Gauging COVID-19’s Ongoing Impact on LMI Communities

This post is the third in a six-part series titled “The State of Economic Equity.” This series examines the challenges facing vulnerable workers this year and possible ways to improve their economic security and resiliency in an economy reshaped by the pandemic.

The COVID-19 pandemic has disrupted lives across the country, and its effects on low-to moderate-income (LMI) individuals and communities have been significant. High concentration of employment in pandemic-disrupted service industries such as leisure and hospitality and a lack of savings have resulted in a more acute impact and slower recovery (PDF). Furthermore, American Indian/Alaska Native, Hispanic/Latino and Black people have borne a disproportionate burden of the pandemic’s adverse economic and health effects.

How might the COVID-19 pandemic continue to affect communities, especially LMI communities, in 2022 and beyond? To help answer this question, we looked to the Federal Reserve’s latest Community Impact Survey (CIS) conducted in August 2021. The Fed has conducted the CIS five times since early 2020 to monitor the effects of the pandemic and recovery efforts. The survey is distributed to organizations serving LMI individuals and communities, such as nonprofits, government agencies and financial institutions, with questions focused on the communities they serve and their own organizations’ financial health.

Based on data from the latest CIS, LMI communities appear to have a long road to recovery, as various aspects of people’s lives—from financial security to housing stability—continued to be impacted by COVID-19. Similarly, organizations serving these communities were facing ongoing challenges with high demand and difficulty maintaining staffing levels. These challenges have likely persisted with the impact of delta and omicron variants beyond the survey period.

LMI Communities Face a Long Path to Recovery

When asked about the peak period of distress,The survey asks providers about the disruptions caused by COVID-19 to the communities they serve for two separate time periods: peak of distress and current period. The peak of distress is self-defined by the respondent based on the context of the community they serve. 86% of providers noted significant disruptions to economic conditions in the communities they serve. Regarding conditions at the time the survey was fielded (August 2021), a much smaller but still sizeable proportion (44%) noted significant disruptions, suggesting that many communities were on a path to recovery.

Still, observations at the time of the survey pointed to ongoing disruptions in various parts of the economy. For example, 78% of respondents said that conditions affecting financial stability, including income loss and changes to income stability, were still worse than they were before the pandemic. Similarly, 81% noted that disruptions to small businesses—including short- and long-term closures, supply chain disruptions and reduced demand—were worse than before the pandemic.

Continued disruptions were noted in other areas, such as housing stability and services for children, as detailed in the latest CIS report.

Expected Time to Recovery: One to Three Years, Longer for Housing Stability

Although the U.S. economy is expected to continue growing, the path to recovery appears longer for LMI communities. When asked when they expect the communities they serve to return to pre-pandemic conditions, one-half of the providers said one to three years. In particular, about half offered the same time frame for expectations related to financial stability, impacts on small businesses and access to health care, plus basic consumer needs. Regarding housing stability, which refers to evictions, back rent, foreclosures and homelessness, 25% of respondents said it would take four years or more to return to pre-pandemic conditions; another 25% said conditions may never return to pre-COVID-19 times.

Entities Serving LMI Communities also Face Ongoing Challenges

Organizations serving LMI communities are on the frontlines of relief and recovery efforts. They work to provide food, ensure access to affordable housing, help people find jobs and support the reopening of small businesses. When asked about the peak period of distress,The survey asks providers about the disruptions caused by COVID-19 to their organizations for two separate time periods: peak of distress and current period. The peak of distress is self-defined by the respondent based on the context of the community they serve. 69% of respondents noted significant disruptions to their organizations. Regarding conditions at the time of the survey (August 2021), the proportion of entities experiencing significant disruptions was much lower, at 32%. Similar to the communities they serve, many organizations were on a path to recovery, while still facing ongoing challenges.

As reported in the CIS, surveyed organizations were seeing higher demand relative to pre-pandemic levels, but their ability to provide services was constrained. One of the providers noted, “We are struggling to attract and retain staff to fill front-line roles. Additionally, some existing staff have left for higher paying work.”This quote comes from the Community Development Outlook Survey (CDOS) (PDF), which asked similar questions around the impact of COVID-19 to organizations serving LMI communities in the Eighth Federal Reserve District. Many of these jobs entail providing direct services that can be highly stressful and carry high risk of exposure to COVID-19. Uncertainty with child care and school closures could pose additional challenges in maintaining staffing levels.

The ability to provide services is also determined by revenue, and most of the revenue sources for these organizations, such as donations and fees for services, have either stayed the same or decreased. However, 60% of the respondents did note an increase in funding from the government. Such relief efforts have been crucial not only to LMI individuals, but also to the many organizations serving them.

Lessons Learned for 2022 and Beyond

Disruptions to LMI communities surely would have been worse without the government’s responses, including the Coronavirus Aid, Relief, and Economic Security (CARES) Act and the American Rescue Plan of 2021. Findings from the August 2021 CIS reflect the importance of these funds, as most of the respondents said measures such as federal stimulus checks, small-business support, unemployment benefits, rent and mortgage relief, and utility support were critically important.

While relief and recovery measures have been crucial, ensuring that resources get to those who need them most continues to be a hurdle. As one respondent noted, “The CARES Act funding is helpful, but the local agencies do not have capacity to effectively utilize these resources. For example, there is money to assist with people staying in their current homes, but the local agency ... only has a small number of case managers to conduct intake and distribute funds. There's a huge bottleneck.” Additionally, complex application processes, burdensome paperwork and lack of technology further impede access to needed resources.

Entities serving LMI communities are doing their best to provide services and have been adapting to the challenging circumstances. Greater coordination among all of the stakeholders, together with building capacity to provide critical services, is key to ensuring an equitable recovery and resiliency among the nation’s most vulnerable.

Notes and References

1. The survey asks providers about the disruptions caused by COVID-19 to the communities they serve for two separate time periods: peak of distress and current period. The peak of distress is self-defined by the respondent based on the context of the community they serve.
2. The survey asks providers about the disruptions caused by COVID-19 to their organizations for two separate time periods: peak of distress and current period. The peak of distress is self-defined by the respondent based on the context of the community they serve.
3. This quote comes from the Community Development Outlook Survey (CDOS) (PDF), which asked similar questions around the impact of COVID-19 to organizations serving LMI communities in the Eighth Federal Reserve District.