Single-family lending drives neighborhood disparities, new report finds

Single-family home lending is one of the biggest drivers of disparities among Chicago’s neighborhoods, according to a new report from the Urban Institute.

The report released Wednesday by the Urban Institute — a Washington, D.C.-based think tank — examined the types of investments in Chicago from 2010 to 2020. Brett Theodos, a researcher at the institute, said analysts spent about a year looking at the different types of capital flowing into the city and seeing how it compared with investments in other U.S. cities.

Chicago can increase efforts to make communities safer to attract more investments in single-family home lending, but other forms of investment are also necessary, he said. He cited Chicago’s Invest South/West, designed to spur development in targeted parts of the city through public and private funding, as one example of how more investments could be directed into neighborhoods.

The report found that the more Black residents living in a neighborhood, the less investment the area saw compared with neighborhoods with more white residents.

Between 2010 and 2020 for single-family investment, neighborhoods where more than 80% of residents identified as Black received an average annual investment of dollars per owner-occupied household of $5,050. Neighborhoods where more than 80% of residents identify as white received $30,284, according to the report. Neighborhoods where more than 60% of residents identified as Latino or Hispanic received $6,667, and neighborhoods where more than 20% of the population identified as Asian received $15,353.

“It really is especially the work of mission finance, as well the public sector, to help even out some of these disparities and help catalyze and spur growth and more investment,” Theodos said. “Obviously, it needs to be done in a way that builds off of residents who are there rather than swapping them out for other residents. It is something where it’s going to take philanthropy, nonprofits, government who are willing to take more risks to get them to move forward.”

The findings from the Urban Institute aren’t the first time that home lending has been linked to Chicago’s racial disparities. In 2020, an investigation by WBEZ and City Bureau found that banks invested more money in Lincoln Park, a neighborhood with a majority white population, than they did in all of Chicago’s majority-Black neighborhoods combined.

The Urban Institute’s report looked at data from the Home Mortgage Disclosure Act from 2010 to 2020 for loans associated with owner-occupied single-family properties that had less than four units, according to the report.

Though there are various local, state and federal programs, Theodos said officials should look at how the programs can all be tied together to boost investments into communities.

“Small amount of resources are not going to make the difference, but mobilizing and directing large amounts of resources is what it will take to be transformative,” he said.

Overall, Chicago ranked 40th out of 100 large U.S. cities for investments that included single-family, multi-unit, small-business, nonresidential, mission-driven and public investments. Theodos said the city has strong industrial properties and a central business district that see investments.

And areas such as the South Loop and West Loop saw larger levels of overall investment during the decade researchers examined, according to the report.

Multi-family investments, which the report defined as lending for properties with five or more units, was one of the areas where Chicago fell behind other cities, ranking 65th, according to the report. This type of investment rose between 2015 and 2017, but slowed to lower levels by 2020, according to the report. Theodos said that could be tied to Chicago’s population trends.

The report takes into account the beginning of the coronavirus pandemic, but it does not account for all the changes that could have taken place over the last couple of years. Theodos said commercial investments, especially for office spaces, could see a change compared to 2010-2020. Single-family investments could also see a change because of rising interest rates associated with lending, he said.

“Things are changing, but it wasn’t like there was as dramatic a change to investment flows as there was, say, to the labor market,” Theodos said.

He added that cities have also received federal funds as part of COVID-19 relief efforts and soon will also receive money tied to infrastructure and transit.

Elvia Malagón’s reporting on social justice and income inequality is made possible by a grant from the Chicago Community Trust.