Community Development and Policy Studies Update

This blog is a summary of Community Development and Policy Studies topics in the Seventh District from the latest CDPS Survey.

According to the latest CDPS survey:

• The biggest issue impacting the health of housing markets in the Seventh District, especially in low- and moderate-income communities (LMI) is the oversupply of vacant homes. Additionally, contacts mentioned that the number of homeowners whose mortgages are under water (balance greater than the value of the home), the continuing high rate of foreclosures, and high unemployment also negatively impact the housing market. Further exacerbating ailing housing markets is that in judicial foreclosure states like Illinois and Indiana¹, the long foreclosure process keeps defaulted mortgagors in their homes long after they have ceased making payments. While the judicial process slows the rate at which foreclosed homes become vacant, it also creates an overhang of supply of foreclosed homes whose occupants have little motivation to maintain them. Illinois Governor Pat Quinn recently signed into law Senate Bill 16, aimed at fast tracking foreclosures of abandoned homes. Quinn explained that, “This law will help restore neighborhoods and property values while fighting crime and blight by decreasing the time a home sits empty and getting it back on the market quickly.²
• The demand for business loans in LMI communities over the four to six weeks prior to the release of the Beige Book had remained relatively steady.
• While many contacts reported credit tightening in LMI communities over the previous four to six weeks, some argued that availability of credit in LMI areas had not changed, but continued to remain low for a variety of reasons including the following: fewer traditional lenders in the market; less available credit; appraisal problems; and higher credit score requirements. Additionally, some contacts noted that demand is low for loans, reflecting the effects of unemployment and foreclosures on LMI communities.
• There are many challenges associated with revitalizing LMI communities, but most contacts cited employment as the biggest one. Jobs are needed and, importantly, they need to be accessible via public transportation. Employment at all skill levels is an issue.
• Research shows that many indicators of poverty—such as poor education, inadequate housing, racism, and poor nutrition—are also indicators of poor health. Where someone lives is also closely associated with their longevity and risk for disease. Increasing access to health care, while essential, is not sufficient to improve health. Given this, community development contacts cite both education and access to care as two key ways to help foster improved health. Improving education can take many forms: from building strong partnerships with municipal governments and advocates, to identifying partnership opportunities with the financial community, to focusing on early education and educational attainment. Likewise, access can take many forms, including: mobile health care clinics, access to fresh food in food deserts (communities lacking grocery stores and produce markets), and better-quality housing. Although much focus is put on physical health, contacts noted that mental health issues also need attention in LMI communities.
• Several contacts highlighted items that were more state dependent: (1) Michigan is very dependent on the auto industry; (2) the Wisconsin economy is sustained by a robust agricultural market; and (3) the fiscal condition of the State of Illinois is likely to adversely affect employment as well as schools, by limiting the incentives it can offer to new businesses or existing businesses to hire and/or train employees.

Footnotes

¹ Iowa and Wisconsin are both judicial and non-judicial foreclosure states, while Michigan is a non-judicial foreclosure state - [foreclosures do not need to go through the court system].

² See Quinn's comments, available online.

The views expressed in this post are our own and do not reflect those of the Federal Reserve Bank of Chicago or the Federal Reserve System.