After decades of overt redlining and racially discriminatory lending practices, financial institutions are once again returning to the nation’s cities. As Paul S. Grogan and Tony Proscio observed “Not only have community-based organizations found it vastly easier to line up financing and equity investments for their projects, but millions of individual borrowers and home buyers have found credit where for decades there had been only rejections.”
Between 1993 and 2000 the share of single-family home purchase mortgage loans going to low- and moderate-income borrowers increased from 19 percent to 29 percent. According to the National Community Reinvestment Coalition, the share of loans going to black households increased from 3.8 percent to 6.6 percent, while the Hispanic share increased from 4.0 percent to 6.9 percent.
Homeownership rates are at all-time high levels. In the first quarter of 2001 the national homeownership rate rose to 67.4 percent. The Joint Center for Housing Studies found that African American homeownership climbed to 47.6 percent and the Hispanic homeownership rate reached 46.3 percent. In central cities the homeownership rate reached a record high of 51.2 percent in 2000, according to the U.S. Department of Housing and Urban Development. All of these figures were the highest in the nation’s history. Though much remains to be done, clearly there has been progress in recent years.
Noting the greater availability of credit in urban and minority markets, some prominent observers attribute such change to the maturing of 1960s style protesters who grew up and now pursue “progress over protest.” Lost in what is in fact a premature declaration of victory is the vital role that advocacy and organizing efforts have played and continue to play in ongoing struggles to increase access to capital in distressed neighborhoods.
Advocacy and Accomplishment
Community development is big business today. Billions of dollars are spent by a range of investors, development organizations and consumers. In observing that community development has emerged as an industry, Lawrence B. Lindsey, former economic policy advisor to President George W. Bush, patronizingly concedes that “The protest banner can still be held reverently in our box of mementos, along with the love beads [and] peace signs.” From his perspective, effective proponents of urban communities act differently today; now they are “business people.” According to Lindsey the evolution is very simple, “It is called growing up.”
In their widely acclaimed book Comeback Cities, Grogan and Proscio ridicule those with a “preference for confrontation over visible results.” As Lindsey would no doubt agree, they applaud the sixties and seventies activists who, they claim, “exhausted by the antagonisms and fruitless turmoil, were more than ready to turn their newfound community-organizing talents to some practical redevelopment projects.” Interestingly, they attribute much of the recent success in urban revitalization to the Community Reinvestment Act (CRA), the federal law that emerged from the Alinsky-style radicalism they dismiss. To this day its effectiveness is grounded in large part in the power neighborhood groups have acquired through a range of advocacy and organizing efforts that Grogan and Proscio also scorn.
Community development is clearly changing. Many lenders see investment opportunities in neighborhoods they would not have considered just a few years ago. Financial institutions and community development groups are sitting down as partners and “doing deals.” In many cases it is the protest organizations that, as a result of their advocacy, were able to bring the lenders to the negotiating table leading to the partnerships. Financial intermediaries like the Local Initiatives Support Corporation and quasi-governmental organizations like the Neighborhood Reinvestment Corporation and Fannie Mae are providing capital. Community development finance institutions have been created to contribute to these efforts. Government agencies have used the proverbial stick as well as the carrot, passing laws like CRA and filing lawsuits to prod reinvestment. No doubt some lenders have simply responded to the signals of the marketplace and found profitable loans and investments in areas they had not previously considered. There are many facets to community reinvestment today.
But those who juxtapose organizing and advocacy efforts against accomplishments and results distort history and current social reality. Community reinvestment is also an emerging social movement. Like other social movements that sought to alter systems of unequal power and privilege (the two most vivid examples of which are the labor movement and civil rights movement), struggle and conflict are intrinsic to community reinvestment efforts. Advocacy and accomplishment are pieces of the same mosaic. And this does not apply just to historical developments. Heated debates over the Financial Services Modernization Act and its implementing regulations indicate that conflicting interests persist. (See Shelterforce #108.) If advocacy and organizing are passé, so is progress in community reinvestment.
Advocacy and organizing are primarily means to various ends. If the basic objective is to increase access to capital on equitable terms to all segments of metropolitan areas, the question remains as to what new policies and practices will realize these ends.
The Community Reinvestment Modernization Act of 2001 (HR 865) introduced by Rep. Tom Barrett (D-WI) and Luis Gutierrez (D-IL) broadens application of CRA beyond federally chartered depository institutions, increases data disclosure requirements and strengthens oversight responsibilities of appropriate authorities.
The proposed legislation was inspired by two trends. First, the continuing disparities in wealth, homeownership and access to financial services between economically distressed, predominantly nonwhite central cities and more prosperous, disproportionately white, outlying urban and suburban communities. Second, the continuing consolidation within and among financial services industries that was reinforced by the Financial Services Modernization Act permitting banks, insurers and securities firms to enter into each others’ businesses in ways that had previously been prohibited by federal law.
To address these trends, the bill would enhance access to financial services for citizens of all economic circumstances and in all geographic areas; enhance the ability of financial institutions to meet the credit needs of all communities; and ensure that community reinvestment keeps pace with affiliations that are occurring in the financial services marketplace.
The sponsors of the bill did not expect it to become law in the near future, and indeed it did not receive serious consideration in Congress. Most of the provisions would not be considered politically feasible today. But the political center does change. And it does so in response to advocacy and organizing efforts that generate a constituency for policies that, while perhaps not in favor at the moment, become policy in the future.
No Permanent Victories
Three or four years prior to its passage, most of the civil rights legislation of the 1960s would have been considered unrealistic. The same could be said about the sweeping welfare reform legislation passed in the Clinton Administration. It took the martyrdom of Martin Luther King Jr. to secure passage of the Fair Housing Act in 1968. It took a Democratic president, advocating what had long been a conservative Republican policy, to get welfare reform. But in both instances there had been years of scholarly research, intellectual debate, conflict and struggle. And there had also been years of advocacy and organizing – on all sides – from the neighborhood level to state houses to the Congress and White House.
The community reinvestment and fair lending victories that have been achieved – in part through the use of tools like the Fair Housing Act, the Home Mortgage Disclosure Act and CRA – reflect a similar history. “Community organizing has been the driving force of the reinvestment movement from the beginning,” according to two of the movement’s pioneers, Calvin Bradford and Gale Cincotta. “At any given point, a legislator, an agency official or some government agency can play an important part in an issue or policy; but over the long haul, community reinvestment remains a movement determined by people power.”
Local neighborhood organizations, working with supportive members of the media, the academic community and some elected officials and representatives of financial institutions themselves (sometimes brought kicking and screaming to the bargaining table) have used a variety of tools to change the way lenders do business in the nation’s cities. And the Community Reinvestment Modernization Act would likely not have been produced if it were not for the advocacy efforts of the National Community Reinvestment Coalition, ACORN, the National Training and Information Center and community organizations around the country.
Saul Alinsky argued that there are no permanent friends or permanent enemies. And there are few, if any, permanent victories. Progress has been made in fair lending and community reinvestment, but that progress is threatened, as the rise of predatory lending in recent years demonstrates. Homeownership may be at record levels today, but low-income and minority neighborhoods remain underserved. Future goals for community reinvestment and fair lending seem reasonably clear, as do the tactics and strategies for achieving them. Sustaining the type of efforts responsible for past victories and required for future ones remains the challenge of the day.