NEW Rpt: Bank Reinvestment, Equitable Economics

Click HERE for ANHD’s latest report

As the new City Administration begins to make important policy choices to shape a new economic development policy, the Association for Neighborhood and Housing Development (ANHD) is releasing a new white paper to help demystify the economic development category of the Community Reinvestment Act (CRA) and to encourage more effective partnerships and activities by banks, regulators, government officials, nonprofits and for-profit developers to further equitable economic development in New York City.

Equitable economic development goes beyond expanding the tax base and beyond simply creating and preserving jobs, which has been the focus of economic development in previous administrations.  Equitable Economic Development emphasizes the quality of the jobs being created and the people being served. Equitable economic development is about creating the systems and environments to create a stable middle and working-class employment base and workforce that creates a meaningful path to the middle class.  It ensures that these systems and opportunities are intentionally extended to the low- and moderate-income (LMI) and underserved communities that need them most through targeted strategies for quality job creation, small business development, and workforce development and placement. 

New York City is at a pivotal moment in this time of persistent and growing economic inequality, which threatens the promise of opportunity of our City.  At the same time, the City has a new administration and progressive City Council that could potentially reverse this course, especially in collaboration with other legislators, bank regulators, nonprofit organizations, and private industry.  The majority of ANHD member organizations – neighborhood based community organizations and Community Development Corporations (CDCs) – have long been recognized for their expertise and central role in affordable housing development, using government-backed programs that leverage investment brought to the table by the CRA.  Many CDCs have also been working on, or are expanding into, economic development.

The CRA states that banks have a continuing and affirmative obligation to help meet the credit needs of the LMI neigh­borhoods in which they do business, consistent with safe and sound business practices.  The fundamental principle of the CRA is that all communities, including LMI communities, rely on banking services and those services must be provided in an equitable manner.  The CRA was passed in 1977 to ensure that banks provide credit and deposit services equitably to the communities in which they do business, including LMI communities.  It has also created the expectation that banks provide an adequate number of community development loans, investments, and services to further these goals beyond their core lending and branch services.

Over the 35 years since the CRA was passed, New York City has developed one of the richest ecosystems and infrastructures in the country to build and preserve affordable housing.  The CRA has fostered collaboration among governments, developers, nonprofit organizations, and banks that has led to the creation of a robust infrastructure with a wealth of CRA motivated capital to support it.

It is time to develop a similar ecosystem to drive equitable economic development in New York City.  There is no reason why all stakeholders can’t take the same strategic, intentional approach to economic development that has been taken for housing in order to develop the tools and resources needed to support New York City’s businesses and workers.

Equitable economic development can encompass multiple sectors and strategies.  One specific strategy ANHD is advocating is to create new, quality jobs in the light manufacturing sector, which tend to pay much higher salaries and more stable employment than the low-wage service-sector jobs that are growing so quickly in the City. A fundamental piece of this strategy is to ensure that New York City has adequate space and resources for manufacturing businesses to start-up, develop, grow, and expand.  Industrial spaces developed, managed, and operated by nonprofit organizations are best suited to support businesses that will create the kind of stable, good paying, quality jobs our communities need.

It is urgent that the City’s public and private sectors come together to address this issue in a smart, systematic manner.  The same CRA that has been so effective in supporting and building a housing infrastructure was developed to be flexible and responsive to the ever-changing credit needs of cities.  Thus, it can also serve as a tool to bring banks to the table once again to develop this new infrastructure for equitable economic development.

The white paper analyzes how the CRA interprets economic development, lays out the range of activities banks can engage in to support economic development, and provides a set of recommendations for the City, banks and regulators to increase investment in equitable economic development in general, with some specific recommendations related to increasing jobs in the manufacturing sector.