Opinion: New rules would bring back redlining

How can we address racial disparities in real estate? One meaningful step is to voice your opposition to proposed rule changes that would undermine the Community Reinvestment Act (CRA).

The CRA was enacted in 1977 to help remedy the fallout from decades of government-

sanctioned redlining and lending discrimination in communities of color. It incentivizes

banks to provide greater access to credit and encourage community-serving development in low-to-moderate income (LMI) communities.

For example, the willingness of banks to provide "small-dollar" loans highlights the importance of the CRA. From a business-perspective, banks are reluctant to make low-dollar loans (less than $100,000) because there is a low return on investment. For low-to-moderate income neighborhoods, this makes non-predatory financing for lower-value homes and minority/women-owned business challenging. However, because these types of small loans "count" for CRA purposes, it provides banks an incentive that can compensate for the otherwise higher fixed costs of originating and servicing them.

If you look at the data on racial wealth disparity, you’ll conclude that the CRA is still as relevant today – if not more important – than it was in 1977. In Hamilton County, like the rest of the country, there is a lack of African American wealth as compared to whites. A recent Brookings Institute study found that in Cincinnati, homes in majority-black neighborhoods are worth 9% less ($10,262 per home on average) than those in white neighborhoods.

Black households were disproportionately impacted by the recession – with a loss of half of their wealth through declines in homeownership and the loss of jobs. Now, more than ever, we need to modernize and strengthen the CRA to help rebuild African American real estate wealth by providing meaningful access to credit.

Unfortunately, the proposed rule changes to the CRA will take us back in time and re-legalize redlining. They would expand eligible CRA lending to a "non-exhaustive list" of activities that do not benefit the low-to-moderate income residents living in the affected community. Worse, the changes would allow banks to pick and choose which CRA-designated areas in which they will lend, so long as they are serving 50% of them. Thus, a bank can decide to serve half of its CRA assessment areas and ignore the rest, with no repercussions.

It doesn’t take a genius to figure out which communities will be left out of the mix. If this is not a modern-day reinstatement of redlining, we don’t know what is.

It is in the interest of our community as a whole to do whatever we can to build more equity in real estate. This cannot happen if banks can choose to not lend in our under-served communities with no repercussions. The efforts to rewrite the CRA are an affront to all of us, regardless of where you live or your political persuasion.

Please join The Port and others by voicing your opposition to the proposed reforms no later than Monday, March 9 at https://www.regulations.gov/comment?D=OCC-2018-0008-1515. More in-depth information about CRA reform can be found at www.ncrc.org.

Jessica Powell is vice president of the Landbank, The Port. Deborah Robb is director of the HURC & Residential Sales, The Port. Sally Duffy is a board member of The Port.