Digging into the St. Louis Fed’s Community Investment Explorer 2.0

November 17, 2021
US map from Community Investment Explorer 2.0 tool 

The community development field is made up of a diverse set of actors—community development financial institutions (CDFIs), tax credit investors, community development corporations, small-business development centers, foundations, government agencies (at all levels), affordable housing developers, and more. Through this complex system flows public and private capital, which takes the form of debt, equity and grants, from a variety of sources.

To increase transparency and accessibility of funding streams that support the community development field, the St. Louis Fed has launched the Community Investment Explorer 2.0 (CIE 2.0). This interactive tool builds on the original Community Investment Explorer by adding several more programs, while including an equity component. As a result, CIE 2.0 visualizes where $3.2 trillion of capital from 10 funding streams was deployed in the community between 2012 and 2020, while highlighting the proportion of capital flowing to low- and moderate-income (LMI) communities and communities of color.

Generally, the activities supported by funding streams in the CIE 2.0 fall into one of three broad issue areas: housing, commercial real estate and business (mostly but not exclusively small business). A list of all 10 funding streams and their descriptions is included in Table 1. Seven of the funding streams allocate capital to one of these three issue areas, while the Community Development Block Grant (CDBG) program, the CDFI program and the New Markets Tax Credit program allocate capital to multiple issue areas.

Data are available for all metropolitan and micropolitan areas within all 50 states, the District of Columbia and Puerto Rico.The U.S. Office of Management and Budget delineates metropolitan and micropolitan statistical areas based on standards used in the 2010 census and those in the 2011-15 American Community Survey, as well as on data from the Census Bureau’s 2018 Population and Housing Unit Estimates. Each metropolitan statistical area must have at least one urbanized area of 50,000 or more inhabitants. Each micropolitan statistical area must have at least one urban cluster of at least 10,000 but fewer than 50,000 people. A deeper look at capital flows by neighborhood is available for the branch cities within the Federal Reserve's Eighth District—Little Rock, Ark.; Louisville, Ky.; Memphis, Tenn.; and St. Louis. Additionally, the raw data—available at the census tract level—can be downloaded to allow for further exploration of community development finance questions.

Table 1

Community Development Funding Streams

Fund Name Description
Community Development Block Grant (CDBG) Program Administered by the U.S. Department of Housing and Urban Development (HUD), the CDBG program provides annual, formula-based (noncompetitive) grants to states and cities to support decent housing and a suitable living environment. The program also expands economic opportunities, principally for people with low and moderate incomes.
Community Development Financial Institution (CDFI) Program Administered by the U.S. Department of the Treasury’s CDFI Fund, the CDFI program provides financial products and services to individuals and organizations that struggle with accessing capital from mainstream financial institutions.
Bank Small-Business Lending Small-business loans—as measured by loans to businesses with annual revenue of less than $1 million—are reported by bank lenders in accordance with Community Reinvestment Act requirements.
Historic Tax Credit Program Administered by the U.S. Department of the Interior’s National Park Service (NPS) and the Internal Revenue Service (IRS), the Historic Tax Credit program provides a tax credit for rehabilitating historic, income-producing buildings that are determined by NPS to be “certified historic structures.”
HOME Investment Partnerships Program Administered by HUD, the HOME program provides formula-based grants to states and localities that support creating or preserving affordable housing.
Low-Income Housing Tax Credit (LIHTC) Program Administered by HUD and the IRS, the LIHTC program provides states and local LIHTC-allocating agencies an annual budget authority to issue tax credits to acquire, rehabilitate or build rental housing targeted to households with lower incomes.
New Markets Tax Credit (NMTC) Program Administered by the U.S. Treasury’s CDFI Fund, the NMTC program attracts private capital into low-income communities by permitting individual and corporate investors to receive a federal income tax credit in exchange for making equity investments in specialized financial intermediaries called Community Development Entities.
Paycheck Protection Program (PPP) Administered by the U.S. Small Business Administration (SBA), the PPP is a federal loan that has helped businesses keep their workers employed during the COVID-19 pandemic.
SBA 7(a) Program Administered by the SBA, the 7(a) program provides financial assistance, such as loans and guarantees, to small businesses.
SBA 504 Program Administered by the SBA, the 504 program provides long-term, fixed-rate financing of up to $5 million for major fixed assets that promote business growth and job creation.

The Equitable Distribution of Capital

An important feature of the CIE 2.0 is linking capital flows to census geographies. As a result, we show how capital is flowing to LMI communities and communities of color.Communities of color are defined as census tracts in which more than 50% of the population identifies as nonwhite. Low- to moderate-income communities are defined as census tracts in which the median family income is below 80% of the area median income.

Across all metropolitan and micropolitan areas of the U.S., the two federal programs included in the CIE 2.0 that allocate grant capital—the Community Development Block Grant program and the HOME Investment Partnerships program—each distributed more than 50% of funds to both communities of color and LMI communities. The only other funding stream to accomplish that is the New Markets Tax Credit program. (See Table 2.)

Table 2

Capital Flowing to Communities of Color and LMI Communities

Funding Stream Share of Funding in Communities of Color Share of Funding in LMI Communities
Community Development Block Grant Program 52% 55%
Community Development Financial Institution Program 40% 35%
Bank Small-Business Lending 26% 24%
Historic Tax Credit Program 35% 40%
HOME Investment Partnerships Program 66% 67%
Low-Income Housing Tax Credit Program 46% 56%
New Markets Tax Credit Program 59% 67%
Paycheck Protection Program 28% 26%
SBA 7(a) Program 34% 29%
SBA 504 Program 32% 30%

While stakeholders in community development may interpret more funding to LMI communities as positive, the interpretation might depend on the funding stream and the issue area supported. For instance, the fact that more than half of funding from the Low-Income Housing Tax Credit program flowed to LMI communities could be viewed as concentrating poverty. Research has shown that creating affordable housing opportunities in more resource-rich areas, as opposed to low-income areas, can be a pathway out of poverty for children.Chetty, Raj; Hendren, Nathaniel; and Katz, Lawrence. “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Project.” American Economic Review, Vol. 106, No. 4. 2016.

Regional and Local Capital Flows Variation

The CIE 2.0 not only includes the share of funding in communities of color and in LMI communities within a metro or micro area, but shows the share of LMI neighborhoods and those where more than 50% of the population identify as nonwhite. For instance, in Memphis, 53% of all neighborhoodsNeighborhoods are defined here as census tracts. are communities of color, whereas 24% of all CDFI capital, or $41.3 million per year, flowed to those neighborhoods. Digging further, the Memphis regional map shows that of the three neighborhoods that received the most CDFI capital—downtown, Eastwood Manor and Cordova—only the downtown neighborhood has a population greater than 50% nonwhite.

The figure below illustrates CDFI funding in communities of color within metros of the Federal Reserve’s Eighth District compared to the share of communities of color in those metros.

Figure 1

Eighth District Communities of Color—CDFI Funding vs. Population

Eighth District Communities of Color—CDFI Funding vs. Population 

Additional Eighth District Capital Flows Findings

  • Jonesboro, Ark., allocated a high percentage of SBA 504 and 7(a) funds (100% and 69%, respectively) to LMI tracts, relative to its share of LMI tracts (32%).
  • St. Louis is among the top five metros across the country for New Markets Tax Credit and Historic Tax Credit investment.
  • Fayetteville, Ark., is the only metro in the Eighth District, and one of only a handful throughout the country, in which a lower percentage of CDBG dollars flowed to LMI areas than to the metro’s share of LMI areas.
  • The micropolitan areas of the Arkansas and Mississippi Delta—Helena and West Helena, Ark.; and Greenville, Greenwood and Indianola, Miss.—are among those attracting the most CDFI capital of any micropolitan area in the U.S.
  • While Louisville is attracting a relatively small amount of CDFI capital overall, the percentage allocated to communities of color (42%) is the highest of any metro in the Eighth District.

Conclusion

The CIE 2.0 is a comprehensive capital flows tool, which is targeted to the stakeholders that make up the community development ecosystem. The Asset Funders Network organized a webinar in October during which a funder, a local government official and a CDFI professional each shared how they are using the CIE 2.0. We’d love to hear how you are using or plan to use the tool in your work. Drop Mike Eggleston an email at michael.c.eggleston@stls.frb.org.

Notes and References

1 The U.S. Office of Management and Budget delineates metropolitan and micropolitan statistical areas based on standards used in the 2010 census and those in the 2011-15 American Community Survey, as well as on data from the Census Bureau’s 2018 Population and Housing Unit Estimates. Each metropolitan statistical area must have at least one urbanized area of 50,000 or more inhabitants. Each micropolitan statistical area must have at least one urban cluster of at least 10,000 but fewer than 50,000 people.

2 Communities of color are defined as census tracts in which more than 50% of the population identifies as nonwhite. Low- to moderate-income communities are defined as census tracts in which the median family income is below 80% of the area median income.

3 Chetty, Raj; Hendren, Nathaniel; and Katz, Lawrence. “The Effects of Exposure to Better Neighborhoods on Children: New Evidence from the Moving to Opportunity Project.” American Economic Review, Vol. 106, No. 4. 2016.

4 Neighborhoods are defined here as census tracts.

About the Author
Michael Eggleston
Michael Eggleston

Michael C. Eggleston is a senior community development advisor, specializing in finance, at the St. Louis Fed.

Michael Eggleston
Michael Eggleston

Michael C. Eggleston is a senior community development advisor, specializing in finance, at the St. Louis Fed.

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.


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