap-and-Trade Program

Laura Choi, Senior Research Associate, Community Development
Federal Reserve Bank of San Francisco

Why should community developers care about cap-and-trade and what do carbon emissions have to do with low-income households? As it turns out, the fields of environmental sustainability and community development have significant overlap, particularly in the area of transit-oriented development, where issues of affordability, equity, and displacement converge with concerns such as vehicle miles traveled and greenhouse gas (GHG) emissions. The need to bridge these two fields has become even more pressing in California as a result of the State’s cap-and-trade program which was implemented in 2012. This market-based regulatory framework creates requirements for GHG reductions while simultaneously generating billions of dollars in proceeds that the State can reinvest in other climate change prevention efforts. In response, numerous organizations launched intensive lobbying campaigns to try to influence how the funds would be appropriated. A new cross-sector coalition called Sustainable Communities for All (SC4A) successfully championed a joint platform that prioritized social equity and proposed allocating a significant percentage of cap-and-trade revenue to provide transportation choices and build homes affordable to lower-income households near transit.

The SF Fed embarked on this study to shine a light on the inner workings of a collaborative partnership that works on behalf of low-income communities, illustrating both the challenges and the lessons learned from such efforts. These lessons are briefly summarized below:

Lesson 1: Clarify the rationale for cross-sector partnership

  • While parties may generally acknowledge the need for integration, they may not immediately understand the points of intersection across sectors or they may struggle to explain why partnership would be mutually beneficial. Be patient and thorough in clearly identifying the areas of convergence and the rationale for working with new partners.
  • Similarly, don’t presume that all parties have a clear understanding of each other’s true priorities, which often go unstated, particularly when new partners are working together for the first time.
  • This clear rationale should also be clearly communicated to external stakeholders.

Lesson 2: Build trust through committed participation

  • Establishing trust among new partners is vital to the success of any cross-sector effort, and it often begins with making a demonstrated commitment to active participation. Building trust takes time, but SC4A partners that “pulled their weight” and stayed visibly engaged in the work ultimately earned the trust and respect of other partners.

Lesson 3: Acknowledge and manage power dynamics

  • Partnerships will vary in their power dynamics, but, regardless of whether there is an even distribution or a severe imbalance in real or perceived power, the group stands to benefit from openly acknowledging the existing structure. This allows partners to then actively manage the power dynamics and create an environment that enables cooperation and compromise.
  • Acknowledging current power structures also prepares the group to strategically consider how the introduction of new partners might impact existing relationships and operations.

Lesson 4: Set boundaries and manage the scope of cross-sector efforts

  • An inherent tension exists within cross-sector work—an initiative needs to be broad enough in scope to be inclusive of many different interests, but narrow enough that partners all have a clear sense of why they’re together and what actions they need to take to achieve their goal. In order to effectively manage scope, partners must be willing to set boundaries. These boundaries can be permeable and flexible, but lines must be drawn in order to maintain focus.

Lesson 5: Prioritize the use of data to drive action

  • From an advocacy standpoint, the effective use of data is critical for influencing key decision makers. Identifying, getting access to, and analyzing the appropriate data can require significant effort; groups need to be prepared to devote time and resources to these tasks. By prioritizing the need for data, SC4A was able to identify and act upon multiple emergent opportunities that led to the development of game-changing research.

Lesson 6: Understand the preferences and processes of key decision makers

  • Key decision makers, such as policymakers or funders, likely have their own preferences and processes for how they work, which may be nuanced and not clearly communicated to outside parties. In order to understand and strategically align with these preferences, cross-sector partnerships need to be willing to regularly engage with front-line staff representing these decision makers.

These lessons are not new or revolutionary by any means—the need for collaboration, trust, and communication are known requirements for any healthy partnership. But too often, these factors are presumed to develop on their own, rather than being the result of an intentional, patient process. It may be tempting to attribute SC4A’s success to any one of its tactical efforts, which included developing data-driven research, building statewide support for its proposal, or carrying a unified message to lawmakers in the Capitol, but it’s important to remember that all of these achievements were enabled by the trust that existed among partners.

Read Building a Cross-Sector Coalition: Sustainable Communities for All and California’s Cap-and-Trade Program