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EITC: Enhancing Health and Wealth

By Chad Bolt and Joanna Ain on 03/21/2017 @ 10:00 AM

Tags: Data and Research, Federal Policy

At CFED, we’ve been diving deep into exploring the link between health and wealth. It seems like every day new evidence is coming about how one’s mental and physical health affects one’s financial health (and vice versa) alongside examples of how those connections come to light in practice, such as the integration of financial capability services into community health centers (CHCs). One of the most exciting connections we’re seeing in this space is between the EITC (Earned Income Tax Credit) and health.

The EITC is the most effective anti-poverty tool in the tax code. Last year, 27 million filers claimed the EITC, receiving an average benefit of $2,454. Significant expansions of the credit were made permanent in 2015, ensuring that approximately 16 million families – including 8 million children – won’t be pushed deeper into poverty. Many workers use their EITC benefit to pay down debt, set money aside to save, or make repairs to their car or home. The EITC is a rarity on Capitol Hill these days: because of its proven track record, it enjoys strong bipartisan support.

The long term benefits of the EITC have been studied as well. This means improved test scores in school, boosted college enrollment, increased earnings as adults and, finally, higher Social Security benefits in retirement.

In addition to those significant and wide-ranging effects, new research from Columbia University’s Mailman School of Public Health finds that receiving the EITC improves health outcomes as well. Researchers looked at data from 1993 to 2010 and found that receiving the EITC increased health-related quality of life and extended life expectancy. It also suggests that the EITC may be more effective than some health interventions in improving health outcomes.

The larger the EITC benefit, the more significant the improvement in quality of life. Researchers found that recipients living in states that had their own state-level match of the federal EITC gained additional quality of life over recipients in states that do not. Similarly, families that receive a larger EITC benefit because they have children gained more quality of life than single workers only eligible for a very small EITC benefit.

Along with the research indicating this connection, the link between EITC and health is coming out in practice, too. In early March, CFED featured StreetCred on our webinar about Your Finances, Your Health: Making the Health/Wealth Connection. StreetCred is an innovative organization that brings tax preparation into pediatricians’ waiting rooms at Boston Medical Center—a safety net hospital that serves many of Boston’s most vulnerable families. Recognizing the importance of EITC and its association with improved health, StreetCred works to help families access those credits more easily during their visits to pediatricians. In its first year, this program returned over $400,000 in tax refunds to almost 200 families. With the success of this program, StreetCred is now reaching out into the community health center (CHC) space to spread this momentum every further to the communities who most need these services.

This link between the EITC and health outcomes is just one more reason Congress should build on the success of EITC by expanding benefits to workers not raising children and empowering workers to save through a Rainy Day EITC program. While researchers noted that additional randomized control trials are needed to further demonstrate the EITC’s effects on health, we know that the EITC improves economic outcomes for workers and educational outcomes for children. Now is the time to protect and expand this critical program.

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2017 Assets & Opportunity Scorecard Policy Data Now Available

By Holden Weisman on 03/09/2017 @ 10:00 AM

Tags: Data and Research, Local Policy, News, Assets & Opportunity Initiative

As a preview of the upcoming 2017 Assets & Opportunity Scorecard, we’re pleased to release a complete set of this year’s state policy data! The State-by-State Policy Profiles and the series of Policy Briefs contain the full set of policies on how far states have gone to build their residents’ financial well-being, as well as what states can do to put their residents on stronger financial footing. You can browse and download both sets of documents by visiting the Assets & Opportunity Scorecard website.

The State Policy Profiles outline the full slate of policies assessed in the Scorecard and identify what has been achieved and what opportunities still exist to enact policies that contribute to household financial security. After learning about how your state performs, you can dig deeper into any of the policies included by downloading the corresponding Policy Brief. If, for example, you’re interested in proposing legislation to remove asset limits in Tennessee, you can download the “Asset Limits in Public Benefits Programs” Policy Brief, which includes an overview of the policies, what the state can do to enact them, how CFED assesses the states on these policies within the Scorecard and what other states have done in this area.

We encourage you to use State Profiles and Policy Briefs to guide your 2017 state-level advocacy work. This might entail referencing the policy solutions presented in testimony relating to bills introduced in your legislature, or it might entail comparing how your state stacks up against your neighbors to identify policy alternatives to problems faced at home. There are a range of ways to use all of the tools, and if you are interested in exploring how you might leverage them, please send us an email.

The State Policy Profiles and the Policy Briefs are only some of the tools we will make available as part of the rollout of the 2017 Scorecard. Later this year, the policy data will be accompanied by the release of our 2017 outcome data, which paint a picture of how residents in all 50 states and the District of Columbia are faring when it comes to their household financial security. More information about the release of the 2017 Scorecard outcome data will be shared via email, so sign up to stay informed.

If you have any questions regarding the Scorecard or need additional data to support your advocacy work during the 2017 legislative season, please contact Holden Weisman, State & Local Policy Manager, at hweisman@cfed.org.

New IASP/CFED Report Finds Universal Policies Designed to Help Students Succeed May Exacerbate the Racial Wealth Divide

By Emanuel Nieves on 12/20/2016 @ 01:00 PM

Tags: Data and Research, Local Policy, Federal Policy, Racial Wealth Divide

Too often, policies aimed at creating greater opportunity for low-income families have resulted in the expansion of the wealth divide between White families and households of color and perpetuating historic inequities. Although past policy choices—such as federally sanctioned housing discrimination and unequal distribution of G.I. Bill benefits—intentionally created the racial wealth divide, current policies continue to drive this gap. These findings and more are included in a new report released this morning by CFED and the Institute on Assets and Social Policy (IASP) called Equitable Investments in the Next Generation: Designing Policies to Close the Racial Wealth Gap, which calls on policymakers and advocates to ensure that investments will result in greater equity.

While there are a number of ways to begin addressing this ever-growing wealth gap, the simplest step policymakers and advocates can start to take is to ensure that policies aimed at creating greater opportunity for low-income families do not have the unintended consequence of expanding the wealth divide between White families and households of color and perpetuating historic inequities. As novel as that may sound, understanding the ways a proposal may affect household finances is critically important to closing the racial wealth divide.

Utilizing a new framework—The Racial Wealth Audit™—jointly launched by IASP and Demos, Equitable Investments focuses on the impacts universal education policy initiatives may have on narrowing or widening the racial wealth divide. In addition, the report also highlights how universal policies designed to help students succeed may exacerbate the racial wealth divide and what we can do to ensure that this doesn’t happen.

For example, the report highlights how universal policies to eliminate student debt could actually increase the racial wealth gap among young adults by nearly 10%, while targeted policies such as providing relief to households making $50,000 (roughly the U.S. median income) or less could reduce the racial wealth gap by 7%.

Although the Racial Wealth Audit framework can and should be applied to many other areas of policy design, it is just one tool to ensure that policies do not spread resources without consideration of need. As the example highlighted above shows, without consideration of need even well-meaning policies can direct resources to those with little financial need, thereby exacerbating the racial wealth gap.

By focusing on the ways in which policy design in the area of education shapes the racial wealth gap, we hope that Equitable Investments will foster a conversation about how policymakers can more effectively address pervasive and far-reaching inequality in the United States through intentional, well-crafted policies that place racial economic equity at the forefront of policy design considerations. Without such focus, our ability to reverse historically-rooted, racial economic inequalities will be greatly impeded.

Manufactured Home Communities in Central Virginia

By Jonathan Knopf, Guest Contributor on 12/16/2016 @ 12:00 PM

Tags: Housing and Homeownership, Data and Research

Central Virginia is home to 13,200 manufactured homes. About 5,000 are found throughout the region’s 66 mobile home parks. While these communities have provided a source of unsubsidized affordable housing to thousands of low-income families for decades, many have also suffered from neglect and unflattering stereotypes. There is a clear need to reexamine the role manufactured home communities might play in the future of Virginia’s affordable housing continuum.

That is why, following a series of high-profile building code enforcement campaigns in mobile home parks in the City of Richmond, a concerned group of service providers and nonprofits gathered to form the Virginia Mobile Home Park Coalition. Earlier this year, the Coalition, along with a group of area funders, sponsored a report on the existing conditions of the region’s parks to lay the framework for improving and preserving these communities. By combining Census data with visual surveys for 54 of the region’s parks, the study provides a detailed demographic and socioeconomic profile of manufactured home households and illustrates the wide range of housing conditions found in mobile home communities. The full text of the report, along with a four-page executive summary, are available on the Virginia Housing Alliance website.

Major Findings

  • Although most the region’s manufactured homes are in rural areas, over half of all the parks are in suburban or urban communities.
  • Park size positively correlates with overall park quality. Larger parks generally have better amenities, infrastructure and housing conditions.
  • There is no “typical” manufactured home park in Central Virginia. Communities range from small rural enclaves to large, master-planned neighborhoods.
  • A significant share of this housing stock is in poor condition. Just over a quarter (27%) of the region’s manufactured homes were built before HUD began regulating safety and quality standards in 1976.

Resident Profile

  • The median household income for families in manufactured homes is $27,000 – half the regional average. Manufactured home residents are also twice as likely to be in poverty (28%) than the average (14%).
  • Central Virginia’s manufactured home parks are home to many households of color. While only 5% of the region’s households are Latino, they account for 30% of households in parks.

Financing and Affordability

  • The median monthly housing costs for a manufactured home in Central Virginia is $602 – over a third less than the regional average for all homes. The average lot rent in parks is $400.
  • About 40% of all households in manufactured homes are housing cost burdened, meaning they spend more than 30% of their income on housing costs. One in four manufactured home households are severely cost burdened, paying more than half of their income on housing costs.
  • Because Virginia law prohibits mobile homes in lot-lease communities from being titled as real estate, buyers cannot access traditional mortgages and are left to pursue chattel loans. One in five manufactured homeowners report interest rates above 8%.

Park Conditions

  • Many parks have deteriorating infrastructure. Only two have sidewalks, and 25% have roads in very poor condition. Four in five parks do not have curbs or gutters.
  • Homes with permanent foundations were found in only eight parks. Poor quality siding and broken windows were found in 35% of all parks.
  • Fewer than half of parks have a management office onsite. Even when there is a dedicated office, it may only be open to residents a few hours per week.
  • Many parks struggle with low connectivity and limited access to services. Three in four parks are over half a mile away from a public transit stop, and 22 are located in food deserts.

Park Typologies

To help bust the myth that all manufactured home communities conform to negative “trailer park” stereotypes, a set of six unique park typologies was developed. These categories represent the types of communities found across Central Virginia and provide a starting point for developing strategies to preserve and improve parks at every level of condition and quality.

1. Top Performers (7 parks)

Excellent park management, high-quality amenities, clear homeowner investment in properties.

2. Traditional Suburban (8 parks)

High unit density in medium- to low-density areas. Lower-quality amenities, but overall acceptable conditions.

3. Under Pressure (10 parks)

Parks along major urban/suburban thoroughfares, threatened by rezoning and redevelopment. Generally older units and inadequate maintenance.

4. Rural Enclave (12 parks)

Smaller, less dense, few amenities, but in good condition. Self-maintained parks with older households.

5. Transitional (3 parks)

Parks “reinventing” to mimic traditional suburban site-design with units parallel with roads. Injection of newer homes, and active management.

6. Obsolete (14 parks)

Widespread infrastructure, housing, management, and amenity problems. Very difficult to repair and rehabilitate. Many pre-HUD homes. Requires significant planning and reinvestment.

Next Steps

The release of this report has sparked significant interest in this topic across the region. On November 3, the Coalition hosted a symposium on the issue to not only present these findings, but also to bring together local stakeholders and policymakers. Nearly 100 people attended the event, which featured presentations by Doug Ryan of CFED, Stacey Epperson of Next Step and Mike Sloss of ROCUSA. Attendees also heard from resident advocates and nonprofit representatives involved in manufactured home communities. On December 7, the report was also presented to a regional group of local government officials and housing providers.

Advocates for safe, affordable housing in manufactured home communities across Virginia are faced with some significant challenges. Nonetheless, there is growing momentum to elevate the issues faced by park residents and to capitalize on the increasing national efforts to resolve these problems through equitable policy reforms at the state and local levels.

By mobilizing a diverse group of concerned residents, advocates and policymakers, the Coalition intends to build a future where families in Virginia’s manufactured home communities are knowledgeable, supported and empowered.

Jonathan Knopf is the Senior Associate for Research and Programs at HDAdvisors, which conducted this study. He may be reached at jtknopf@hdadvisors.net.

In the Mississippi Delta, Housing is Cheap – and Largely Unaffordable

By Merrit Gillard on 12/05/2016 @ 10:00 AM

Tags: Housing and Homeownership, Data and Research, State Policy

The Mississippi Delta region is at once home to some of the richest farmland in the country—and some of the poorest people. This predominantly rural region was once a thriving agricultural center, but new technology and foreign competition did away with many of the jobs in the Delta. A long, violent history of racial oppression also continues to shape the economic and social fabric of the Delta, which is marked by a stark Black-White wealth divide. Today, poverty and unemployment rates are high, and housing affordability is a major problem. We recently studied the housing landscape in Delta region counties in Mississippi and Arkansas, and here’s what we found.

Homeownership Is Relatively Rare…

The homeownership rate in the Delta is relatively low—just 56% of the region’s residents own their homes, compared to about two thirds of residents in Mississippi, Arkansas or the U.S. as a whole. There is a glimmer of light in the homeownership situation in the Delta, though: residents of manufactured housing in the region are more likely to be homeowners. 63% of manufactured home residents in the Mississippi Delta and 66% in the Arkansas Delta own their manufactured homes.

…Especially Among Black Residents

Sharp racial disparities in homeownership persist in the Delta region. Even though 60% of the region’s residents are Black, only 45% of the region’s homeowners are black. Whites make up just 37% of the total population but more than half of homeowners in the Delta region.

Housing Costs Are Low in the Delta…

The median rent, mortgage payment and owner costs for housing are lower than in the Delta region than in Mississippi or Arkansas as a whole, two states with some of the lowest housing costs in the country. In addition, housing costs are even lower among owners of manufactured homes than they are for renters or all homeowners.

…But People Still Can’t Afford Their Housing Costs

Unfortunately, even though housing costs are so low in the Delta region, residents still struggle to afford their homes because incomes are especially low. More than half of renters and more than one in five homeowners in the Delta are cost burdened, meaning them spend more than 30% of their income on housing. Also, there is a severe shortage of affordable housing the Delta. Only 20% of the region’s homes are affordable to very low-income households, compared to 28% of homes in both Mississippi and Arkansas as a whole. (Once again, the situation is a little better for manufactured housing. A greater share of manufactured homes are affordable and a smaller share of manufactured home residents are cost burdened in the Delta region than are residents of all types of housing.)

Arkansas Is Doing Some Affordable Housing Work, But Mississippi Is Doing Very Little

Arkansas offers targeted homeownership assistance to the Delta region by easing eligibility requirements for the “ADFA Advantage” First-Time Homebuyer Program in a number of Delta counties. In addition, Arkansas is one of just 13 states that have established state tax credits for housing. There is no such credit in Mississippi. Both Mississippi and Arkansas disburse federal dollars for affordable housing—such as through the Community Development Block Grant (CDBG) and the Home Investment Partnership Program (HOME)—but there are few other state resources available to support housing affordability, especially in Mississippi. Neither the state of Mississippi nor the Delta counties spend any funds on affordable housing, and advocates in the region note that any proposal that requires new revenue or tax increases is a political non-starter.

Manufactured housing presents an affordable housing option in an area where affordable options are few and far between. Unfortunately, Arkansas and Mississippi aren’t doing much to protect or preserve this type of housing—both states have among the fewest protections for homeowners living in manufactured home communities of any state in the nation.

More Needs to be Done to Make Housing More Affordable

The housing needs of the Delta region are great. In order to make housing more affordable, put homeownership within reach of more Delta families and help close the gaping Black-White homeownership gap, the Delta region needs better laws to protect manufactured housing and more resources to strengthen the region’s housing stock.

Check out these resources to find out more about housing in the Delta Region:

Exploring Best Practices for Integrating Technology into CSA Program Design

By Bahar Akman, Guest Contributor on 11/18/2016 @ 09:00 AM

Tags: Children's Savings Accounts, Data and Research

Inversant, a Children’s Savings program based in Boston, Massachusetts, recently released a report and hosted a follow-up webinar to share insights they gained in their efforts to integrate and test various tech-based solutions to support their program goals. Like many other Children’s Savings Account (CSA) programs around the country, Inversant is interested in exploring how technology can offer cost-effective solutions to expanding program reach while increasing participation and engagement from participants. The research revealed that there is still demographic barriers to accessing and using the internet. Low-income families and families that speak primarily Spanish at home suffer from these disparities.

Starting in fall 2015, Inversant introduced monthly e-newsletters paired with e-survey sweepstakes, text messaging and an online portal for parents. These tech-based outreach and community strategies were developed to support three programmatic goals: 1) to encourage families to stay on track with their savings, 2) to effectively promote financial literacy and capability among college savers, and 3) to enhance two-way communication while cultivating a virtual college saver community. The paper and webinar offer an overview of these new tools and share the knowledge gained while launching and implementing them. For now, the evaluation mainly focuses on engagement with the e-newsletters (and whether participants have access to them). This first attempt at gauging our families’ engagement levels revealed some good news, but also raised new questions that need further attention:

  • E-newsletters are useful to families who receive them. The monthly open rate averaged 40%, which is well above the open-rate benchmarks used for the non-profit or education sectors.
  • The e-newsletters are a good complement to Inversant’s learning circles.
  • 30% of families did not provide Inversant with an email, which means that they could not take advantage of the e-newsletters.
  • 92% of families earning above $50,000 per year gave an e-mail address, but only 62% of families earning below $30,000 did so.
  • A large portion of Inversant families are Latino, and although the e-newsletters were available in Spanish, almost half of the families who speak primarily Spanish at home did not have access to them.

While tech-based outreach offers low-cost solutions to reaching more participants, our analysis shows that there are still important demographic barriers to accessing and using the Internet. Therefore, it is crucial to assess how comfortable participants are with using email addresses and other online services before seeking to cultivate consistent online engagement.

As we gather data, other briefs will follow with evaluation of impact and effectiveness of other tech-based tools. With this ongoing research, Inversant seeks to start a conversation on best practices for integrating a wide range of tech-based communication and outreach strategies to support CSA programmatic goals.

Please contact Bahar Akman Imboden, Inversant’s Director of Research, if you have questions.

Immigrants Can Play Role in Boosting Economic Growth through Entrepreneurship

By Diego Quezada on 11/11/2016 @ 12:00 PM

Tags: Entrepreneurship, Data and Research

Recent headlines suggest that the American economy is bouncing back – the Census Bureau found that the U.S. median household income rose by 5.2% last year, to $56,500. A lot of Americans, however, are not feeling the economic recovery and for good reason. The median household still makes 1.6% less in inflation-adjusted terms than it did in 2007, just before the financial crisis.

What's one reason for this lackluster recovery? The rate at which people start businesses has declined for the last three decades, and it shows no signs of reversing. Entrepreneurship plays an important role in spurring economic development in communities and economic mobility for workers and their families, so this trend is worrying.

There's a common-sense solution to help spur entrepreneurship. As CFED has written about before, immigrants are the most entrepreneurial group of people in the United States. The Partnership for A New American Economy found that these rates of entrepreneurship aren't limited to particular education levels or nationalities. In 2014, 10.6% of immigrants who identified as Asian were self-employed entrepreneurs, and 11.6% of Hispanic immigrants were entrepreneurs. By comparison, the rate for U.S.-born Americans was 9.1%.

In fact, immigrants from the Middle East and North Africa (MENA) – a group that has come under particular criticism during this past election season – has had an outsized role in starting businesses. Even after removing Israeli nationals from this group, the entrepreneurship rate among MENA immigrants is higher than that of the entire U.S. population rate. Entrepreneurial activity from MENA immigrants has helped jumpstart Detroit's economic comeback – Middle Eastern-owned businesses in Detroit generate between $5.4 and $7.7 billion in wages and salary earnings each year.

In August, the White House proposed a new rule to allow immigrant entrepreneurs to stay in the country for up to five years. Immigrants who have an “active and central role” in an American company founded in the last three years have to show that they've raised at least $345,000 from U.S. investors, and immigration officials would approve applicants on a case-by-case basis. Although it's a step in the right direction and could boost economic growth, the narrow parameters of this rule limit its scope.

Too often in our political debates, people assume that the United States has a fixed number of jobs, and immigrants and natives compete for those slots. The political rhetoric doesn’t match up with the evidence on economic growth. Immigrants start businesses, helping create jobs for themselves and native-born Americans. If more people realize these facts, hopefully the next Congress can act to create broader reform to help the economy reach its full potential.

The State of the Children’s Savings Field: A Look Behind the Numbers

By Shira Markoff on 11/07/2016 @ 01:00 PM

Tags: Children's Savings Accounts, Data and Research

CFED recently released A Growing Movement: The State of the Children’s Savings Field 2016. Based on a survey of CSA programs, the document highlights trends in the field. For most people, that document covers all that they want to know about the state of the CSA field. However, for my fellow data wonks and CSA aficionados, this blog offers a deeper dive into the survey results.

One of the more revealing aspects of the survey is the variations in CSA program models. To dig into these variations more, we analyzed key program features by program size. For the purpose of this analysis, we categorized programs enrolling 2,000 or more children annually as “large” and programs enrolling less than 2,000 children as “small.” (See more on annual enrollment across programs in the State of the Field document.) Here is what the analysis shows about differences and similarities in key features between these programs:

Enrollment

  • Large programs are more likely to use automatic enrollment — 57% of larger programs are opt-out as compared to 26% of smaller programs.
  • Large programs usually have narrower target populations — all but one of the large programs enroll children at just one point in time (birth or kindergarten). Just over half of small programs have only one enrollment point, while the other 49% allow kids to enroll at multiple points (e.g., at any grade in elementary school).

Incentives

  • Large programs are more likely to offer initial deposits — 100% of large programs provide an initial deposit compared to 57% of small programs. However, the median initial deposit amount is the same for both ($50).
  • Large and small programs offer savings matches and benchmark incentives at virtually the same rates.

Account Type

  • Large programs are more likely to use 529s as their account platform — 71% of large programs use 529s compared with 43% of small programs.

Funding

  • Large programs are more likely to be at least partially government funded — 57% of large programs receive some type of government funding (local, state or federal) compared with 34% of small programs.

The analysis reveals that large and small programs tend to differ in some significant ways, particularly around enrollment. This is not very surprising given the need to streamline operations when a program enrolls thousands of children per year—even as many as 35,000. Larger programs cannot expend as many resources per child as smaller programs if they hope to keep administrative costs manageable. So, for example, automatically enrolling children based on data collected through birth or school records is more efficient for a large program than reaching out to and following up with more than 2,000 families about enrolling their children in the program.

Higher usage of 529 accounts for large programs is also not surprising, since four out of the seven large CSA programs are statewide programs. It makes sense that these programs would use the state-supported 529 college savings plan, especially given the difficulty of finding one bank or credit union that is accessible in all regions of the state. The omnibus 529 structure also supports automatic enrollment, since the program can invest an initial deposit on behalf of each child into the pooled 529 account by just using information obtained from state birth certificate records.

Overall, the structure of larger programs matches CFED’s guidance on designing CSA programs for scalability. (See a discussion of this at the beginning of Section A in Investing in Dreams.) Features such as automatic enrollment, working within the existing structure of a 529 account and receiving public funding and support, may make it easier to build and sustain large-scale programs, especially statewide programs. Even for programs that are starting with a smaller rollout, if the ultimate goal is to serve thousands of children per year, it is important to build in the features that will make the program manageable and successful at a larger scale.

A Tale of Two Cities: Racial Economic Inequality in New Orleans and Miami

By Dedrick Asante-Muhammad and Kylie Patterson on 11/02/2016 @ 11:00 AM

Tags: Racial Wealth Divide, Data and Research, Economic Inclusion

New Orleans and Miami, two cities long touted as tourists’ paradises, share another similarity - racial wealth inequality.

Racial wealth inequality is a major issue in the United States. It’s origin dates back to the transatlantic slave trade, followed by the ratification of the 13th amendment, Jim Crow era, civil rights movement to now - the country has a painful history of white supremacy and racial prejudice with economic repercussions.

The tale of race and economics resonates strongly in New Orleans where, following Hurricane Katrina, the failure of the levies and massive flooding, more than 950 people lost their lives and hundreds of thousands more were displaced.

The racial wealth inequality in post-Katrina New Orleans reflects the inequality from pre-Katrina and explains why the African American community in particular was so vulnerable to a natural disaster and devastated by its impact.

In CFED’s recent report, The Racial Wealth Divide in New Orleans, the ramifications of this displacement and the current racial wealth divide in the city are explored.

Today, some 69% of families of color are liquid asset poor, meaning they do not have savings to stay above the poverty line in the event of an emergency or job loss, compared to 29.4% of white families. Additionally more than 30% of black households are under the poverty line ($23,850 or less for a family of four), compared to just 4.9% of white households.

These disparities have also led to much racialized internal displacement or gentrification, where former black communities are disappearing and/or moving further and further out from the city center.

Yet, it should be noted that while the size of the black community decreased post-Katrina, there has been growth in the Latino community, and the Vietnamese community growth is relatively flat. Still Latinos and Vietnamese in New Orleans face similar economic and political challenges to that of African Americans.

In Village de L’Est, for example, the Vietnamese community had to fight to open a local school and close a landfill, after one was created in the rush to rid the city of debris, following the storm.

Gentrification and its affects are not unique to New Orleans. In the second report released by CFED this month, The Racial Wealth Divide in Miami, they found that more than 65% of Miamians of color are cost-burdened renters and less than 30% are homeowners, compared to 43% of whites.

Miami’s wealth inequality, unlike New Orleans is further nuanced by its long history of immigration. Even today, 3 out 5 Miamians are foreign-born. Miami has been home to numerous immigrant groups. Most recently, there has been an influx of Central and South Americans.

Unfortunately there are great disparities among and even within racial and ethnic groups. The homeownership rate among Cubans is 36.9% compared to just 16.7% of Central Americans. Still, neither ethnic group compares to Whites that have a homeownership rate of 42.9%. In education, we see even greater disparities. Just 3.6% of Haitians have a bachelor’s degree or higher compared to 7.3% for African Americans, which is then compared to 31.3% for Whites.

Although similar challenges face these cities, they differ by their magnitude and how they manifest within families and communities - it is these differences that require targeted and local interventions.

With the release of these profiles, CFED also announced their project Building High Impact Nonprofits of Color. The project’s interventions rest upon this belief - those working in communities are best equipped and positioned to affect the racial wealth divide.

CFED’s Racial Wealth Divide Initiative has selected ten organizations, five in New Orleans and five in Miami. In New Orleans, the selected nonprofits are as follows: Ashe Cultural Arts Center, Jericho Road Episcopal Housing Initiative, MQVN Community Development Corporation, Puentes LatiNola and VAYLA New Orleans. In Miami the selected nonprofits are as follows: ConnectFamilias, Hispanic Unity of Florida, Miami Children’s Initiative, Partners for Self-Employment and Sant La Haitian Neighborhood Center. With the selection of these organizations and their investment, CFED’s Racial Wealth Divide Initiative, in partnership with JPMorgan Chase, is making the case that to address the racial wealth divide, investments must be made in communities to organizations of color with high impact asset-building services.

There is hope. With these investments, the work of organizations, and significant policy reform we may be able to address the racial wealth divide and find ourselves in paradises that serve both tourists and their local communities of color.

Health Care is Not Enough

By Joanna Ain and Parker Cohen on 11/01/2016 @ 12:00 PM

Tags: Data and Research, Economic Inclusion

We know that health care alone is not enough to prevent poor health outcomes. In fact, research indicates that only 50% of health outcomes are determined by health behaviors and access to quality clinical care. The other 50% is determined by social and economic factors, along with elements of one’s physical environment. These factors, which include socioeconomic status, poor housing conditions, education and the presence of support systems, are referred to as the social determinants of health.

Many low-income families are impacted negatively by several social determinants that affect their health. For example, when you live in or grow up in poverty, you are more likely to live in substandard housing, work in hazardous circumstances and have low educational attainment. The relationship between finances and health is explored in our new integration brief, “Integrating Financial Capability Services into Community Health Centers.” This piece highlights policy interventions we can take to bring financial capability services into community health centers (CHCs) to help enhance both the financial and health outcomes of patients.

CHCs are community-based organizations whose primary goal is to provide underserved populations with access to critical primary and preventive health care services. They serve over 7% of the U.S. population—over 25 million people since 1965, and 92% of their patients are below 200% of the Federal Poverty Level. CHC staff have already earned the trust of their patients through a community-focus and high-quality healthcare delivery. They are geographically accessible to low-income populations and keep hours conducive to the often irregular schedules of their patients. All these factors and more make CHCs prime spots to integrate financial capability services.

As they go through the doors of their local CHC, low-income patients face innumerable challenges—many involving their financial insecurity—that are intertwined with their health issues. In order to decrease the impact that financial insecurity has on health outcomes, CHCs should integrate financial capability services into their programs. Services that help patients access benefits, save for emergencies and rebuild credit can reduce stress and, overtime, increase financial well-being. So how can we help people improve their financial capabilities in a CHC? Here are a few policy changes we outline in our new brief:

  • Raise awareness among CHCs about the possibility of including financial capability services in their offerings. The U.S. Department of Health and Human Services (HSS) can expand the definition of “enabling services”—services that aren’t clinical in nature but help support patients in accessing clinical health interventions—to definitively include financial capability services. Listing financial capability services explicitly in the definition of enabling services will allow CHCs to identify the best services to meet their patients’ needs and garner support for building out a stronger physical and financial health program.
  • Help CHCs build financial capability services by leveraging the success of the Affordable Care Act. Many patients enroll in health insurance during intake with the help of a Health Navigator, trained to help patients find healthcare in the Marketplace. HHS should create a pilot training program to build the capacity of Health Navigators to connect patients with financial capability services. With some targeted training, Health Navigators could expand their focus to include financial capability services.
  • Encourage CHCs to build partnerships with other social service programs helping vulnerable populations. HHS should provide guidance to local CHCs that encourage partnering with Assets for Independence (AFI) grant recipients that provide matched-savings services. Because AFI grantees already offer financial capability services through Individual Development Account projects, partnering with them would allow CHCs to connect patients with opportunities to save for homeownership, postsecondary education or small business ownership.

These approaches will help bolster the already great work that many are doing to connect CHCs to financial capability services and bolster new innovations in the space. Check out "Building Financial Capability: A Planning Guide for Integrated Services" to learn more about best practices around integrating financial capability services into social services programs and "Integrating Financial Capability Services into Community Health Centers" for more on our federal policy recommendations.

Solving the Homeownership Crisis Requires Far More than Affordability

By Doug Ryan on 10/14/2016 @ 04:00 PM

Tags: Housing and Homeownership, Data and Research

Editor's Note: This post originally was published on October 13, 2016, on Rooflines.

According to recent research, the availability of starter and trade-up homes is in the midst of a four-year decline, which, at least in most markets, shows little evidence of abating. (Trulia defines starter homes as those priced in the bottom third of the market and trade-up homes as the middle third.)

Homeownership rates continue to tumble from their 2005 perch of about 69 to less than 63%. The rates for African Americans and Latinos has settled in the mid-40% range.

This problem may get worse. A forthcoming paper by Arthur Acolin, Laurie Goodman, and Susan Wachter suggests that as California goes, so goes the nation. California, for many reasons—not the least of which is housing costs—has had in recent memory a homeownership rate considerably lower than that of the rest of the nation. According to the most recent data, California’s rate continues to decline. At 53.4%, the state now has the second-lowest rate of homeownership in the country (after New York). Acolin and his colleagues suggest that the factors that influence California’s low homeownership rate may drag the rest of the nation to the low 50s by 2050. One major reason, these authors argue, is the shortfall of production—300,000 fewer units than household formation in 2014.

A shortage of all homes impacts the likelihood of new homeowners. Fewer for-sale and rental homes, of course, raises prices, excluding families from the homeownership market. Meanwhile, the tight rental market eats up the cash that could otherwise be set aside for downpayments. And of course, not all markets are the same. The great variation among metropolitan areas is significant, and while prices in some markets have vaulted well past their previous highs, other have still not recovered. Dallas and Denver, for example, are up at least 30% above their July 2006 highs, yet much of Florida’s homeownership market remains stagnant.

Each of these market dynamics impacts the availability of homes for new buyers.

If prices are too high, the market is simply out of reach. Consider the Wells Fargo/National Association of Home Builders Housing Opportunity Index (HOI), which calculates what percentage of an area’s housing stock is affordable to a family with the region’s median income (based on “standard” underwriting of 10% down and 28% of income spent on housing). San Francisco, often the poster child for out-of-control housing markets, has really been this way since the crisis. In early 1994, nearly 22% of its for-sale homes were affordable to the median-income family. Today, the same can be said of just 8.5% of homes for sale in the Bay Area.

The reverse also hurts potential buyers. In Miami, the HOI is now about 40%, up from a nadir of 10% in 2007. Much of this is because the home values in the region are about 30% below their peak, according to the Wall Street Journal’s analysis. Miami now has one of the lowest homeownership rates of any major city in the nation, despite the measure of affordability.

One reason for this trend—a trend we see in markets across the country—is that despite good affordability ratios, there just isn’t enough housing stock on the market. When owners are underwater due to the crash, they stay in their homes, which prevents starter homes from entering the market, reducing incentives for construction and generally keeping a local market soft. Across many markets, there is a dearth of both starter and trade-up homes, essentially freezing out new buyers.

The fall of the homeownership rate in the U.S. isn’t only due to our failure to create new homes. Also to blame are mortgage policies, both before and after bubble burst. Far too many families faced crises from predatory loans, such as refinancing, and from the subsequent downturn in the economy. Yet when faced with such a market crisis, many lenders and guarantors failed to work in the best interest of the borrower or even comply with the law. A recent article about Philadelphia’s experience with HUD’s Distressed Asset Stabilization Program underscores how better policy and practice could have kept families in homes and shielded their neighbors from some of the fallout from the crisis.

We also know how to better prepare families for homeownership and lower the barriers to entry. A comprehensive study of NeighborWorks America’s housing counseling efforts supports this claim. Buyers who participated in counseling were about one-third less likely to become delinquent on their mortgages. This has huge implications for advocates and new entrants to the market. Couple this with what we already know about the potential of low-downpayment loans, such as Self Help’s Community Advantage Program, and we have an effective pathway to addressing the homeownership crisis. A number of major lenders are offering such low-downpayment loans by accessing Freddie Mac or Fannie Mae products, but the uptake has been slow. We need to rethink how we approach these opportunities.

Access to credit is still a huge challenge. The White House recently highlighted many of the artificial and antiquated ways that local jurisdictions limit affordability and affordable housing development. The Housing Development Toolkit is a solid starting point for all of us to approach this work. Parking requirements, lack of density, permitting delays and idle land all raise costs for future residents and potential developers while limiting new stock.

Since before the housing crisis, and certainly in the years since, we have known what tools work: good preparation, good underwriting, good servicing and good local laws. Loans should be designed to be sustainable. Local laws must support these tools.

Missed the ALC Applied Research Forum? Here Are The Best Parts!

By Kasey Wiedrich on 10/11/2016 @ 03:00 PM

Tags: ALC 2016, Data and Research, Events

Research has always been a key part of the Assets Learning Conference (ALC) agenda, and the 2016 ALC, held last month on September 28-30, was no exception. Research presentations were imbedded in sessions throughout the three full days of the conference, but this year we tried something new. We dedicated three hours in the first afternoon of the conference to an Applied Research Forum, designed to bring ALC attendees the latest findings from key research in our field and to highlight the implications of those findings for practice and policy as well as future research. We pulled together research from an array of different topics to look at the broader question about what is working to help individuals and families build financial capability, financial stability or health and well-being. The Research Forum wasn’t an event for researchers to speak to researchers, but rather to get information from researchers to the practitioners, advocates, policy makers and funders who want and need answers about what might be able to move the needle in their communities.

To tell this story, we went through a competitive process, selecting 24 presentations and papers out of over 120 submissions. The breadth and depth of rigorous research that we had to choose from and that we were able to highlight in the Forum speaks to our growing knowledge base and how far we have come from the days of having to simply establish the fact that low-income households can and will save.

Kasey Wiedrich, far right, on stage with Research Forum plenary speakers

The Forum opened with remarks from Gail Hillebrand, Associate Director of Consumer Education & Engagement at the CFPB, and then an opening discussion on household financial security and the key financial challenges facing American families. We heard new research that furthered our understanding of how Americans feel about their financial situations and the level of volatility with which they are dealing. We also heard evidence of the lack of resources that many families have to weather those financial shocks, and how those resources are particularly lacking for households of color.

Next we turned to research and evaluations of the effectiveness of different solutions to those financial challenges. We organized the presentations into seven topical break-out sessions, but looking across the presentations, researchers were mostly testing a common set of interventions in different settings and measuring the impact of those solutions on a related set of outcomes:

  • In the Credit-Building Loans session, researchers showed that credit building loans can help some people, but not all, establish or raise credit scores and that this improved credit can give people a greater sense of control over how they manage their money and borrowing.
  • In both the Behavioral Nudges and Encouraging People to Save sessions, we saw that incorporating behaviorally informed nudges, messaging, small incentives and gamification led to increases in account take up and how often people use their accounts, larger savings deposits and ultimately in one savings program, a reduced use of pay-day loans. But we also saw in the context of some matched savings programs that nudges were not successful over time in helping people overcome barriers to savings.
  • Looking at the overall Impact of Matched Savings, however, we found that that in the short and medium-term, IDAs and matched savings at tax time resulted in higher levels of savings and liquid assets, but there was no impact on debt or use of alternative financial services. In a CSA program, families with CSAs were able to maintain their initial savings deposits over the long-term, which is a positive finding given the barriers they faced to continue to saving the in the accounts.
  • In Financial Capability for Youth and Children, we found that providing access to youth-friendly accounts, combined with financial education and other support services, resulted in greater account take up, higher savings, increased financial knowledge and more positive financial behaviors and attitudes that we believe will help establish a foundation for financial well-being later in life.
  • Finally, there were a number of studies involving Financial Coaching, with evidence that one-on-one financial coaching can increase savings, lower debt, improve payment history and credit scores, lead to more positive financial behaviors and help people feel more positively about their financial situations.
  • When this one-on-one coaching or counseling was integrated into larger employment, human service or public programs (in Integrated Financial Empowerment Services), we also saw higher rates of people being banked, better rates of people bringing past-due accounts current, and some positive impacts on employment, although those didn’t result in higher incomes.

This quick and high-level summary of the research presented at the Forum is intended to help underscore how much we have added in recent years to the evidence base about what is working for whom and under what circumstances, but also demonstrates what work we still have to do to answer additional questions. We had a closing discussion on the topic of what we need from research going forward and whether we are exploring the right solutions for our current challenges. Panelists discussed how to make research applied and fit the realities of our communities, including explicitly exploring impacts on and collecting data in communities of color, incorporating the expertise and knowledge of practitioners, trying to better match the timelines of research and decision-making processes and thinking beyond solutions that are designed to only change the behavior of people and not also consider changing the economic and support systems in which we all operate.

The Research Forum was a great success and the ALC audience was very engaged in the discussions and sessions. We’d like to thank all of those who helped us plan the event, spoke in or moderated a panel, and finally all of those who attended. Personally, I feel lucky to work in a community that not only values research, but also values connecting research and evidence to the work happening in organizations on the ground and in public agencies and legislative bodies.

You can download most of the papers and presentations from the Forum on the ALC website as well as watch the opening and closing discussions on CFED’s YouTube channel.

Official Statement on the Consumer Financial Protection Bureau’s Youth Financial Capability Report

By Kasey Wiedrich on 09/16/2016 @ 03:00 PM

Tags: Data and Research, Education, News, Financial Capability

The Corporation for Enterprise Development (CFED) has been working with the Consumer Financial Protection Bureau (CFPB) and other partners on defining financial well-being and ways to measure it over the past several years. A big question that emerged from that work on financial well-being and its drivers was how do children develop the skills and characteristics that support financial well-being and how can we help children and youth build those attributes? CFED, with the University of Wisconsin-Madison, the University of Maryland, Baltimore County, and ICF International researched these questions through an extensive literature review, a scan of youth financial capability programs, and interviews and discussions with expert academics and practitioners.

Last week, the CFPB released a report on the result of this research, which describes the building blocks of financial capability and the ages at which they begin to emerge.

The building blocks are:

  • Executive function – a set of cognitive processes used to plan, focus attention, remember information, and juggle multiple tasks successfully that begins to develop in early childhood (ages 3-5).
  • Financial habits and norms – the values, standards, routine practices, and rules of thumb used to routinely navigate day-to-day financial life that children begin to acquire during middle childhood (ages 6-12).
  • Financial knowledge and decision-making skills – familiarity with financial facts and concepts, and the ability to do financial research and make conscious and intentional financial choices that come into focus during adolescence and young adulthood (13-21).

These building blocks develop over the course of childhood and they build upon and reinforce each other over time. With these developmental windows of opportunity in mind, the report also lays out a set of strategies to help youth develop financial capability:

  1. For young children, focus on developing executive function skills.
  2. Help parents and caregivers actively shape their child’s financial socialization.
  3. Provide children and youth with opportunities to learn from experience.
  4. Teach youth financial research skills.

These recommended strategies reflect the fact that children and youth don’t learn skills or knowledge in one way or in one setting. Schools and educators play a critical role, but parents and home environments are often the most influential agents of financial socialization as CFED documented in our research earlier this year. And as they age and grow more independent, children and youth are influenced by their peers and their own experiences in their communities. To support these different players in building youth financial capability, the CFPB has produced a number of different resources:

Working with the CFPB on this research has been a valuable experience for CFED, and we are excited about its potential for organizing all of those who care about building youth financial capability around a common set of strategies. If you want to learn more, join us at the ALC in the session, “Setting Children Up for a Lifetime of Financial Well-Being,” where Sunaena Lehil of the CFPB will talk about the report and the CFPB’s work on youth financial capability.

How Children’s Savings Accounts are Helping Bridge the Racial Wealth Divide

By David Meni, Graduate Intern on 09/13/2016 @ 02:00 PM

Tags: Children's Savings Accounts, Racial Wealth Divide, Data and Research

We’ve written a lot on the blog this summer about the growing promise of Children’s Savings Accounts (CSAs) and reports from the field on how CSA programs have been growing and succeeding in more places than ever before. Shira Markoff wrote about how CSAs can fit into the larger national conversation about free or debt-free colleges, Delaney Luna took us through a number of CSA pilot programs that are leading the way in New England, and just last week, Megan Kursik from Michigan Communities for Financial Empowerment discussed strategies for proliferating a strong CSA program throughout the state of Michigan.

Now that the summer is winding down (though you wouldn’t know it from the heat here in DC), let’s take a step back and look at why states and localities have been pursuing CSAs so enthusiastically. Spoiler alert: it’s because they work.

Today we’re releasing a new Fact File: Scholarly Research on Children’s Assets and Children’s Savings Accounts. The Fact File serves as a guide to the growing body of evidence that shows the potential of CSAs to expand opportunity for children, particularly those from low- and moderate-income families and families of color.

A great deal of new evidence on the effects of CSAs has been released in the last few years, particularly from the SEED OK experiment in Oklahoma, the first randomized controlled trial (RCT) of a universal progressive CSA in the United States. The strength of this RCT study reinforces a litany of past research on the promise of CSAs and children’s savings in general: that they improve child development, college expectations and outcomes and help build financial capability.

Here’s a summary of the major findings from the literature:

  1. CSAs improve early child development and academic performance. Starting children off with savings early in life has ripple effects throughout their development. One study showed that the development effects of having a CSA are similar to that of the Head Start Program. Children with savings have also been shown to perform better on standardized math exams.
  2. Parents and children with early savings have greater college expectations. Having expectations of attending college– and developing those expectations early for both parents and children – is one of the most important factors that put a child on a pathway to enrolling in college. Studies have shown that CSAs and other early childhood savings can be one of the most potent tools for developing college expectations, particularly in families where neither parent went to college themselves.
  3. Children with college savings are more likely to enroll in and graduate college. Children’s savings can impact more than just expectations of going to college. Even a small amount of savings – less than $500 – increases a low- or moderate-income child’s likelihood of attending college threefold. CSAs may also be able to help families weather the uncertainty about college affordability and prevent them from having to take out expensive loans or dropping out entirely.
  4. Children’s savings increases a child’s future financial capability and reduces the racial wealth gap. From reinforcing financial literacy education to helping low- and moderate-income individuals become banked from an early age, studies on CSAs have found that these programs have the capacity to bolster a child’s financial capability as they mature.

The fact that the strongest CSA programs are universal and progressive (matched funds are greater for lower-income families) also means that CSAs can act as one of a number of policies we can enact to help reduce the racial wealth gap.

For more information on these and other findings, be sure to check out our latest Fact File.

Special thanks to our partners at the Center for Social Development at Washington University St. Louis and the Center on Assets, Education, and Inclusion at The University of Kansas for their continued work in the field of CSA research and for indispensable input on this publication.

The Color of Patrimonial Capitalism

By Dedrick Asante-Muhammad and Chuck Collins, Guest Contributor on 09/07/2016 @ 02:00 PM

Tags: Racial Wealth Divide, Local Policy, Federal Policy, Data and Research, Featured Stories

Editor's Note: This article originally appeared on the Huffington Post.

Without a course correction, French economist Thomas Piketty warned, we are hurtling toward a grotesquely unequal future. A future governed by a hereditary aristocracy composed of the progeny of today’s billionaires.

In his assessment, however, Piketty overlooked the “peculiar institution” of our nation’s original sin. The color of what Piketty calls our “patrimonial capitalism” will be almost exclusively white.

Progress in race relations has done little to narrow the racial wealth divide. If average black wealth grows at the same rate it has over the last 30 years, it will take another 228 years before it equals the amount of wealth currently possessed by white households.

If we stay on our current trajectory of unequal wealth growth, the wealth divide between white families and black and Latino families will double to about $1 million by 2043, the same year when households of color are projected to account for half of the U.S. population.

The legacy of discrimination in asset-building programs, which help people purchase homes, save for college or increase retirement savings, goes back generations and has a direct impact on the net worth of today’s families. Assets are a more durable measure of inequality than income, providing a buffer against economic downturns, both personal and societal.

Wealth plays an essential role in establishing financial security and opportunity for future generations. The average retirement savings for black and Latino households is $19,049 and $12,229, respectively, compared to $130,472 for White households.

Homeownership still stands as the most significant asset for low- and middle-income families. In the years after World War II, as the G.I. Bill propelled millions of white households into homeownership, discrimination in mortgage lending left most people of color behind.

The result today is an enormous gap in homeownership. More than 70 percent of white households own their home compared to less than half of black and Latino families.

The driving causes that both compound wealth inequality and worsen the racial wealth divide are overlapping but different. Policy preferences that favor asset owners over wage earners, such as low capital gains taxes and most global trade agreements, have supercharged the share of wealth flowing to the top one percent. The Forbes 400, a list exclusively of billionaires, now possesses a stunning $2.34 trillion — more wealth than the entire black population and one-third of the Latino population combined or a total of over 60 million people.

Policy inaction to reduce inequality, such as allowing the minimum wage to lag and diminished investment in higher education, undermine workers of all colors. Yet popular equalizing initiatives, such as raising the minimum wage or expanding college access, will not aid black and Latino workers in the same way it does for Whites. Homes in black and Latino neighborhoods do not appreciate at the same level as homes in predominately white neighborhoods. And the return on investment for black and Latino college graduates is significantly lower than Whites in terms of lifetime earnings.

So what course corrections are needed to reverse generations of racial economic inequality?

For starters, consider public programs aimed at asset-building and homeownership. These well-intentioned policies lack rigorous enforcement against predatory and asset-stripping products and services.

Low-wealth households often must rely on alternative financial services, such as payday loans, prepaid cards and check-cashing. In some cases, these services take away as much as 10 percent of a household’s income. Black and Latino households are more than twice as likely to have to turn to these services, thanks to barriers to traditional banking. We should provide incentives, such as reduced taxation, to banks that provide accessible banking services to those without significant assets.

We also need to make a full-throttle effort to reverse existing upside-down tax incentives. Over $600 billion in tax subsidies each year helps promote homeownership, private retirement funds, and savings and investments. The overwhelming majority of these subsidies flow to affluent and white households. Why not push these subsidies towards people who actually need them?

The racial wealth divide was created and exacerbated by public policies that currently threaten to push our nation towards fundamentally un-American levels of inequality and unequal opportunity. Another future is possible, one where public policy can begin to bridge our nation’s deep divisions, not continue to widen them.

Mentors & Money: A Law Student’s Story

By Joanna Ain on 08/11/2016 @ 10:00 AM

Tags: Data and Research, Economic Inclusion, Education

Editor’s Note: To continue our blog series sharing the stories of young workers across the country who we’ve interviewed as part of our Financial Security at Work Initiative, we’re highlighting Ron*, a law student living and working in Chicago.

We know that people’s financial health and physical health are inextricably linked. We also know that people’s chances of boosting both their physical and financial health are higher when they have a personal support network. Ron’s story illustrates both of these points perfectly.

Ron works at a national soda manufacturer in Chicago and is about to start his final year of school. During the school year, Ron works 6-7 hours a day, but since he’s off school for the summer, he’s currently working 12-14 hours per day during the week and every other Saturday. At the soda manufacturer, Ron does the shipping and receiving—loading trucks and doing inventory on all the soda products there. Ron started earning $13 per hour and appreciates both his wage and his job. “I actually like the teamwork aspect of it,” Ron explains. “Everybody likes to work hard there. You stay busy.” Every day is different and interesting, and Ron has learned a lot in the past two months since he started there. Moreover, Ron supports himself and tries to help out his grandmother from time to time.

With such a hectic life, Ron has experienced several financial crises in years past. Each financial wake-up call led to physical health issues. But, in these difficult times, Ron was able to lean on a strong network for support and advice.

Ron had a stroke freshman year of college—a stroke he attributes to working too hard—which put him in the hospital for three weeks and required that he spend the next several weeks after that in rehab. Without health insurance, he acquired a lot of medical debt. Not one to shy away from advice, Ron learned how to budget. A professor at his college showed Ron how to use a calculator, notebook and estimates of how much he would spend each month to figure out a plan. “I was actually slipping a lot in class—falling asleep and stuff. I was worrying about money problems. [My professor] passed on advice. He showed me, and I just took it from there.”

Last year, Ron had another financial wakeup call in the midst of his studies as a law student. He hadn’t been taking good care of himself again due to money issues—he wasn’t eating nutritional meals because he was running out of money at the end of the month and resorting to canned and processed foods instead. He had also fallen behind on his rent. “I slacked off one month,” Ron says, “so it kept going. It was like a domino effect.” His mother set him straight. She said, “If you don’t eat right, you won’t be able to focus.” Ron knew he had to change his financial behaviors in order to get through his final years of law school.

These days, Ron focuses on budgeting and saving in hopes of moving out of his small apartment and buying a car to make transit easier. To make sure he meets his goals, Ron has started diverting some of his paycheck automatically into a savings account each month. To facilitate this process, he uses the bank at work and direct deposit benefits that his employer offers. “It’s actually pretty accessible,” Ron reports. “Your money is there at the same time each pay period. It’s never late.”

He also continues to get guidance from family members. His mother checks in on him from time to time. Ron says, “With school and work and everything, it is pretty stressful. I can talk to her about anything, and so I just let her know what’s going on with me. She gives her advice.” Ron’s uncle, an accountant, works with him on figuring out payment plans with creditors, avoiding bankruptcy and handling his medical debt. Ron shares his appreciation for the help, “I would say I was a little bit lost last year. Now I have gained a lot of knowledge from different people.”

*Name has been changed.

CFED’s Financial Security at Work Initiative, sponsored by the Prudential Foundation, explores the current state of workplace-based financial wellness programs and envision how the workplace can be strengthen as a platform for financial security in the future. At CFED, we envision a world where people like Ron have the chance to transform their hard work into a strong financial future. To learn more about the project, check out:

Practitioners Discuss Challenges, Opportunities for Entrepreneurs of Color in Webinar

By Diego Quezada on 07/29/2016 @ 11:00 AM

Tags: Data and Research, Entrepreneurship

Four Bands Executive Director Lakota Mowrer used this apt analogy during CFED's July 12 webinar on entrepreneurial success and the racial wealth divide. Four Bands works to help American-Indian people build strong and sustainable small businesses and increase their capability to build assets and wealth. But, as her comment suggests, it’s often an uphill battle. Along with two other panelists serving African-American and Hispanic communities, Mowrer shared her reflections on the heightened difficulties facing the entrepreneurs of color with whom she works.

According to CFED's Assets & Opportunity Scorecard, white-owned businesses are valued nearly three times as high as businesses owned by people of color on average. Additionally, the median household wealth of white households is 13 times that of Black households, and 10 times that of Latinx households.

Entrepreneurs who start with little comparative wealth find themselves in a more precarious situation from the beginning. It is much more difficult for them to overcome obstacles that arise with the ebbs and flows of business, she said. This hurdle and other financial vulnerabilities experienced by entrepreneurs of color—especially African Americans—are explored in CFED’s recent field scan, Unstacking the Deck: Toward Financial Resilience for African-American Entrepreneurs.

In addition to having fewer financial resources, entrepreneurs of color also experience other disadvantages. Because of systemic discrimination and exclusion, people of color encounter more difficulties and distrust when interacting with social, economic and public systems. “Financial institutions have been like gatekeepers,” Mowrer said. “They’ve master-scripted a lot of the language around financial statements and financials to only make sense to an elite group of the population.”

Beto Yarce, Executive Director of Ventures, noted that undocumented immigrants struggle to access traditional loans in the absence of a social security number. To meet this need, his organization has begun offering loans to those with Individual Taxpayer Identification Numbers (ITIN), something many traditional lenders won’t do. However, this door to opportunity remains out of reach for many undocumented workers who have few contacts in the United States and might avoid interacting with financial institutions for fear of deportation.

Yarce also said that recent immigrants often have limited social networks, and therefore have far less access to collateral that might help them secure loans, mentors and model entrepreneurs. This challenge was echoed among African-American entrepreneurs in the South in Unstacking the Deck.

Taken together, all these mitigating factors—fewer financial resources, distrust of powerful institutions and less expansive social networks—further prevent entrepreneurs of color from building wealth through business ownership.

Fortunately, though, many Community Development Financial Institutions (CDFIs) and nonprofits are addressing these challenges and envisioning new solutions. Ventures offers a financial management training program for entrepreneurs with limited resources, for instance. Gaynelle Jackson, the President of the Alabama Micro Enterprise Network (AMEN), added that CDFIs should look to the untapped potential of rural communities. She said that a lot of CDFIs aim their outreach exclusively at urban communities, neglecting a rural population that is also underserved.

Most importantly, all three speakers reminded their fellow practitioners of the importance of meeting business owners where they are and helping them achieve success as they define it. “There are many businesses that don’t want to be big,” Jackson said. “They’re very happy meeting the needs of their clients and being a force in their community, and that’s okay. We should celebrate where they are and the kind of business they want to be ... and help them grow based on how they define growth.”

Mowrer, Jackson and Yarce all agreed that creating policies and programs that support entrepreneurs of color will create positive ripple effects for their communities, many of which can’t be measured in dollars earned or jobs created. “I started out talking about assets as a financial asset [but] sometimes we should redefine what an ‘asset’ is,” Jackson said. “If you’re the one raising the flag about a political issue or a justice issue, if you’re the one that is the role model for kids in your community—that’s an asset, that’s good will.”

Learn more about the challenges facing entrepreneurs of color by watching our July 12 webinar.

Challenges to Building Wealth and Financial Security in Puerto Rico

By David Meni, Graduate Intern and Rachel Merker, Graduate Intern on 07/28/2016 @ 02:00 PM

Tags: Data and Research, Federal Policy

Three point five million
American civilians are on the hook for billions
Vulture bonds are circling and lobbying for payout
There’s nothing left to tax or cut
We’re stuck we need a way out

Hamilton’s Lin-Manuel Miranda rapped about his home of Puerto Rico in a song on Last Week Tonight, calling on the nation to pay attention to the island’s dire situation.

With Puerto Rico’s $72 billion debt crisis continuing to grab headlines, the needs of its residents are often swept under the rug. Puerto Ricans are American citizens as much as residents of Vermont or Indiana (or Guam, for that matter). However, more than 46% of Puerto Rico residents live below the federal poverty line (despite having a higher cost of living than many urban areas in the continental US), and income inequality in Puerto Rico is worse than anywhere else in the United States.

If we really want to help the almost half of Puerto Ricans living in poverty find a realistic path out, we need to give them access to the same anti-poverty and asset-building programs available to all other American citizens. Without these policy measures, Puerto Rico is less equipped to offer effective public benefit programs, implement an equitable tax code, adequately fund education or make any number of the other investments and policy changes needed to foster economic opportunity. On top of all that, a lack of accurate and up-to-date data often makes it difficult to diagnose the problems of financial security in Puerto Rico.

Weakened Public Benefit Programs

Puerto Ricans rely on public assistance at a rate higher than the national average. However, many of the commonwealth’s public benefit programs are inadequate, especially compared to their mainland counterparts:

Left Out of the Federal Tax Code and the Benefits of Tax Programs

Congress’ many exemptions for Puerto Rico keeps the Commonwealth from fully integrating with the U.S. tax system. But don’t be too jealous that Puerto Ricans don’t have to pay federal income taxes. An unintegrated tax code denies Puerto Rico access to some of our most powerful anti-poverty programs:

A majority of Puerto Rico’s residents would see no or negative tax obligation if the full federal income tax — along with programs like EITC – were implemented there. Providing equitable tax credit treatment to Puerto Ricans was part of the Obama administration’s initial aid proposal, but has since been scrapped.

A Crumbling Public Education System

As Puerto Rico’s economic troubles worsen, public education is suffering. Puerto Rican children have the lowest average test scores in the nation, and public schools are closing at rapid rates. Educational disparities in Puerto Rico abound:

  • State-Funded Pre-Kindergarten: Research shows the importance of early education in enhancing children’s economic futures. Currently, there is no state-funded pre-K program in Puerto-Rico — though it’s not for lack of trying. In fact, the commonwealth was recently denied a Preschool Development Grant from the federal government.
  • Underfunded Special Education: 129,000 minors in Puerto Rico receive services under the federal Individuals with Disabilities Education Act. But due in part to a funding cap, Puerto Rico has had to delay payments to special education therapists for months.

Beyond the Debt Crisis, a Dearth of Data

These are just some of Puerto Rico’s challenges in the implementation of policies that enhance economic security. In order to truly bring the economic disparities in Puerto Rico to light, advocates and policymakers alike need access to more data. Whether it’s foreclosure rules, unemployment compensation or the unbanked population in Puerto Rico (the most recent data for which is from more than a decade ago), the commonwealth is often missing from various efforts to track and evaluate state policies, including our own Assets & Opportunities Scorecard.

Without readily available information on whether Puerto Rico is implementing important strategies for facilitating individual economic security, advocates are hindered in offering real, proven solutions to the income and wealth disparities on the island.

Where Credit is Due: How Building Credit Builds Financial Security

By David Meni, Graduate Intern on 07/19/2016 @ 10:00 AM

Tags: Data and Research, Federal Policy

The first credit reporting agencies came into being in the 1950s and 1960s as a way of helping banks and retailers assess a consumer’s creditworthiness. Since that time, credit reports and credit scores have expanded in importance. A change in credit score can have significant impacts on the terms of a mortgage, and the details of a consumer’s credit history can serve as a gateway to everything from employment to health insurance.

Access to credit is an important asset-building tool. The ability to borrow money under reasonable terms allows households to weather instability and support long-term savings. Having access to credit also eases access to important pillars of wealth-building, like buying a home or starting a business. In this way, access to credit is, in itself, an asset. However, millions of Americans are either left out of the traditional credit reporting system or are blocked from financial and personal opportunity because of poor or erroneous credit.

We recently released a new fact file about credit reports and credit scores and their impact on wealth-building opportunities for low- and moderate-income consumers. Here are some highlights:

  • Nearly one in five consumers is “credit invisible” or has no credit score. Either because of a lack of credit history or a thin credit file, 45 million Americans have no credit score.
  • Most Americans have less-than-stellar credit. Over half of consumers that do have a credit score have “subprime” scores, which can result in higher costs for loans and more difficulty weathering income volatility.
  • The difference between having good and poor credit can be staggering. Compared to a typical subprime score, having a prime credit score can save you more than $32,000 over the course of a 30-year mortgage. Imagine having $1,000 more in your pocket every year after buying a home, and you can see how much of a difference good credit can make for the average low- or moderate-income family.
  • Poor or missing credit disproportionately harms households of color. Black and Hispanic individuals report higher rates of subprime credit and are significantly more likely to be credit invisible. Much of this is the result of discriminatory lending practices that pushed subprime loan products onto communities of color.
  • Credit reports are used for non-lending purposes like employment, health insurance and more. Despite the fact that credit reports were never designed to assess anything besides one’s ability to repay a loan, credit histories are regularly scrutinized by employers, despite the fact that in most cases, credit history has no bearing on job performance. So far, only eleven states have banned credit checks for employment.
  • Many low-income people who pay their obligations on time aren’t given the credit they deserve. For millions of Americans, the most consistent payments they make are monthly rent and utility bills. But for most of the history of credit reporting, this kind of recurring payment wasn’t captured by credit bureaus. Even responsible folks who have paid these obligations on time their whole lives can still have poor or missing credit. When negative events are reported (like collections and delinquencies) but positive and responsible behavior isn’t, a person’s credit history can unfairly paint them as financially irresponsible, despite steps they may have taken to prove otherwise.

The credit reporting industry is catching up to some of these trends. For example, many of the “big three” credit bureaus are developing alternative scoring mechanisms that will help bring previously unscored or low-credit people into the fold. However, more can be done to prevent credit reports from becoming barriers to non-lending opportunities like employment. To learn more about these opportunities, download our new fact file today.

No One Should Have to Choose between Paying the Mortgage and Eating

By Samuel Weinstock on 07/18/2016 @ 03:00 PM

Tags: Data and Research

Editor’s Note: To continue our blog series sharing the stories of young workers across the country who we’ve interviewed as part of our Financial Security at Work Initiative, we’re highlighting Robert*, who lives in a suburb of Houston and is struggling to make ends meet on a regular basis.

Every day, Robert has to think about financial survival for himself and his mother, whom he lives with and supports financially. He works part-time as a griller at a breakfast fast food restaurant, but he doesn’t always have enough for food on his own kitchen table. Even when Robert is able to stretch his income across all of his bills, he and his mother have to cut back on some things. “Usually it’s food,” he says. “Eating less—it’s kind of good for you, kind of bad.” Robert’s precarious financial position means that food isn’t the only necessity that he can’t always take for granted. He relies on a water pump outside of his house, but he can’t always keep the lights on inside. “One time during the summer, they cut off our lights because we just couldn’t pay it,” Robert says. “It was one of the worst times in my life.” He says that he didn’t realize how much he needed lights in the house until they went out. Spending money on entertainment is out of the question. “You really don’t need it,” he says.

Robert describes being able to scrape by with occasional cuts in food and utilities, but says that, despite his constant uncertainty about how much money he’ll have left over, he absolutely cannot skip the mortgage payment for the small house that he and his mother occupy. He knows that missing payments could lead to eviction, and he’s willing to go hungry to avoid that, if he has to. “It would just suck getting kicked out after so long...paying,” he says.

In terms of improving his financial situation, Robert says that his main focus is earning more income. He views his expenses as having a clear hierarchy of priorities, with the mortgage at the top. He always pays it first, and then other bills, such as the electricity, if he can. “It was pretty simple,” he explains. “You just say, ‘Hey, not going to pay for the phone bill [and] cut this on food, and we’ll have enough for next month.’ It’s pretty simple. It wasn’t like, ‘Dang, got to bust out the calculator.’”

To make purchases, Robert and his mom share a prepaid card. He noted that one problem with such a system, however, is that his pay varies week to week, so that the amount he would have to spend would be inconsistent. He also says that it can be hard to plan out his expenses exactly. “I can actually have my money set out for what I should spend my money on […] but sometimes […] I want a snack or something, and you end up [with] not enough.”

With regards to benefits at work, Robert doesn’t get much from his employer by way of help with his finances. He knows that direct deposit is available, because a little TV in the restaurant’s back room plays an advertisement for the service over and over again. Robert says that he trusts direct deposit, simply because the service (and the advertisement for it) comes from the company’s corporate office. Nevertheless, he doesn’t use direct deposit, because he wants to have cash in his hands at the end of the week. “Something about cash feels really good,” he says. “I know I have it.” And, for Robert, having physical cash is central to managing his finances. “When I have the cash, I can see how much money I have left,” Robert says. “In the bank account, not really.”

*Name has been changed

CFED’s Financial Security at Work Initiative, sponsored by the Prudential Foundation, explores the current state of workplace-based financial wellness programs and envision how the workplace can be strengthen as a platform for financial security in the future. To learn more about the project, check out:

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