Chicago’s top equity and housing officials say the city must “step into a more proactive role” to get banks and other financial institutions to lend more equitably throughout Chicago’s neighborhoods.
Marisa Novara, Chicago’s commissioner of housing, and Candace Moore, the city’s chief equity officer, spoke with WBEZ about the recent WBEZ/City Bureau investigation documenting extreme disparities in home purchase lending between the city’s majority-white neighborhoods and its black and Latino communities.
Moore said on the one hand, it’s hardly surprising that there’s more lending in Chicago’s white areas.
“And then the other part of you — it’s just shocking,” said Moore. “It sort of hits you right in the gut when you see how significant it is.” She called the findings “alarming” and “a call to action.”
WBEZ found four community areas in Chicago that each individually attracted more home purchase lending from 2012-18 than all the city’s black neighborhoods combined.
Sixty-eight percent of all home purchase dollars flowed in those years to the city’s majority-white communities, while just 8% went to majority black neighborhoods, and 9% went to majority Latino areas.
Home loans are one of the key ways money moves into neighborhoods.
Novara said discrimination in real estate and lending that began 100 years ago is still having an impact today. “We began with the start of the Great Migration to put in place very race-focused rules about where black people who were coming from the South could live. It was incredibly race conscious,” said Novara.
Decades later when those laws were found to be illegal, “we began to put in place very race-neutral language,” Novara said. “But it turns out that race-neutral policies do not result in race-neutral outcomes.”
Novara pointed to credit scores as one example. She said banks that won’t lend below a certain credit score — and apply that policy across the board — “that may be equal, and it may seem fair on the surface, until you consider all the ways that people of color have been denied access to credit, have been the disproportionate subjects of predatory lending,” said Novara.
She said to achieve equitable access to lending, banks have to come up with different metrics to figure out who to lend to, how much and where to lend.
“Bottom line: What we know about structural racism is that simply letting things unfold is not neutral.”
Public investment as muscle
Moore and Novara are working for a mayor who campaigned on promises she would address inequities and bring development to neighborhoods left behind.
But cities don’t regulate banks. Moore says lenders can be enlisted as partners, though, and city investments can push them to lend where they haven’t before.
Moore points to an effort to revive 10 commercial corridors on the South and West sides dubbed INVEST South/West. The city wants $750 million in public investments to help attract private capital as well. So far, two banks have committed $30 million.
“So really thinking about our own work … our own access to capital, our own access to dollars that we can be putting out to try to drive at particular results,” said Moore. “Say, ‘Hey, we know that there has been a lack of investment in these neighborhoods, and we’re going to do something affirmative about it.’”
Moore said the city can also tell banks, “what has happened is not acceptable.”
WBEZ’s analysis found philanthropy is not a cure for disparate lending. JPMorgan Chase has donated $40 million to improve opportunity for residents on the South and West sides over the past few years; at the same time, in its day-to-day business, the bank invested just 2.4 cents in Chicago’s black communities for every dollar it loaned to majority-white neighborhoods.
WBEZ asked Novara and Moore if the city would consider specific strategies WBEZ heard suggested during our reporting: divesting city funds from banks that fail to lend equitably; starting a public bank so the city has more control over investment; increasing homebuyer assistance; offering equity in insurance to homeowners in black neighborhoods, so they can buy and improve their homes without worrying home values will stagnate or fall.
Moore and Novaro said they are considering some but not all of those ideas. They declined to give details.
1,000 homes for the South, West Sides
Novara did say the city is exploring “establishing homeownership on the South and West Side at a scale to reach critical mass.”
Novara is talking about an idea for 1,000 new single-family homes on the South Side, and 1,000 more on the West Side. The concept comes from a coalition of community organizations; they want the city to donate vacant lots for the homes.
Novara says the idea would be to rebuild disinvested communities on a scale that can really make a difference.
“We can’t just sit back and say, ‘Well, when there are properties, people will buy them and banks will lend — and it’ll all just take care of itself,’” said Novara. “We’ve seen over and over that that’s not the case. And we’ve got to step into a more proactive role.”
Novara said she’s not ready to offer more specifics yet on what could be 2,000 new single-family homes across some of Chicago’s most disinvested neighborhoods, but she said the disparities in investment documented by WBEZ are exactly what the initiative would seek to address.
Linda Lutton covers Chicago neighborhoods for WBEZ. Follow her @lindalutton.