Eighth District LMI Communities Respond to COVID-19’s Toll

Within a May 2020 article, the St. Louis Fed’s community development team analyzed Eighth District data from the first iteration of the survey, Perspectives from Main Street: The Impact of COVID-19 on Low- to Moderate-Income Communities and the Entities Serving Them.

That article’s findings concluded, “The COVID-19 pandemic constitutes a substantial economic disruption to communities and community development entities across the Eighth District. It will take time for these neighborhoods and organizations to return to their pre-pandemic economic conditions.” Like the author, individuals who both live in and serve low- to moderate-income (LMI) communities likely assumed the same: Recovery was going to take time.

The fourth, and most recent, administration of the survey (administered from Oct. 7-16, 2020) confirmed that likelihood to be true.

In the October 2020 survey, 59% of the respondents said that the pandemic has resulted in a significant disruption to the LMI communities they serve, with income loss being a primary impact. The entities serving the communities are not faring better, with 48% indicating significant disruption with increased demand for services and a reduced ability to serve their communities.

Of the 1,127 respondents in the latest survey, 139 were organizations that serve LMI communities in the Fed’s Eighth District (comprising the state of Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee). Analysis of these responses reveal both consistencies and contrasts with the national results.

Attributes of Eighth District respondents:

• The two entities with the most respondents were nonprofit organizations (40%) and financial institutions (31%).
• The organizations served both rural (43%) and urban (33%) areas, and primarily focused on supporting small businesses, food access and housing security.
• 77% of respondents were direct service providers (they offer services directly to individuals, families and/or small-business owners).

Impact on LMI communities:

• Two-thirds of the respondents said that the communities they served were facing significant disruption, with almost half of them expecting a difficult recovery.
• While noting the disruption caused by the pandemic, 31% of the respondents acknowledged the disruption was manageable—a more positive outlook compared to national survey results.
• Consistent with previous surveys, income loss, job loss or unemployment were among the top impacts. (See the graph below.) More than 40% of the respondents said that this had gotten modestly worse.
• While only 14% of respondents chose education as a top impact, 36% noted that education had gotten modestly worse.
• Results showed both private (17%) and public (27%) financial supportsPublic financial supports include access to federal and state resources for individuals. Private financial supports include access to private lending and philanthropic resources for individuals. got modestly better.
• Half of respondents said it will take more than a year for their communities to return to pre-pandemic conditions.

Top Impacts on LMI Communities

NOTE: This graph shows the top impactThe top impact responses are to the question: “At this point in time, what is the top impact of COVID-19 on the people and communities you serve?” The response options included income loss/job loss/unemployment, business impacts (e.g. short/long-term closure, supply chain disruption and reduced demand), basic consumer needs (e.g. housing, food and other personal needs), education (e.g. childcare, K-12 and higher education), health (e.g. adequate healthcare, access to health insurance, mental health and COVID-19 transmission), public financial supports (e.g. ability to access federal and state resources for individuals) and other. on LMI communities, according to the entities that serve them.

Impact on organizations serving LMI communities:

• For 63% of the organizations, the demand for services increased. In contrast, only 37% saw their ability to provide services increase in the same time period.
• More than half (54%) of entities noted that their expenses increased in the past eight weeks.
• Of the organizations surveyed, 28% said they could operate for less than a year before exhibiting financial stress.
• Almost half (47%) of entities responded that the disruption was manageable, with 28% saying their entity could operate for more than 12 months before exhibiting financial distress. (See the figure below.)

Months of Operation before Financial Distress

NOTE: This graph shows the number of months entities believed it would take before they experienced financial distress. Responses are to the question: “Given your existing resources, how many months can the entity you represent operate in the current environment before exhibiting financial distress (including reducing services, laying off staff, closing locations)?”

Entities Face Barriers and Opportunities

The survey also included an open-ended questionThe question was: “At this point in time, are there any programs or initiatives that have presented notable opportunities and/or barriers for the low- and moderate-income communities you serve?” that asked organizations if there were any barriers or opportunities for serving LMI communities. Two primary responses that emerged were the availability of funding at the local level (e.g., United Way and One Louisville Fund) and the efforts to reduce housing distress through rent, mortgage, utility assistance or other eviction prevention measures. This is notable in light of recent analysis that shows an average of 14.9% of renters living in Eighth District states are not current on their rent.Eighth District Housing Distress: Challenges, Demographics and Resources | St. Louis Fed

Although the Paycheck Protection Program (PPP), CARES Act and unemployment benefits were reported as a relief during this period, respondents did note experiencing difficulty accessing these funds due to various barriers (e.g. issues with the application process and not having a relationship with financial institutions that were providing funds).

One respondent noted, “On one hand, PPP and Community Advantage programs have been made available. On the other hand, there was not equal access to these programs by people of color or women. Additionally, immigrant residents of our region were left out of the stimulus check program, which is a huge barrier. We are increasingly concerned about a wave of evictions."

Another respondent remarked about disparate access for minority-owned businesses: "The PPP loan was hard for a lot of minority-owned and smaller businesses to access because of the rollout. Larger banks were not very customer friendly to smaller businesses and many minority-owned businesses did not have the financial infrastructure to access the program.” said the respondent.

In combination with the results, a September 2020 blog written by our St. Louis Fed community development colleagues highlighted similar issues and provides a deeper understanding of the pandemic’s impact on LMI communities. Although organizations and communities are being resilient in the face of unprecedented disruption, it is worth noting that survey responses are only from entities that are currently surviving. Therefore, it is imperative that community development organizations have access to the support they need to remain resilient and serve the LMI communities that are reliant upon them.