Bridges Fall 2019

Bridges is a quarterly review of regional community and economic development issues, projects and regulatory changes for practitioners from community-based organizations, as well as for Community Reinvestment Act officers, academics and government of

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I N D E X T H E F E D E R A L R E S E R V E B A N K o f S T . L O U I S | C E N T R A L T O A M E R I C A ' S E C O N O M Y F A L L 2 0 1 9 Can Work-Based Learning Ease Talent Issues? 4 5 10 CRA: AN EXAMINER'S PERSPECTIVE Considerations for Branch Closings Shifting Dynamics in Eighth District Cities A N D M O R E > > Here Comes the Neighborhood: Breathing New Life into the Inner City, One Mortgage at a Time By Glenn Burleigh, Clayton Evans, Jonathan Ferry, and Michelle Witthaus A Credit Crisis T he flow of capital and credit is to an economy what blood is to the body. If the flow of credit gets cut off, it will decay much like an arm or leg will turn gangrenous without proper circulation. For decades, neighborhoods in parts of St. Louis, particu- larly in North St. Louis City, have been cut off from the flow of credit, and this has resulted in tremendous disinvestment. Neighborhoods have witnessed business and factory reloca- tions, school closings, residents moving away and properties falling into disrepair as a result of a lack of access to credit. is lack of credit can be traced back to a pre-civil rights era federal government policy, commonly known as redlining. is policy effectively acted as a tourniquet for credit, restricting the flow of funds into certain geographies deemed to be a poor financial risk. Most of these "poor risk" areas happened to also be areas of majority minority populations. e impact of this policy in St. Louis is evident when you drive through many neigh- borhoods north of Delmar Boulevard. Red lines on a map once divided these areas from investable areas, and to this day the "Delmar Divide," which serves as North City's south- ern boundary, is a dividing line between the city's wealthy and poor communities. Appraisals at the Forefront Mortgage lending is a critical component of credit access. Without mortgage lending, many who desire to reinvest in communities are unable. Where there is a will, people are left without a way. According to the Home Mortgage Disclosure Act data, only 4% of new home mortgages within the city of St. Louis were issued for homes north of Del- mar Boulevard in 2017. is stark reality is a reminder of the deep divides our region faces. While redlining is a thing of the past, the legacy it has left in its wake is the problem of depressed property values and appraisal gaps. Put simply, mortgage lenders are restricted from lending buyers more money than the appraised value of the house they want to buy. In a healthy market, this restriction makes perfect sense. Why would a bank lend you $150,000 for a $100,000 house? But in a market that has suffered under decades of credit restriction, and subsequent asset depre- ciation, such a policy prevents using credit to purchase and rehabilitate properties; thus, holding down property values. A recent Brookings Institution report revealed that undervaluation of homes in communities of color is a nationwide trend that is affecting wealth accumulation for many families. To understand just how this is reflected in our region, the Metropolitan St. Louis Equal Housing and Opportunity Council (EHOC) conducted a follow up investigation in the same vein as the Brook- ings study. When comparing sale prices for similar-sized homes in neighborhoods with similar median incomes, the investigation found that sale prices in majority black neigh- borhoods were often half of those in majority white neighborhoods. Based on their find- ings, EHOC concluded that "is represents a significant loss of household wealth for our region's black households. It plays a role in >> continued on Page 3

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