A new report details stark racial and economic disparities when it comes to financial investment in Chicago neighborhoods.
The Washington, D.C.-based Urban Institute examined public, private and mission-driven investment in Chicago from 2011 to 2017. The report includes a study of loans, sales, and construction and rehab activity for four classes of Chicago real estate: multifamily, single-family, commercial and industrial.
Among the findings:
The median low-poverty neighborhood (less than 10% of residents living in poverty) receives 4.3 times as much private-market investment per household as the median high-poverty neighborhood (more than 30% of residents living in poverty).
Majority-white neighborhoods receive 4.6 times as much private-market investment per household as majority-black neighborhoods and 2.6 times as much private-market investment as majority-Latino neighborhoods at the median.
Public and mission-driven investment sources (nonprofit or investors who take lower rates on return) generally flow the opposite way: public and mission-driven actors have invested 10 times more per household in high-poverty neighborhoods than they have in low-poverty neighborhoods when comparing median neighborhoods. Public and mission-driven sources of investment are much smaller than private-market sources and are thus unable to fully make up for disparities in private-market investment.
“Chicago has a long history of segregation and these findings confirm that,” said Brett Theodos, study author and senior fellow at the Urban Institute. “That said, so does Detroit, so does Baltimore and so do a number of older industrialized cities in this country. While the findings are stark and definitely a call to action, Chicago is definitely not alone in these trends.”
Theodos said the report has been shared with new Chicago Mayor Lori Lightfoot who pledges to reduce inequity in the city.
The big takeaway is that high-poverty neighborhoods and neighborhoods of color are starved of private-market capital.
“Public investment was much more equitably spread — 10-fold the investment in high-poverty neighborhoods,” Theodos said. And mission-driven investment, too, he added.
But there isn’t balance.
“We have a scenario where the public sector, the mission finance sector is not making up for the deficits for where the private market capital is slowing,” Theodos said.
WBEZ’s examination of transit-oriented development, or TOD, serves as an illustration of this imbalance between private-market investment and public investment in Chicago communities.
The city’s TOD ordinance allows developers to increase density and to reduce the number of required parking spots for new housing. Developers like it because they can spend less money on parking. The city likes it because those savings, in theory, attract more developer interest. On top of that, less parking means fewer cars, a healthier environment, and more walkable neighborhoods.
Even though the TOD ordinance offers the same benefits, there’s been very little TOD development along the Green Line on the South Side compared with the building boom occurring along the Blue Line on the Northwest Side.
In fact, much of the land near some Green Line stations on the South Side remains vacant. And the strong interest from the private sector to take advantage of the ordinance in Logan Square has not been matched in South Side communities. The two South Side Green Line locations with TOD have received significant public investment from local and federal government resources. They include Woodlawn Station and KLEO Art Residences.
Lending for industrial properties was more prevalent in neighborhoods with higher poverty and people of color. But Theodos said that’s not necessarily a victory because people don’t typically want to live near industry.
The report doesn’t give policy recommendations but does ask a series of provocative questions — around the need for stronger appraisals, whether market investors need better information about opportunities and if greater credit enhancements or other “carrots” for investors are needed for under-invested neighborhoods.