Community Development Discussion Papers are a series of research publications exploring regional and national issues in community development, consumer affairs, and economic education. The series began in 2005 as Public and Community Affairs Discussion Papers.
Payday Lending Regulation and the Demand for Alternative Financial Services
by Roman V. Galperin and Andrew Weaver
Credit Conditions by Neighborhood Income: The Picture in Massachusetts
by Ana Patricia Muñoz
Using Credit Reporting Agency Data to Assess the Link between the Community Reinvestment Act and Consumer Credit Outcomes
by Ana Patricia Muñoz and Kristin F. Butcher
The Social Impact of Home Rehabilitation in Low-Income Neighborhoods
by Erin Graves and Elizabeth Shuey
Home-Mortgage Lending Trends in New England in 2010
by Ana Patricia Muñoz
Small Businesses in Springfield, Massachusetts: A Look at Latino Entrepreneurship
by Ana Patricia Muñoz, with Lynn Browne, Sol Carbonell, Prabal Chakrabarti, DeAnna Green, Yolanda K. Kodrzycki, Anna Steiger, Richard Walker, and Bo Zhao
The Federal Reserve Bank of Boston has been collaborating with community leaders in Springfield, Massachusetts, on exploring revitalization strategies. Latino entrepreneurship is playing an important and increasing role in Springfield's economic development—providing new jobs and services and maintaining storefronts that might otherwise be vacant. An analyst in the Fed's community development unit, Ana Patricia Muñoz, has recently completed a discussion paper on this topic, "Small Business in Springfield, Massachusetts: A Look at Latino Entrepreneurship." Among the implications: if Springfield stakeholders were to expand their support and technical assistance, these small businesses could broaden their role in the city's comeback.
Adds Muñoz, "Although Latino self-employment has been growing, gaps relative to whites, to Massachusetts, and to the United States persist. It is therefore important to have strategies geared to Latino entrepreneurs and to reach out to them."
The Fed is looking into whether the paper's recommendations might also benefit other postindustrial cities in New England.
Housing Policy and Poverty in Springfield
by Lynn E. Browne, with Marques Benton, Prabal Chakrabarti, Sol Carbonell, DeAnna Green, Yolanda Kodrzycki, Ana Patricia Muñoz, Anna Steiger, Richard Walker, and Bo Zhao
This essay considers whether housing policies may have contributed to the concentration of poverty in downtown Springfield, Massachusetts – a question that emerged in conversations with local leaders. Springfield is not alone in having large numbers of lower income households living downtown. This pattern is common in American cities. Recent research emphasizes the role of public transportation in causing lower income households to live closer to downtown. However, spillover effects and government policies, including housing policies, have reinforced this tendency. The essay reviews federal housing policy, with a focus on Springfield. A dilemma for Springfield today is that housing and community development policies and resources tend to reflect the needs of communities with strong housing markets where preserving affordable housing is critical. In Springfield, with a much weaker housing market, these policies may perpetuate the status quo. A higher priority for Springfield is attracting a more economically diverse population.
Receivership: A Coordinated Strategy to Stabilize Troubled Properties
by Chris Edell and Kai-yan Lee
With the impact of municipal debt burdens, coupled with the effects of declining real estate prices and the US financial crisis, municipalities are looking for novel and cost-effective approaches to address abandoned, blighted and/or foreclosed properties that threaten the quality of life of their communities. Receivership, the use of statutory power to seize buildings and place properties under control of a judicially supervised ‘receiver’, can be an effective tool to tackle the problem of troubled properties which repeatedly violate safety and sanitary codes. Despite its potential, receivership requires significant coordination, as well as a committed team, in order to implement the intricate process of running a successful receivership strategy.
Electronic spreadsheets used in this discussion paper are available for download.
Does Springfield Receive Its Fair Share of Municipal Aid? Implications for Aid Formula Reform in Massachusetts
by Bo Zhao with Marques Benton, Lynn Browne, Prabal Chakrabarti, DeAnna Green, Yolanda Kodrzycki, Ana Patricia Muñoz, and Richard Walker
This paper examines the distribution of unrestricted municipal aid in Massachusetts, which has been a major concern to civic leaders and elected officials of many communities, including Springfield. The paper develops a measure of the municipal fiscal gap indicating the relative need of municipalities for state aid. The analysis shows that in recent years, unrestricted municipal aid has not been distributed in proportion to the gap measure among the 10 largest cities in Massachusetts. For example, despite having the largest municipal gap, Springfield received almost the lowest per capita amount of Additional Assistance—a key component of municipal aid. This pattern is the result of deep and uneven aid cuts in the past that distorted the distribution of municipal aid. This paper therefore suggests that state government consider adopting a formula that provides more aid to communities facing larger municipal gaps. To avoid disrupting local budgets, the state could consider holding existing aid harmless, and using the gap-based formula to distribute new aid. The simulations show that if the state commits to reasonably large increases in municipal aid, this new approach can be both equalizing and beneficial to a majority of municipalities in the Commonwealth within a relatively short time period. The paper provides various formula evaluations and policy recommendations that could support efforts to reform state aid in Massachusetts.
Toward a More Prosperous Springfield: A Look at the Barriers to Employment from the Perspective of Residents and Supporting Organizations
by DeAnna Green, with Marques Benton, Lynn Browne, Prabal Chakrabarti, Yolanda Kodrzycki, Ana Patricia Muñoz, Richard Walker, and Bo Zhao
Compared to the city, the region, and the state, labor force participation rates in Springfield’s downtown and surrounding neighborhoods are very low. Residents and community leaders have expressed concerns about the employment prospects for the low-income residents that make up these neighborhoods. The purpose of this discussion paper is to highlight the perspectives of residents and community-based organizations on why so few residents of Springfield’s downtown neighborhoods are employed and to look at the some of the resources available to Springfield residents to help them address barriers to employment.
Jobs in Springfield, Massachusetts: Understanding and Remedying the Causes of Low Resident Employment Rates
by Yolanda Kodrzycki and Ana Patricia Muñoz, with Marques Benton, Lynn Browne, Prabal Chakrabarti, DeAnna Green, David Plasse, Richard Walker, and Bo Zhao
As part of the Federal Reserve Bank of Boston's commitment to supporting efforts to revitalize the economy of Springfield, Massachusetts, this paper explores the causes of and potential remedies for the city’s low resident employment rates. When compared to the state as a whole and to other midsize New England cities, the share of employed city residents is low, particularly for residents of downtown Springfield and its nearby neighborhoods. by analyzing the availability of jobs across Springfield’s various neighborhoods and in nearby towns and cities, this paper’s goal is to learn why so few Springfield residents are employed, and thus to identify policy priorities to increase employment. This study finds that solving Springfield’s low resident employment rates will require a combination of new job creation, improved informational and physical access to jobs, and strengthening the citizenry’s job skills.
Greater Springfield Employment Challenges: Findings of Employer Survey and Interviews
by David Plasse, with Marques Benton, Lynn Browne, Prabal Chakrabarti, DeAnna Green, Yolanda Kodrzycki, Ana Patricia Muñoz, Richard Walker, and Bo Zhao
This paper presents the findings from in-depth interviews and a survey of employers in the Greater Springfield area regarding (a) employment opportunities for entry-level workers with limited skills and (b) barriers that residents of Springfield’s low-income neighborhoods face in accessing these jobs. The survey and interviews indicate that entry-level jobs that do not require college are available in the Springfield area. However, even entry-level jobs require the ability to perform a variety of tasks, and many applicants lack the skills needed to perform these jobs or have work readiness problems. Lack of prior experience and the absence of referral networks limit access to these jobs for residents of Springfield’s low-income neighborhoods.
Reinvigorating Springfield’s Economy: Lessons from Resurgent Cities
by Yolanda K. Kodrzycki and Ana Patricia Muñoz, with Lynn Browne, DeAnna Green, Marques Benton, Prabal Chakrabarti, David Plasse, Richard Walker, and Bo Zhao
As part of the Federal Reserve Bank of Boston’s commitment to supporting efforts to revitalize the economy of Springfield, Massachusetts, this paper analyzes the economic development approaches of other mid-sized manufacturing-;oriented cities during the past half century. From among a comparison group of 25 municipalities that were similar to Springfield in 1960, the study identifies 10 “resurgent cities” that have made substantial progress in improving living standards for their residents, and that are recognized as vital communities in a broader sense by experts on urban economic development and policy. These case studies suggest that industry mix, demographic composition, and geographic position are not the key factors distinguishing the resurgent cities from Springfield. Instead, the most important lessons from the resurgent cities concern leadership and collaboration. Initial leadership in these cities came from a variety of key institutions and individuals. In some cases, the turnaround started with efforts on the part of the public sector, while in other cases nongovernmental institutions or private developers were at the forefront. Regardless of who initiated the turnaround, economic redevelopment efforts spanned decades and involved collaborations among numerous organizations and sectors. Also published as Public Policy Discussion Paper 09-6.
Towards a More Prosperous Springfield, MA: What Jobs Exist for People without a College Education?
by Lynn E. Browne, with Marques Benton, Prabal Chakrabarti, DeAnna Green, Yolanda Kodrzycki, Ana Patricia Muñoz, David Plasse, Richard Walker, and Bo Zhao
This paper analyzes projections of Massachusetts employment opportunities by occupation to address concerns about a shortage of jobs for those who lack a college education. While occupations requiring a college degree will grow more rapidly over the period 2006-2016 than occupations that do not require college, replacement needs will ensure large numbers of job openings that do not require college. Wage levels in jobs that do not require college are generally low, however. The exceptions usually require meaningful training of another sort, such as long-term on-the-job training or courses in postsecondary schools or community college. Additionally, some individuals who demonstrate the necessary qualities achieve higher wages through promotion. The distribution of occupations in the Springfield metropolitan area is sufficiently similar to that in Massachusetts that inferences from the Massachusetts projections should be relevant to Springfield.
Towards a More Prosperous Springfield, Massachusetts: Project Introduction and Motivation
by Lynn Browne and DeAnna Green, with Marques Benton, Prabal Chakrabarti, Yolanda Kodrzycki, Ana Patricia Muñoz, David Plasse, and Richard Walker
The Federal Reserve Bank of Boston has committed to supporting ongoing efforts at the state and local levels to revitalize the City of Springfield, Massachusetts. Drawing upon its analytical capabilities, its experience working with community organizations and earlier research on poverty in Springfield, the Bank seeks to develop strategies that will enable Springfield residents, particularly those living in impoverished neighborhoods in and near downtown, to participate more fully in the Springfield economy and the revitalization process. The Bank’s efforts are also intended to complement the development of an economic vision for Springfield that is currently being undertaken by the civic think tank, MassINC, as well as efforts by Massachusetts and Springfield public officials and the local business community to attract jobs to the City.
The Role of Community Partners in Urban Investments
by Anna Steiger, Tessa Hebb, and Lisa Hagerman
Institutional investors seeking to deploy capital to underserved areas do not have either the time or the expertise to actively manage these specialized investments. Investment vehicles intervene by using their financial expertise to pool assets and lower transaction costs. Community partners, in turn, link the investment vehicle to the neighborhood. This paper develops a typology of community partners and their unique characteristics that enable them to overcome information asymmetries in certain markets. The paper also discusses the business models that establish the relationship between the investment vehicle and community partner to highlight strengths of the different models for delivering community transformation.
Foreclosure's Price-Depressing Spillover Effects on Local Properties: A Literature Review
by Kai-yan Lee
The costs of foreclosure often spill over from foreclosed properties to other nearby properties. This short paper reviews some of the research on foreclosure's price-depressing impact on sales of nearby properties, only one of several forms of spillover effects. The studies reviewed here focus on various cities, use different datasets and methodologies, employ different assumptions, and cover different time periods. Their conclusions about foreclosure effects range from reducing nearby properties' sales value by as little as 0.9% to as much as 8.7%. Research also shows that negative spillover effects tend to diminish with distance and time, as does the marginal impact of each additional foreclosure. This paper also presents two studies with rough estimates on New England communities' possible losses from foreclosures' spillover effects on nearby property values.
The Case for the Community Partner in Economic Development
by Anna Steiger, Tessa Hebb, and Lisa Hagerman
Community-based organizations promote economic development by assembling investments in affordable housing, mixed-use real estate, community facilities, and small business in specific geographies. A principal way that community-based organizations tap institutional investors for deals is by partnering with investment intermediaries who manage the risk of these transactions by pooling assets, spreading risk across investors, and pricing the transaction up to the associated risk. Such a partnership allows an investment intermediary, or what the industry calls an “investment vehicle,” to use its expertise to structure a deal that delivers high financial returns to the institutional investor while allowing the community-based organization, or “community partner,” to ensure that the investment provides a community benefit.
In this paper, we argue that both sets of actors are necessary to achieve revitalized communities. Communities need to be able to tap into large-scale investment opportunities made possible by institutional investors while simultaneously ensuring that community residents benefit from such investment. We develop case studies of two investment vehicles and their community partners: the first investment vehicle we examine is the Urban Strategies America Fund, a for-profit urban development real estate fund in Boston; the second is Coastal Enterprises, Inc., of Portland, Maine, a not-for-profit community development corporation with for-profit investment subsidiaries.
Overborrowing and Undersaving: Lessons and Policy Implications from Research in Behavioral Economics
by Marques Benton, Stephan Meier, and Charles Sprenger
The U.S. household carries over $7,500 in uncollateralized debt and likely saves at a negative rate. There is a growing body of evidence that this borrowing and saving behavior may not, as assumed by standard economics, be the product of rational financial planning. This paper discusses insights from behavioral economics on how self-control problems could play a crucial role in determining such financial outcomes. It is important to note that self-control problems, as defined in this paper, are thought of as an issue affecting all people, not just those involved in our specific research.
The paper reports results from a field study targeted to low-to-moderate income individuals conducted in Dorchester, MA. It links measured self-control to borrowing and savings outcomes taken from individual credit reports and survey questions respectively. We find that self-control problems are associated with higher borrowing, specifically on credit cards, and lower savings of income tax refunds. The paper discusses how policy prescriptions built around addressing self-control issues could prove helpful in improving financial outcomes.
Venture Capital Investment in Secondary Cities: Issues and Opportunities for Impact
by Carole Carlson and Prabal Chakrabarti
Venture capital has been one of the major drivers of the U.S. economy. Using the State of the Inner City Economies database of the Initiative for a Competitive Inner City, we found that secondary cities – which we have defined as cities outside the 40 largest U.S. metro areas – have received far less than their proportionate share of private equity deals and dollars. By failing to attract capital at similar rates to larger cities, secondary cities are missing a major engine of job and wage growth. Notably, however, a number of secondary cities have managed to assemble the right combination of factors to significantly outperform their peers. To understand this better, we interviewed the leaders of 17 venture capital firms (including both national firms and regional firms and firms representing more than one-half of the top 10 investors in secondary markets). We also interviewed and surveyed 53 companies in secondary markets that successfully received venture capital investment funds, as well as industry experts and venture funding facilitators. Based on these interviews and surveys, our research posits six plausible factors that enable successful secondary cities to attract more venture capital than their peers.
University-Community Partnerships: 2006 Worcester Speaker Series
Prepared by Marga, Inc. with support from the Federal Reserve Bank of Boston and the Annie E. Casey Foundation
Over the last decade, partnerships between colleges and universities, government, and businesses have helped foster economic development in the city of Worcester, Massachusetts. In 2006, the Worcester UniverCity Partnership, a coalition of private and public sector organizations working with colleges, in collaboration with the New England Resource Center for Higher Education, organized a speaker series aimed at promoting the depth and impact of university-community partnerships in the city. This report provides highlights from the 2006 Worcester Speaker Series, discusses the history and characteristics of Worcester’s partnerships, and suggests steps toward a workable action agenda for the city. This is a portrait of one city’s approach to strengthening its partnerships, which can also serve as a model for other cities interested in promoting economic development through university-community partnerships.
Understanding Foreclosures in Massachusetts
by Ricardo Borgos, Prabal Chakrabarti, and Julia Reade
Recent increases in foreclosure rates in New England and other parts of the United States are raising concerns. Distressful for individual borrowers and potentially destabilizing for their communities, the negative effects of foreclosures flow beyond the impact on housing markets and the financial consequences for creditors. Public officials, lenders, current and potential homeowners, community organizations, and other stakeholders are paying careful attention.
In low- and moderate-income communities in New England, community leaders view current trends as especially worrisome. Among possible explanations, they stress the expansion of high-cost and subprime lending in these communities; and they cite aggressive or unscrupulous mortgage practices, and even mortgage fraud. Historically, however, other factors have been responsible for foreclosure activity. Regional job losses, rising interest rates, weak housing markets, and stretched borrowers facing negative life events are among the factors that usually push up foreclosure rates. And even critics of current mortgage lending practices acknowledge that homeownership is an effective assetbuilding strategy and that expanding the availability of credit to previously underserved population groups is a worthy goal.
This paper describes recent trends in New England foreclosure rates, discusses possible causes, and looks at the prevalence of foreclosures in Massachusetts cities and towns with significant populations of low- and moderate-income households. It finds that the prevalence of higher cost lending is associated with higher foreclosure rates.
Home Mortgage Disclosure Act (HMDA) Home Purchase Data: Summary for New England, 2003
by Julia Reade
This paper provides summary statistics for home purchase data collected under the Home Mortgage Disclosure Act in 2003. In addition to aggregate totals, patterns by income and race / ethnicity are also described. These analyses of HMDA data have been conducted to examine access to home purchase loans, while focusing on traditionally underserved populations low- and moderate- income (LMI) households and minorities. Overall lending activity has risen in recent years in New England, driven mainly by increasing volumes of applications from LMI and minority households. Although higher income households received more favorable origination and denial rates than lower income households, gaps between groups have narrowed significantly over recent years. In contrast, origination and denial rate gaps between whites and minorities (particularly African Americans and Hispanics) have widened. Gaps between whites and minorities are wider at higher income levels.
Community-Campus Partnerships for Economic Development:
by Anna Afshar
Formal collaborations between community groups and academic institutions to promote economic development have increased substantially over the past 10 years. The bulk of research on community-campus partnerships has focused on the experiences of institutions of higher learning and the foundations that have funded the collaborations, leaving a gap in our understanding of community experiences. This report draws on a variety of sources, including first-person interviews and academic literature, to bring out community perspectives on what makes for successful partnerships. The conclusions are presented as practical suggestions for community groups and campuses seeking to optimize partnerships. Four case studies describe lessons learned by participating community groups.
International Remittances: Information for New England Financial Institutions
by Mamie Marcuss
Each year, individuals in the United States send billions of dollars abroad. Most of these remittances are sent by immigrants to their home countries, and the majority of them flow through a handful of service providers who dominate this highly profitable business. As the immigrant population in the United States continues to grow, the volume of remittances climbs each year, reaching nearly $35 billion in 2004. Bankers and other financial professionals are taking notice, and financial institutions around the country are investigating ways to enter the market and capture a share of this growing source of revenue. To aid New England's financial institutions in their exploration of the remittance market, the Federal Reserve Bank of Boston has developed this report, intended to enhance the overall understanding of remittances and to highlight the potential costs and benefits of establishing a remittance program.