This Law Could Put Thousands of Dollars Back in the Pockets of Wyoming Manufactured Home Owners
By Mikah Zaslow on 03/14/2017 @ 12:00 PM
When Wyoming resident Jason Halvorson sought to refinance his manufactured home, he didn’t know he was embarking on a nine-month endeavor that would lead to changing state law. But, as Wyoming Public Radio reports, that’s what it took for the homeowner to avoid getting gouged and spending an extra $50,000 on his mortgage.
The problem? A law that made it impossible for many manufactured home owners to get the titling paperwork they need for fair financing.
Halvorson wanted to refinance his home after making upgrades, but he learned that the traditional method of going to a banker would not work as he did not have the Manufacture’s Statement of Origin for his home—and a duplicate could not be issued by the county clerk. While financing is available without this paperwork, the options have higher unfixed rates and are out of reach to many homeowners. Halvorson reached out to his coworker State Rep. Tyler Lindholm about the issue, who looked into the matter and was struck by the legal inequality of the state’s titling law. And earlier this month, their efforts resulted in Governor Matt Meade changing Wyoming’s titling law.
CFED’s Doug Ryan, who was interviewed for the story, brought up the lack of consistency in the way states handle titling laws. While New Hampshire, Vermont and Oregon have favorable titling laws, most are somewhere in between. According to Ryan, Wyoming’s house bill is an important example for other states, and that because manufactured housing represents an affordable means of homeownership, “states need to be more creative and more aggressive in making sure these homes are part of the housing system.”
Halvorsen said that other manufactured home owners can benefit from these changes as well if they are willing to dig in to the law. Our new resource guide, Titling Reform: How States can Encourage GSE Investment in Manufactured Homes reviews current state titling laws and can be used to aid in efforts to improve states’ manufactured home titling laws. Titling manufactured homes as real property is also important for the eligibility for the Duty to Serve rule, which details how Fannie Mae and Freddie Mac must serve the manufactured home market. However, outside of a proposed chattel property pilot, manufactured homes must be titled as real property to be eligible for credit under the rule.
States that want to reform their laws don’t have to start from scratch, though. In 2012, the Uniform Law Commission approved a model law—the Uniform Manufactured Housing Act (UMHA). If enacted, UMHA would resolve the many deficiencies and ambiguities in the existing state titling laws and greatly increase the number of homes eligible for financing that satisfies the new Duty to Serve requirements. A clear statutory titling procedure also has the potential to open up new markets for real property lending, offering lenders new lines of business and borrowers better options.
Titling manufactured housing as real property creates financial opportunities and serves to create greater equality among homeowners. The work of advocates like Halvorson is critical to ensuring that manufactured home residents have the same opportunities to access affordable financial products as owners of site-built homes.
2016 Year in Review: Despite Challenges, Assets Advocates Have Much to Celebrate
By Sean Luechtefeld on 01/11/2017 @ 09:00 AM
The last two months of the year brought significant uncertainty and concern about the future for many of us. But for all of us working to build a more inclusive economy, 2016 also offered much to celebrate. We began the year by launching an ambitious new Strategic Plan, and although our tactics for achieving the goals laid forth in that plan may shift in the wake of the new political environment, our overall objectives do not. Because much of the foundation for achieving those goals was laid in 2016, we want to take time to reflect with you on all we accomplished together throughout the year.
One key area of focus in 2016 was on closing the racial wealth divide. Our Racial Wealth Divide Initiative marked its first full year of operation, deepening our field’s analysis of the financial challenges facing communities of color. As part of this effort, the 2016 Assets & Opportunity Scorecard offered new data measures that were, for the first time, disaggregated by race. We also kicked off two exciting projects: the African-American Financial Capability Initiative, made possible thanks to generous support from the Northwest Area Foundation, and the Building High-Impact Nonprofits of Color project, made possible thanks to generous support from JPMorgan Chase & Co.
The past 12 months also saw significant strides when it comes to consumer protections. This summer, the Consumer Financial Protection Bureau released its long-awaited proposed regulations on predatory small-dollar lenders, while just weeks later, the Bureau outlined a framework for regulating abusive debt collection practices. Then, just last month, the Federal Housing Finance Agency released its long-anticipated “Duty to Serve” rule, which compels Fannie Mae and Freddie Mac to serve the manufactured housing finance market. Each of these three victories illustrate just how important it is that federal agencies and regulators have vulnerable families’ needs and interests on the top of their agendas.
Ultimately, these achievements would have been impossible without a large and growing network of advocates, service providers and other allies like you who are fully committed to the notion that our skin color or the ZIP code in which we're born shouldn't determine our chances of success. Nowhere did this message resonate more than at the 2016 Assets Learning Conference, which was the largest-ever gathering of asset-building professionals. Your energy, your eagerness to learn and your willingness to use your voice to build the opportunity economy are what make CFED confident that despite the challenges ahead, 2017 will offer several victories for us to celebrate together.
One Easy Step to Improve Tax Return Accuracy and Protect Consumers This Tax Season
By Chad Bolt on 01/10/2017 @ 01:00 PM
In Washington, DC, all eyes are focused on a date less than two weeks away: January 20, Inauguration Day. Outside the beltway, another date this month looms large for hardworking taxpayers and tax prep volunteers across the country: January 23, the official kick off of tax season!
The new administration and the new Congress have an opportunity to improve tax return accuracy, reduce overpayments and protect tax filers during tax season by setting minimum competency standards for paid tax preparers. Currently, 46 states do not require paid preparers to meet any minimum level of training or expertise to charge filers to file a return on their behalf. Chances are, your hairdresser has undergone more training and certification than your paid tax preparer.
The lack of minimum standards has serious implications. A recent National Consumer Law Center and Consumer Federation of America review of mystery shopper testing studies found problems in as many as 90% of returns filed by paid preparers! In 2013, South Carolina had to permanently ban a tax services provider due to fraudulent claims that federal authorities estimate cost the federal government $55 million. Maryland established its own minimum standards at the state level after it stopped accepting tax returns from four groups of private tax preparers due to a high volume of suspicious returns and repeated compliance violations. Minimum standards would save the government money and protect consumers from predatory preparers that lack basic competencies.
Fortunately, we already have a model for implementing effective minimum competency standards: the Volunteer Income Tax Assistance (VITA) program. VITA must meet strict federal standards to ensure returns are accurately and efficiently prepared. Unlike paid tax preparers, local VITA programs are held to a national standard for tax preparer training, site administration and quality of tax preparation. Local VITA programs train and prepare volunteers, who must become certified according to strict IRS standards. To prevent identity theft issues, valid federal or state identification is required of all filers.
How have these standards affected VITA’s results? VITA’s level of accuracy has been steadily increasing over the years, from 85% in 2009 to 94% in 2015, despite increased demand for VITA services and stagnant funding. The 94% accuracy rate is one of the highest of any category of tax preparation services, including CPAs and major tax preparation services companies, and proves that minimum competency standards can have a marked impact on the quality of tax preparation.
Congress can improve tax return accuracy, particularly returns that involve the Earned Income Tax Credit (EITC), by establishing minimum competency standards. This is an easy but effective way to reduce overpayments without making the EITC more complex to claim or less beneficial to workers that claim it. The Joint Committee on Taxation has scored proposals to establish minimum competency standards as generating $135 million over ten years – in part because unenrolled paid preparers are more likely than any other type of preparer to file inaccurate returns. Even big tax preparation software providers and large tax preparation chains support this proposal.
Tax reform is sure to be a top priority in the 115th Congress. Any discussion of reforming the tax code should include this easy and commonsense measure that improves the accuracy of tax returns, reduces overpayments and protects tax filers.
You can help by calling your member of Congress and letting them know you support minimum competency standards for paid preparers. Or, if you are a member of the tax preparation community and have a story to share about someone you know who fell victim to an unscrupulous preparer, email CFED’s Federal Policy team so we can make sure members of Congress know how the lack of minimum competency standards affects their constituents.
The Power of Visual Frameworks in Communicating on Financial Capability
By Craig Sandler on 12/09/2016 @ 10:00 AM
"How do you talk about financial security in a simple, easily digestible way?" is a question we get asked frequently at CFED. Finding accessible words to explain the complicated relationship money has to our lives can be challenging. Terms like “asset building” and “financial capability” can seem opaque to those outside of the field, and even to some within. Attempts to explain these concepts can too often descend into confusing jargon or overcomplicated explanations of the role of money and our knowledge/ability to handle it.
Many of CFED’s partners and networks, however, have found that using infographics to distill these core concepts into easily-understood visual formats is an effective way to talk about some complicated issues. View the slideshow below in full screen to see several examples of frameworks and explanations of their value. (Note: In order to click on the hyperlinks embedded in the slideshow, you can download the slideshow as a PDF here).
Every community is different and has unique financial capability needs, and different frameworks are more appropriate for some communities than others. What is important is finding a way to communicate the nuances of asset building and financial capability in a way that resonates with your audience. We hope that these examples help to inform your own thinking or inspire you to create a framework that will be most helpful to your partners and the communities you serve.
If you have a financial capability framework that you think would be valuable to your peers, please share it with us at email@example.com.
Explaining the Financial Security Framework with Leigh Tivol
By Ariel Sankar-Bergmann on 12/08/2016 @ 10:00 AM
Decades of research—plus our own gut instincts—tell us that boosting financial security is complex. We know that achieving lasting financial well-being is not simply a matter of earning enough, but rather requires a range of factors to come together in a person’s financial life. To help explain these components and how they come together, CFED recently revamped its Household Financial Security Framework, which we launched last month with a new white board animation. The Framework helps illustrate how people must be able to navigate financial systems, learn key skills, earn money, save their earnings, own assets and protect those assets in order to achieve financial security.
To better understand the Framework and how each of its component parts coalesce in people’s financial lives, I sat down with Leigh Tivol, CFED’s Vice President for Strategy & Engagement, to learn more about the development and evolution of the framework.
Ariel Sankar-Bergmann: Tell me a little about why CFED developed the household financial security framework in the first place.
Leigh Tivol: CFED is trying to solve a really complex problem: we are trying to find ways to help people have better financial lives. We know that there are so many different components that make up the daily life of a consumer, and we recognized that the solutions to these problems are equally complex.
The original Household Financial Security Framework helped us to make sense of CFED’s work. As our work evolves, so has the Framework, and it continually helps us make sure that we consider and impact all components of a household’s financial life.
CFED also works with increasingly diverse players. It’s important to have a way for external stakeholders to see their goals, work and interests reflected in the work that CFED does. For example, if I’m a housing provider or a financial coach, I can look at the Framework and see how my work is so critical to people’s financial lives. The Framework helps CFED make the case to partners and potential partners and shows them that we have a clear set of interests in common.
ASB: How has the Framework evolved over the years?
LT: Originally, we conceived of “learn” as a mash-up of financial education, K-12 and higher education. As we moved towards a better understanding of financial capability, it became clear that we needed to separate out the part that is about consumers having the skills, access and safe products to make good financial choices, which now falls under navigate, from educational attainment. Having a high-school diploma and postsecondary education can have a significant impact on financial well-being, and it no longer felt like it was appropriate to combine the two. After all, financial capability requires life-long learning, not just the focus of a two- or four-year degree. We also changed “invest” to “own” because we realized that “invest” was confusing to us and to the organizations in our field. On the flip side, “own” was much more straightforward. So, the Framework is an example of how we as a field can apply what we are learning to create new tools.
ASB: How do you think the Framework can help organizations work better?
LT: I think the Framework can help organizations in three ways. The first is that it helps organizations see where their mission and work can fit into a larger picture of household financial well-being.
The second way is that it can help guide organizations as they think about their own internal gaps and identify opportunities for partnership. For example, if your organization is providing workforce development and helping clients get banked—but it hasn’t addressed the “navigate” component of the Framework—it’s possible that your clients won’t be successful in managing their bank accounts and they may end up back in the check-cashing store down the street. In this scenario, there is an opportunity for the workforce development organization to either partner with an organization that specializes in helping clients navigate financial situations, they could refer clients to that type of organization or they could build the capacity of their own staff so that they can help clients navigate financial systems.
Finally, the Framework is a great tool for conveying the complexity of financial security strategies to policymakers, funders and partners. Going back to the example of workforce development, if I am working with a financial coaching program that is not helping clients access bank accounts, having this Framework makes it easier to bring partners to the table to address this gap in services because they can see the importance of helping households navigate the system.
ASB: Given all that the Framework can do to help organizations see their work, tell me a little about how the Framework informs CFED’s work?
LT: At the highest level, it informs the framing of our strategy. Improving household financial security is a complex problem and we see opportunities all over the place to do great work. But if that work doesn’t fit into the Framework, it’s probably something that another organization is already doing. At a micro-level, it is much more intuitive. The Framework informs how we think about the delivery of information, of products and of services that allow people to get on firmer financial ground.
ASB: Who do you wish would read or use the framework in program development, policy creation or advocacy?
LT: It sure would be nice if every state and federal legislator saw the Framework! On the policy side, there sometimes is a tendency for policymakers to think, “Oh, we passed that one bill, so we’re done.” If a policymaker, legislative body or agency really wants to see low- and moderate-income people get ahead, we need policies that support all aspects of the Framework and that don’t disincentivize behaviors that we hope consumers will engage in.
It would also be great for funders to look at the Framework. Some funders already understand the Framework really well, but I think for others, it would be eye-opening. We cannot achieve a particular financial security outcome unless we address its underlying elements, and we need to think about how we can get resources to organizations so that they can do this.
ASB: Is there an example of how a group or a person might use the Framework?
LT: Actually, I can give an example of a group that currently does use the Framework, and with some success. The Financial Empowerment Network, a Washington State-based organization whose mission is to advance financial empowerment through partnerships which support access to financial coaching, products and resources, used the Framework as the basis for a workshop they developed in 2011. The purpose of the workshop was to help case managers and supervisors learn about resources to help clients improve their financial situation.
The Framework is also part of a resource guide that is designed to help frontline staff understand basic financial empowerment issues and make credible referrals. These are just two of many examples of how other organizations are taking an idea that we started with and really running with it—adapting it to meet their own needs and those of their clients.
Bright Spots for Financial Security in the Election Results
By Kamolika Das and Solana Rice on 11/17/2016 @ 12:00 PM
As the dust settles from tumultuous presidential and congressional elections, we are working to forecast and prepare for what is on the horizon for low- and moderate-income families. One thing we do know is that state and local policy will be even more important frontier in advancing financial security. Admittedly, the issue of household financial security took a hit in some parts of the country. For example, Right to Work is now enshrined in the Alabama constitution. We’re taking note of some wins in states and cities in the hopes that they will deliver more financial stability and security to low- and moderate-income families in the coming years.
Increasing income and protecting consumers
While not quite $15 an hour, voters in Arizona, Colorado, Maine and Washington approved ballot measures to increase the minimum wage to at least $12 an hour ($13.50 for Washington) by 2020. Arizona and Washington also approved a minimum of paid sick leave. All four states will adjust the minimum wage based on cost of living after 2020. Aside from the increases last week, other states and cities have either introduced legislation or vowed to pursue a referendum in 2017 for minimum wage hikes. The across-the-board approval of minimum wage increases demonstrate that regardless of changes to the federal minimum wage, states and select cities will continue to march ahead in the coming years. Ensuring a stable income is an essential pillar to financial security. For an overview of where your state stands on the issue click here.
There is also great news out of the Mount Rushmore State! South Dakota voters both protected wages for teenagers by rejecting a referendum that would have decreased the minimum wage people under age 18 from $8.55 an hour to $7.50 AND voters approved a 36% rate cap on payday loans. Advocates overcame both a well-resourced lobby and conflicting ballot measures. These are huge wins for low-income workers and consumers.
At CFED, we are aiming to turn the tax code right side up by ensuring that the tax code protects and supports low- and moderate-income workers in making ends meet, saving for their future and building assets that help weather a financial crisis. We saw voters across the country agree. Florida and Louisiana passed constitutional amendments on property tax exemptions to help tax payers save money. In Florida, Amendment 5 allows senior citizens to save on their property taxes as soon as they file for exemption, instead of waiting. Amendment 4 in Louisiana is exempting property taxes for widowed spouses of military personnel and first responders. Click here for additional ways that states can deliver property tax relief.
In Oklahoma, the bottom 20% of taxpayers pay 10.5 % of their income in taxes, versus just a 4.3% tax rate for the top 1%. Oklahomans took steps to reject an additional regressive sales tax. Despite the fact that the revenue would be used for an “Education Improvement Fund,” opponents to the increase recognized there are other ways to fund valuable things like teacher salaries that don’t disproportionately impact low- and moderate-income families.
Maine, on the other hand, decided to fund public education through a “3% surcharge on the portion of any household income exceeding $200,000 per year.” This increase will provide an estimated $157 million for public education funding that, according to a Maine Center for Economic Policy report, took a hit with two tax breaks for the wealthy since 2011. They project this being a help to closing the opportunity gap in a state where the number of low-income students are increasing.
Affordable housing has become another key issue in state and local races. At the state level, Rhode Island voters approved a $50 million Housing Opportunity Bond designed to expand affordable housing and improve blighted properties. However, the bulk of movement around affordable housing occurred in cities from Boston and Baltimore on the east coast to a slew of west coast cities. Boston voters approved a 1% property tax surcharge to fund affordable housing units, while voters in Baltimore approved an amendment to the city charter to create an Affordable Housing Trust Fund. Several measures in Los Angeles County, Orange County and the Bay Area could change the outlook for affordable homeownership in California. For example, voters in Alameda County overwhelmingly supported creating an Affordable Housing Bond to construct 8,500 units of affordable rental housing with the support of a slight property tax increase. Affordable housing measures expanded beyond just the west coast and Northeast – Asheville and Greensboro, North Carolina also voted to dedicate part of their annual transportation budget to affordable housing initiatives.
Do you have bright spots for financial security to share from your neck of the woods? Or are there particular policy challenges to financial security that you’d like our support on? Submit a comment below!
Crossing the Great Divide: Building Assets and Wealth for All
By Andrea Levere on 11/10/2016 @ 09:00 AM
Editor's Note: This article originally appeared on the Living Cities blog.
“But it’s all right, ‘cause it’s all white…I ain’t talking about rich, I’m talking about wealth.” - Chris Rock, 2004
Sometimes the most vivid truths are spoken by the most unlikely suspects. Since its founding 36 years ago, CFED has pursued a mission to reduce wealth inequality, although we didn’t know it was called that until 25 years ago (what timing!) when Michael Sherraden introduced asset building as the next approach to poverty alleviation in his book, Assets and the Poor. A New American Welfare Policy. While the creation of the social safety net was one of the crowning achievements of the 20th century, the economic changes of our time demand more if we expect to help families stabilize their financial lives and escape the cycle of poverty.
The asset-building approach was grounded in the belief that a household needs knowledge of and access to affordable financial products and services to build the savings and economic cushion that enable upward mobility. Policies that protect consumers in the financial marketplace and encourage savings and investment among low-income households can work in conjunction with traditional antipoverty programs to help families get ahead. The core insight that “it’s not just what you earn, but also what you own” led to our view that the task ahead was to “turn the safety net into a ladder” by building a field of practitioners, crafting policies, engaging private markets, and collecting the data that diagnosed the challenges and delivered evidence of what worked.
CFED’s partnership with Living Cities led to a pivotal report in 2011 titled Building Economic Security in America’s Cities: New Municipal Strategies for Asset Building and Financial Empowerment. This report chronicled the innovative approaches of a growing number of cities in advancing economic security and opportunity through offices of financial empowerment, innovations ranging from access to banking to credit building, and the use of municipal regulation to restrict predatory financial practices. The enduring gift of this report was the design of the Household Financial Security Framework, which illustrated how personal behavior and aspirations, financial structures and systems, public policy and economic trends all interact to create the complex financial lives that we all live and how cities can align services and partners to build financial security in a comprehensive way. Five years later, this framework still guides the work of cities, states and nonprofit organizations.
Another leap came with the creation of the Liquid Asset Poverty metric, which measures the ability of a household to exist at the poverty level for three months if its main source of income is disrupted. Today, 44% or almost half of US households live in liquid asset poverty, with rates much higher in many of our major cities. This number has changed the political conversation; rather than focusing on “those poor people” as a problem, we now understand that more than half of the population faces some level of financial insecurity every day and is part of a broader community seeking solutions.
Yet despite the success of many of our asset-building programs and policies, the current level of income and wealth inequality has increased to levels not seen since the Depression. While Americans of all backgrounds have experienced significant losses of wealth since the recent recession, Americans of color have suffered the most. They are 2.1 times more likely than white households to live below the federal poverty line and 1.7 times more likely than whites to lack the savings needed to weather an unexpected financial crisis. Today, the gap between the average wealth of white households and Black and Latino households exceeds $500,000. A report issued by CFED and the Institute for Policy Studies last month revealed the stunning news that if the average Black and Latino family’s wealth increased at the same rate it has over the past 30 years, it would take Blacks 228 years and Latinos 84 years to generate the same amount of wealth white families have today.
And this sobering reality brings us back to the prophetic words of our favorite comic-turned-economist, Chris Rock. The challenge ahead is to proactively address the racial wealth divide through community-based and policy solutions that reduce this inequality at the national, state and local levels. While much of this inequality is the result of centuries of racist policies, our current tax code expands economic inequality every day through subsidies for homeownership, savings and investments, retirement and higher education that return almost $147,000 annually to the top 0.1% while the average benefit for those making less than $50,000 was barely $150. We need to flip the tax code while we place racial equity at the center of our strategy to revitalize cities and build financial well-being for their residents. I can imagine no organization better prepared to rise to this challenge than Living Cities as it celebrates its 25th anniversary.
Bank of America Fellowship: Measuring Changes in Client Financial Capability and Well-Being
By Hiba Haroon on 11/08/2016 @ 10:00 AM
The expansive benefits of financial coaching range from changes in savings and credit to employment retention and greater health. In addition to changes in financial behavior, access to financial coaching has been related to improving individuals’ personal perceptions of their financial situations. More and more, organizations now offer financial coaching to gain a deeper understanding of clients’ financial needs and goals and to provide the necessary tools and resources to increase clients’ financial capability.
As the coaching field grows, so does the need to measure client outcomes and attitude changes to assess its effectiveness.
To help address this need, CFED just launched its 4th Bank of America Fellowship to explore how impact measurement and evaluation systems can be integrated into existing financial coaching programs. The fellowship aims to build the capacity of senior leaders at five organizations, all of which currently provide financial coaching services, to develop monitoring and tracking systems using the CFPB’s Financial Well-Being Scale and Financial Capability Scale to better understand how client outcomes are changing over time.
CFED will provide the five fellows intensive technical assistance on program design and implementation, partnership opportunities and outcomes evaluation through site visits and bi-monthly meetings. CFED will organize and facilitate three virtual convenings and two in-person convenings to provide the fellows opportunities to share lessons and promising practices.
Finally, CFED will work with fellows to integrate Better Money Habits into their coaching services. Better Money Habits is an online financial education curriculum powered by the Bank of America Charitable Foundation. It provides objective and user friendly financial education to empower consumers to be informed and prepared to make financial choices.
We are excited to introduce the fellows selected to engage in this project:
Hopeworks: Dan Rhoton, Executive Director (Camden, NJ)
Hopeworks uses innovative program model teaching homeless and vulnerable youth how to code and build websites while offering individual psychological and emotional support. Hopeworks is training staff how to be financial coaches so that they can offer support to youth during individual counseling sessions.
YWCA Seattle: Matt King, Director of Employment and Regional Services (Seattle, WA)
Born from a commitment to empower women and advance social justice, the YWCA has a rich history and wide array of workforce development programs. YWCA already provides financial education within their job training program and will use that platform to provide financial coaching.
Goodwill Sacramento: Robynne Rose-Haymer, Workforce Development Director (Sacramento, CA)
Goodwill Sacramento was established in 1933. Offering services to thousands of people across are large geographic area, the organization is an important presence in the greater Sacramento community. Goodwill Sacramento has four trained coaches on staff who will continue to find ways to provide coaching services within their workforce related activities.
In addition to these three organizations, two Financial Opportunity Corps sites will participate in the Fellowship:
Baltimore CASH Campaign: Courtney Bettle and Sara Johnson, Program Manager and Director of Financial Security respectively (Baltimore, MD)
The Baltimore CASH Campaign was formed in 2001 to employ strategies to help working families in Baltimore maximize their financial opportunities and resources. Baltimore CASH has a well-developed financial coaching model and is now entering their fourth year as a Points of Light network member.
Accounting Aid Society: Lindsey Vaclav, Manager of Financial Potential Programs (Detroit, MI)
Accounting Aid Society was established in 1972 by accountants who wanted to give back to the community. Accounting Aid Society offers a wide array of services to over 26,000 people in the greater Detroit area. Their services include VITA tax prep, small business financial services, financial education and financial coaching.
Over the next 10 months, we will share updates on members and their progress.
CFED is grateful for Bank of America and their support throughout the fellowship, and we look forward to the progress we will make together!
The Marriage of Health and Wealth: A Union to Last a Lifetime
By Kate Griffin and Parker Cohen on 11/03/2016 @ 11:00 AM
“If you want to lower my blood pressure, help me pay my electricity bill.” These words that frame Jason Purnell’s essay in What It’s Worth capture it perfectly: the connection between health and wealth is inextricable. At CFED’s 2016 Assets Learning Conference, we held a lively concurrent session and an invitation-only discussion with 50 leaders from the health care, public health, community development and asset-building sectors to gain a deeper understanding of this intersection. Judging by both attendance and the enthusiasm of the conversation, we’ve tapped into something important—and we’re excited to share three promising avenues for us to explore as a field.
Prolonged financial stress can cause “toxic stress,” which affects the immune, cardiovascular and nervous systems, and can lead to conditions like high blood pressure and heart disease. Financial stress also forces some households to forgo doctor visits or skip prescriptions. For children, the stakes are even higher—their brains develop differently when they grow up carrying the stressors of poverty.
The “social determinants of health”—which the World Health Organization defines as “the conditions in which people are born, grow, live, work and age”—are “shaped by the distribution of money, power and resources.” While the social determinants of health may be shaped by systems, they impact us as individuals. We must address financial health as a foundational issue to the social determinants of physical health. Based on what we heard at the ALC, we see three opportunities emerging for our field.
Opportunity 1: Expand Service Delivery
How can we build fruitful partnerships with health care providers to jointly deliver services? Just like asset-builders, many in the health care field provide financially vulnerable people with established, trusted community services. For example, Federally Qualified Community Health Centers serve 24 million low-income people annually. Broadly speaking, their mandate is to serve the community’s health needs, and they accomplish this in part by being true community hubs: their staff and boards are composed predominately of community members, and they provide wraparound services and host community events. More about how we might integrate financial capability services into CHCs can be found in our recent policy brief.
Opportunity 2: Broaden Our Coalitions
The U.S. Department of Health and Human Services recently released a new definition of public health. “Public Health 3.0” is the idea that a community public health officer sits at the intersection of each of the systems impacting social determinants of health: business, economic development, housing or criminal justice, to name a few. As such, health policy should be embedded into each sector to ensure equal access to health, not just health care. Public Health 3.0 is a call to expand coalitions, which presents an opportunity for the many asset-building coalitions around the country. Expanding and joining coalitions can help us work together to answer many of these critical questions and forge a path forward.
Opportunity 3: Build Better Systems Together
When people are healthy, our economy benefits. In his What It’s Worth essay, Jason Purnell explains that the most powerful interventions to make people and society healthier involve changing the ways our systems are configured. The Affordable Care Act is a great example of this configuration shift in that it focuses on remunerating health care outcomes, rather than individual services. For instance, if a patient is seen for the same illness multiple times in a month, the health care provider may only be reimbursed once for that expense, thus incentivizing a holistic, preventive approach to health care. These seemingly small intervention can have big effects, as it orients our thinking toward measuring progress in terms of progress toward our ultimate goal: healthier people and healthier communities.
Participants in our ALC sessions dove into these topics by thinking about the other systems-based changes we can leverage to make people healthier. Among the many opportunities raised, they pointed to advocating for systemic change to build a more equitable society and reduce financial stress by bridging the racial wealth divide and turning the tax code right-side up. Although these are no small undertakings, they would go far to improve not only people’s financial health, but also their physical well-being.
The potential for collaboration between the physical and financial well-being sectors is vast. If you’re interested in staying informed on our work in this area, sign up to receive updates here.
A Tale of Two Cities: Racial Economic Inequality in New Orleans and Miami
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
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.
Entrepreneurship Can Serve as Pathway Towards Stability for Formerly Incarcerated People
By Diego Quezada on 10/27/2016 @ 02:00 PM
The recently concluded Assets Learning Conference convened participants on a variety of topics and target populations. One session covered a particularly vulnerable group – formerly incarcerated individuals. From discrimination of employers to restrictions on housing to high fees associated with parole and probation, people re-entering mainstream society face a plethora of challenges that threaten their financial wellbeing. However, entrepreneurship programs are emerging as a tool to help formerly incarcerated people overcome these financial barriers.
It is critical to consider the current climate of the criminal justice system to understand who is most impacted. Overwhelming evidence suggests that Black people face harsh disparities in the system. Black Americans are more likely to be arrested for drug crimes despite the fact that white people use illegal drugs at comparable rates. Black people are also more likely to have their cars searched, be offered a plea deal that includes prison time and serve longer sentences than white Americans for the same offense.
This evidence helps explain the growing political consensus in favor of criminal justice reform. Former presidential candidates as distant as Ted Cruz and Bernie Sanders have spoken of reducing the prison population. Additionally, criminal justice issues and the prison system have penetrated into the cultural ethos of the country. In just the past two months, hip-hop icon Jay Z narrated a short film on mass incarceration for the New York Times, and filmmaker Ava DuVernay released the critically acclaimed Netflix documentary 13th, which also explores the issue. Improving re-entry opportunities for the incarcerated is essential to reforming the criminal justice system, and several emerging programs use entrepreneurship as a re-entry strategy.
During the Assets Learning Conference session on formerly incarcerated people, the Aspen Institute’s Joyce Klein discussed her recent publication, Prison to Proprietor. This publication highlights nascent programs that are focused on building entrepreneurial skills for formerly incarcerated people. Lifelong Information for Entrepreneurship (LIFE) is a 32-week course covering business development and re-entry planning for female prisoners. An evaluation of LIFE found that participants were 41% less likely to recidivate than a control group.
Another program, Defy Ventures, serves a primarily male population of returning individuals. Participants attend a five month program that combines job readiness training, business development and financial management and introduces them to mentors and investors. Defy Ventures has served more than 475 formerly incarcerated people who have started more than 100 businesses in industries as diverse as cleaning services, event management and construction. The recidivism rate for Defy Ventures participants is less than three percent.
Although these programs are making positive, incremental progress, we need large-scale change. There are no dedicated public funding streams that support entrepreneurship among currently or formerly incarcerated people. Most programs are funded by foundations and individual donors.
These programs lower recidivism rates, which translate into lower costs for the government. The case for public investment couldn't be clearer. Let's not permanently exclude people from building wealth for themselves and their families, especially when seventy percent of us have committed criminal activity that could land us in jail. Learning from our mistakes is part of life, and mistakes shouldn’t prevent us from creating and sustaining better lives for ourselves and our families.
(Saving) Money Makes Money
By Justin Chu on 10/26/2016 @ 12:00 PM
“A little goes a long way.” The age-old adage can help families all around the country this tax season save a little money and hopefully win a lot more. Commonwealth (formerly D2D Fund) and America Saves have paired together to bring taxpayers the SaveYourRefund program for the 2017 filing season. As many Americans struggle with creating savings behavior, this program is a unique way to target low- to moderate- income households to save more of their refund and begin accruing wealth. According to a Federal Reserve report on economic well being of U.S. households, 47% of a randomly surveyed population said that they would have difficult handling a $400 emergency expense. These numbers are alarming, but not novel for those in the asset-building field; as a result, SaveYourRefund has stepped in to utilize a great savings opportunity: tax time.
Who Can Save?
During the last tax season, approximately $300 billion of federal tax refunds were awarded to 110 million households. With an average of nearly $3,000 per household, a unique opportunity to create wealth exists for so many Americans. As a result, SaveYourRefund extends to a vast group of people as tax filers over the age of 18 who split their refund using Form 8888 in at least two accounts with at least one being a qualified savings account (U.S. Savings Bond, Savings Account, CD, IRA, myRA, 529s, TreasuryDirect Account or a Prepaid Card) are eligible to win 100 weekly cash prizes of $100.
In addition, any savers who submit a picture of their savings goal or motivation to save with a short caption are entered into the grand prize contest with a $25,000 cash payout. By creating an incentive to save, filers can begin to build themselves out of debt and create wealth. Last year, SaveYourRefund helped nearly 3,000 clients save over $2.1 million and win $35,000 in prizes.
As last year’s SaveYourRefund grand prize winner Ebony Brown-Parks said, “You never think this stuff will happen to you. It feels good to win because I try to do the right thing. Income goes up and down – especially with my layoff – and one of the things I really care about is being financially secure.”
How Can I Get Involved?
For many programs, getting involved in SaveYourRefund can really make a difference. Judy Schwartz of Fremont Family Resource Center in Fremont, CA, said, “SaveYourRefund and Commonwealth have provided a wonderful set of tools to educate our VITA taxpayers on the importance and the easy of saving at Tax Time! Quite of few of our customers have been winners of the weekly $100 drawing, and when we celebrate this at our VITA site, more of our customers become interested in saving.”
If you want to get involved in the SaveYourRefund program as a community tax preparation site or have an affiliation to one, join them as a partner to receive promotional and training materials for this upcoming tax season!
Portable Benefits Can Offer Stability for Gig Economy Workers
By Diego Quezada on 10/17/2016 @ 01:00 PM
Recently, a federal judge rejected a proposed $100 million settlement between Uber Technologies, Inc. and its drivers. The settlement would have afforded Uber drivers at least minimum-wage salaries and reimbursements for expenses and gasoline. This decision reopens a case the Wall Street Journal calls a "pivotal moment for more companies that depend on a pool of freelance workers to drive taxis, clean houses, run errands or perform other menial tasks."
This case underscores the uncertainties “gig economy” workers face – their incomes are inconsistent, and they may not have paid sick leave or an opportunity to enroll in an employer-sponsored health-insurance plan. While 29% of on-demand workers also have full-time employment, several are still missing out on the benefits of traditional employment. These issues are facing more and more Americans. According to economists Lawrence Katz and Alan Krueger, all net employment growth from 2005 to 2015 occurred in alternative work arrangements. The Government Accountability Office notes that as many as 30% of workers have contingent jobs, and a recent Deloitte survey found that 42% of executives plan to use more contingent workers in the next three to five years.
The financial insecurity many contingent workers face, and the likelihood that the gig economy is here to stay and growing, highlight the need for these workers to attain benefits and stability. For gig economy workers who are not able to supplement their incomes from on-demand platforms with full-time jobs, these benefits are even more vital to their financial security.
The idea of portable benefits – workers’ compensation and sick leave that workers can carry from job to job – reflects the need for benefits to keep up with the wide-scale changes in economic activity. Without extending benefits to “gig economy” workers, we would stay on a trajectory of shutting out a growing segment of the working population from the stability benefits provide for millions of Americans.
Many companies already support portable benefits. The U.S. Department of Labor recently announced $100,000 to fund portable benefits research. Additionally, portable benefits has bipartisan support – former John McCain economic adviser Douglas Holtz-Eakin and former Hillary Clinton adviser Anne-Marie Slaughter signed a letter to lawmakers supporting the policy.
The benefits infrastructure forged decades ago does not accommodate the realities workers face in the twenty-first century. Intuit found that the typical income stream of a gig economy worker includes a mixture of on-demand work, a traditional full- or part-time job, consulting and owning a business. Economists have found that paid leave raises the probability that mothers return to employment later and then work more hours and earn higher wages. Benefits are good for business and good for workers. Let’s ensure that all gig economy workers – especially those with low or moderate incomes – have access to the benefits everyone deserves.
Celebrating Success and Reflecting on Lessons Learned at the Financial Inclusion Policy Action Initiative’s Pre-ALC Convening
By Craig Sandler on 10/13/2016 @ 09:00 AM
It was no surprise that ALC 2016 was packed with content, but there was exciting work being done during ALC week even before the conference officially began. For the past two years, CFED has been working on a three-year project with seven organizations funded by the Northwest Area Foundation’s Financial Inclusion Policy Action Initiative to build financial capability and security among Native and non-Native communities in the Northwestern region of the US. This cohort met early during ALC week in order to celebrate their accomplishments over the past two years of the grant, share their lessons and to chart a path for their work in the final year.
This two-day pre-convening event kicked off with a celebration of successes from the Initiative’s second year, highlighting the State and Tribal policy wins and successful advocacy that these partners engaged in over the grant. These wins included:
- Expanding revolving loan programs to foster minority and Native entrepreneurship
- Eliminating asset limits from state public benefit programs
- Defending against predatory and payday lending bills that would strip many consumer protections
- Expanding incentive savings programs for low-income individuals
- Building critical financial education skills and awareness in Native communities.
As advocates always must, these organizations wrestled with daunting obstacles that stood in the way of their policy goals. Adversarial legislators, powerful lobbyists from the predatory lending industry, barriers to coalition-building and effective engagement, and institutional challenges, such as lack of jobs or structural racism, all made their efforts to build financial capability in the Northwest region an uphill battle. These organizations, however, were successfully able to overcome many of these barriers, building the systems and momentum needed for policy change at the State and Tribal level. This impressive and inspirational achievement energized the cohort to dive head-first into their work for the final year of the grant, where they will continue to fight for financial security in low-income communities.
The cohort also discussed some of the lessons learned over the course of the year. For instance, one key insight that emerged is that even progressive legislators don’t always act in the best interest of their constituencies and districts. Sometimes, legislative allies turn out to be less supportive (or sometimes even obstructionist) than those with a lived experience working on the issues or with populations most affected by the proposed policy change.
Another insight was that coalition partners and other allies are not always well-equipped or comfortable in advocating for change, thus building the advocacy skills and comfort of these partners is necessary. Several organizations, including the Minnesota Asset Building Coalition (MABC), Neighborhood Partnerships, and the Idaho Asset Building Network (IABN), kept this valuable lesson in mind as they invested time and resources in helping build their coalition’s capacity and comfort in effective advocacy. For example, IABN created a series of webinars on advocacy skills, rules, and strategies that helped build the comfort of its Network partners. Other organizations, including MABC, IABN, and Neighborhood Partnerships, hosted advocacy days to educate policymakers on key financial inclusion issues at the start of their legislative sessions. Neighborhood Partnerships also hosted an ‘advocate’s college’ to train coalition partners on effective advocacy and engagement. These lessons, and others, shared during the cohort meeting will prove invaluable as the partners go into their final year of this project.
CFED is delighted to work with such an inspirational group of partners on the Financial Inclusion Policy Action Initiative. Being able to celebrate the amazing accomplishments they made during year two of their project, and reflect on lessons learned as they gear up for year three, was an excellent reminder of how lucky we are to work with this cohort. We would like to thank all of our cohort members and their partners for making our pre-ALC meeting such a valuable and memorable one.
CFED would also like to thank our partners who provide invaluable technical assistance on this project, including Seven Sisters Community Development Group, Center for Responsible Lending, First Nations Development Institute, Campaign for Every Kid’s Future, and independent consultant Tanya Beer. Finally, we offer a huge thanks to the Northwest Area Foundation for their vision and leadership in building financial security at the State and Tribal level.
How HOPE Is Helping Create Opportunity for Families in Poverty
By Jessica Shappley, Guest Contributor on 10/12/2016 @ 02:00 PM
This year, HOPE (Hope Enterprise Corporation and Hope Credit Union) team members had the opportunity to join 1,300+ of our asset-building colleagues at the 2016 Assets Learning Conference. Throughout the conference we learned and conversed with some of the most innovative minds in the field on how to build an opportunity economy in the United States. After three days of meaningful discussions around what it takes to create a more inclusive economy, we left the conference more eager than ever to make a more equitable economy a reality, particularly in the Deep South.
People entrenched in long-term poverty experience a range of complex challenges that limit opportunity for some. The Mid-South (HOPE’s service region) is home to a quarter of the nation’s persistently impoverished counties – counties where the poverty level exceeds 20 percent for at least three decades. Families who live in these high-poverty areas often must overcome the lack of resources that support efforts to improve their quality of life as education, health care, financial inclusion and employment outcomes remain lower in persistent poverty counties.
It is important to not only understand where poverty occurs but also who it impacts. In the Mid South, more than 30 percent of the population lives in persistent poverty. This is the equivalent to the entire population of Mississippi – approximately three million people. Likewise, communities of color are more likely to live in persistent poverty. Thirty-five (35) of the 39 majority-minority counties in the Mid South are also persistent poverty counties. For some in long-term poverty, this can create an exceptionally difficult environment for them to make ends meet, much less move forward through homeownership, entrepreneurship or post-secondary education.
In areas that continue to suffer from decades of long-term poverty, it is crucial to create ladders of opportunity. This undoubtedly includes closing the racial wealth gap, turning the tax code right-side up and creating pathways to homeownership and post-secondary education.
Creating opportunity for families in poverty is no small feat but with thousands in the field sharing the same vision of a more equitable economy, overcoming these challenges has never felt so in reach.
Startup Propels Immigrants' Entrepreneurial Activities
By Diego Quezada on 09/09/2016 @ 10:00 AM
If you've paid any attention to the 2016 presidential election, you've seen how immigration is such a heated political issue. But beneath all of the rhetoric, real people's lives and their impact on the American economy stand. The most entrepreneurial group of people in the United States wasn't born here. Although they make up just 13 percent of the U.S. population, immigrants now start more than a quarter of new businesses. Between 1995 and 2005, immigrants started 52 percent of all new Silicon Valley companies. Immigrant-founded companies have a collective value of $168 billion and create an average of 720 jobs per company.
Despite all their contributions to job creation, too many immigrants find barriers to starting businesses. Without the ability to transfer their credit histories from other countries, immigrants cannot prove their reliability to borrowers. In fact, more than 42.4 million immigrants living in the United States have limited access to credit. These limited options force many immigrants to turn to exploitative payday loans that can charge interest rates as high as 300 percent.
As a result, many immigrants today toil in low-paying jobs that don't reflect their skills. According to a 2014 Migration Policy Institute report, about 20 percent of foreign-born adults who had post-secondary degrees from abroad were working in low-skilled jobs compared with 12 percent of the U.S.-born population. Too many people are locked in jobs that don't allow them to meet their personal and professional goals or maximize their economic productivity.
Nova Credit, a cross-border consumer credit reporting startup, made their official product launch Aug. 15. Instead of essentially starting over when they arrive to the United States in the eyes of financial institutions, immigrants would show those institutions their credit reports and payment behavior. If Nova Credit succeeds in their goal of providing credit history to immigrants, they would create a $600 billion lending opportunity for American institutions.
This startup represents the best of American policy – helping motivated, entrepreneurial immigrants thrive rather than making it harder for them to succeed and pushing them away. Enabling immigrants access to loans will further unlock their potential on the economy. Everyone in the United States, immigrant and native-born alike, will benefit when people with great ideas have the freedom to turn those ideas into job-generating companies.
Looking More Closely at Microbusinesses Sheds Light on Other Aspects of Financial Security & Inequality
By David Meni, Graduate Intern on 08/23/2016 @ 10:00 AM
Being supportive of small businesses in the United States can often be like supporting apple pie or baseball. With every election season comes the inevitable parade of campaign commercials with B-reel footage of a smiling baker or construction worker, evoking the American entrepreneurial spirit.
However, many efforts to support “small” businesses in the United States don’t help the country’s millions of microbusinesses—those with 1-5 employees, including the owner. These firms constitute more than 90% of all small businesses and are responsible for a significant share of national employment relative to their size. In fact, during the Great Recession, microbusinesses were the only kind of firm that were still creating jobs.
If there’s one thing to know about microbusinesses, it’s this: if just one in three of them hired an additional employee, the United States would reach full employment.
Despite the fact that microbusinesses are such a powerful force in the U.S. economy, a minority of federal funds for small business go to these firms, and microentrepeneurs face barriers to financial stability in everything from financing to everyday cash flow.
CFED’s newest Fact File on microbusinesses highlights the importance of these firms in the national economy, diagnoses their financial challenges and elevates the potential of microentrepeneur support in advancing goals of racial and gender equity.
Here’s an overview of how microbusiness development is informed by some of CFED’s other work.
Predatory Lending Regulation Should Help Businesses, Too
One of the biggest hurdles facing microbusinesses and the entrepreneurs that run them is a lack of appropriate financing. Many traditional lenders are only providing business loans of $1 million or more. Since the Great Recession, that amount of smaller loans given out by traditional lenders has gone down year after year, even as larger loans have rebounded.
But demand for smaller business loans is high: 68% of small businesses are seeking loans less than $250,000, and 50% want loans less than $100,000. With the Small Business Administration’s financing of small loans remaining nearly flat since 2010, many business owners (and soon-to-be business owners) have had to turn to high-cost alternative lenders like Merchant Cash Advances (MCAs).
These loans have all the issues we’ve written about with predatory payday loans to consumers, but are for many thousands of dollars instead of a couple hundred. On average, an MCA has an interest rate of 94%, saddling business owners with monthly payments that are nearly double their income. These unsustainable loans prevent many microentrepeneurs from hiring or growing their business.
While the Consumer Financial Protection Bureau has come out with a proposal on how to rein in the debt trap of small-dollar consumer lending, such rules would not apply to these predatory business loans—despite the fact that they’re essentially mega-payday loans.
Microbusiness Support Could Address the Women’s Wealth Gap
My fellow graduate intern, Anna Mahathey, published a great blog series this summer about the harsh realities of the gender wealth gap in everything from retirement savings to asset limits. Though the growth of new women entrepreneurs since the recession has been high, women-owned businesses have more difficulty securing equity financing, accessing reliable networks and mentors, and growing their enterprise.
Since women are over-represented in the microentrepreneurship space, additional support, research and funding for businesses of this size could go a long way towards helping address the gender wealth gap and ensuring women entrepreneurs gain a more stable foothold in their retirement savings and other personal assets.
The Racial Wealth Divide is Also Fueled by Business Assets
“The Ever Growing Gap,” a report CFED and the Institute for Policy Studies published this month to illustrate how far-reaching the racial wealth divide is in the US, paints a bleak picture. The report finds that it will take centuries for Black household wealth to catch up to where white wealth was in 2013. Other households of color don’t fare much better.
While the racial divide in homeownership is one of the biggest drivers of this wealth gap, it is also driven by differences in business value between white entrepreneurs and entrepreneurs of color. The average value of a white-owned business is more than eight times larger than that of a Black-owned business. Much of the reason for this persistent gap in business value comes from a vicious cycle of financial insecurity facing microentrepreneurs who lack sufficient credit and savings to launch and sustain their businesses. Since entrepreneurs often leverage their own savings or the equity of their home to start and maintain a business, lower levels of wealth for people of color translates into more difficulty in sustaining entrepreneurship.
The silver lining here is that a bit of support for businesses owned by people of color goes a long way. Research conducted by FIELD at The Aspen Institute found that microenterprise development programs helped level the playing field for non-white business owners, increasing business survival rate to be on par with white-owned firms, and boosting business revenues and owner take-home pay.
Microbusinesses and entrepreneurship have always been important issues for CFED. As our new Fact File shows, the field of microbusiness intersects with so many of our other policy and advocacy areas.
Where We’ve Been & Where We’re Going: Our Financial Security at Work Initiative Road Trip
By Joanna Ain on 08/22/2016 @ 02:00 PM
We’ve traveled all around the country this summer as part of our Financial Security at Work Initiative. Through our posts, you became acquainted with young folks who were facing a variety of hardships. We met Julia who is balancing college classes and working nights as a waitress in Portland, Oregon, spoke to Robert in Houston, Texas who can’t always afford food and utilities with his part-time job in a fast-food restaurant and chatted with Ron, who is trying to complete law school in Chicago, Illinois, despite repeated issues related to his personal finances and health. Ranging from 18- to 29-years-old, the workers we interviewed were all employed by at least one employer and had a total household income below 80% of the area median income.
From these and dozens of other interviews with young workers across the country, we are seeking answers to eight questions:
- What financial issues are young workers dealing with?
- Where do they currently go for help on financial issues?
- How do young workers feel about addressing financial issues at work?
- What financial wellness services are currently available to young workers?
- What financial wellness services are they currently using?
- What available services aren’t young workers using? Why?
- Which financial services would young workers like to see offered at work in the future?
- Are there differences in perspectives between young workers with different characteristics?
With these travel stories from the summer, we hope that we’ve whet your appetite for more! We’re looking forward to sharing our complete findings in our report, due out in early 2017. The report will delve into the above questions and will share more stories from young workers in Portland, Philadelphia, Houston and Chicago.
In the meantime, join us at CFED’s 2016 Assets Learning Conference for our session, “Working It: Creating Financial Wellness Programs That Work for Employees.” Here you will get a sneak peek of the initial findings from our Young Workers Study, as well as a study from the Center for Social Development at Washington University in St. Louis on Employer-Based Financial Wellness Programs. You will also hear from experts in the field on how we can best move financial wellness programs forward.
Thanks for traveling around the U.S. with our Financial Security at Work Initiative team this summer — we’re looking forward to seeing you this fall at the ALC!
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 Julia, Robert and Ron have the chance to transform their hard work into a strong financial future. To learn more about the project, check out:
Rent Reporting for Credit Building is a Hit at Home Forward
By Sarah Chenven, Guest Contributor on 08/22/2016 @ 12:00 PM
Close to 40% of U.S. households live in rental housing, and that percentage is even higher for families at the lower end of the income spectrum. Many of those low-income renters are among the 100 million U.S. consumers with no, thin or subprime credit and who lack opportunities to establish or build credit. Historically, only homeowners have been able to build positive credit histories when make housing payments on time. And this matters. A good credit score can save a person tens of thousands of dollars in interest and fees over the course of a lifetime and it can make the difference in access — or lack thereof — to safe housing, employment and asset-building opportunities like starting a small business and owning a home.
Credit reports and credit scores that do not recognize on-time rental payments as creditworthy behavior present an incomplete and negatively skewed assessment of the credit risk many renters pose, particularly low- and very-low income residents living in public housing and striving to successfully join the financial mainstream.
Fortunately, there is a now a proven and cost-effective way for these renters to benefit from the same credit building opportunities afforded to homeowners through the inclusion of on-time rent payments as valid trade lines on traditional consumer credit reports (view the results of Credit Builders Alliance’s 2012-2014 Power of Rent Reporting Pilot). Rent reporting provides them with the chance to build credit without taking on additional debt or incurring the burden of an additional monthly expense. And now, progressive public housing authorities across the country like Home Forward (HF) in Portland, Oregon (formerly the Housing Authority of Portland), who have long recognized the importance of empowering residents to move toward economic independence, are naturally looking to implement rent reporting programs.
In April 2015, Credit Builders Alliance (CBA) received a generous grant of $40,000 from the Meyer Memorial Trust to work with three entities: Home Forward, to furnish resident rental data; Innovative Changes (a local nonprofit), to provide credit education; and CFED, to help assess resident credit and other outcomes. The primary objective was to implement a responsible rental payment reporting initiative. CBA considers rent reporting (as it does traditional loan data reporting) to be a responsible financial capability strategy when combined with credit education to help establish and/or improve participant credit profiles.
This initiative was piloted at one of Home Forward’s Hope 6 properties — Stephens Creek Crossing — for a group of low-income residents participating in its Family Self-Sufficiency program, GOALS (Greater Opportunities to Advance, Learn and Succeed), which is a natural fit given the program’s purpose. To date, Home Forward has successfully enrolled 67 residents, 28 of whom have now had their rents reported for over three months. Once the benefits of rent reporting spread by word of mouth across the property, Home Forward expects to see even more residents enroll.
To leverage the rent reporting as a financial capability strategy, Innovative Changes was contracted to provide credit education to enrolled residents. Innovative Changes designed a custom, four-part credit workshop series that covered the importance of having a good credit history, how building credit through rent reporting can help households achieve and sustain short- and long-term goals, how to dispute errors on credit reports, how to negotiate with creditors to settle debts and best practices in monitoring and leveraging improved credit over time to achieve goals. In total, 62 residents participated in the various workshops, and pre- and post-survey results revealed that participants were extremely engaged and increased both their knowledge and skills.
CBA also contracted with CFED to help assess credit and other program outcomes of the initiative. With input from CFED, CBA, Home Forward and Innovative Changes decided to track not only credit score changes and debt reduction levels, but also implementation lessons learned. CFED conducted interviews with residents participating in the pilot, as well as Home Forward and Innovative Changes staff, about their respective experiences with the program. In addition to the pre- and post-surveys, these interviews will help inform future iterations of the pilot with respect to outreach and marketing, program design and overall program success.
The final report on this initiative will be formally presented at CFED’s Assets Learning Conference in September 2016 — join us there to hear the details! The preliminary results look promising. Here’s what we know so far:
- Rent reporting is seen by renters as a great opportunity for credit building. 100% of residents who participated in the final workshop stated that they were likely or very likely to consider their credit when making future financial decisions.
- Rent reporting offers a significant credit-building opportunity to residents living in public housing.
- Rent reporting is a viable financial capability strategy for affordable housing providers seeking to help their residents achieve financial stability. According to Rachell Hall, Financial Capability Coordinator at Innovative Changes, “Rent reporting needs to be coupled with financial education – [it is] more impactful when you’re more informed.”
CBA, Home Forward, Innovative Changes and CFED expect this pilot to serve as a model for other public housing authorities hoping to directly report rental payments and partner with local nonprofit experts to integrate credit education as a powerful credit building and financial capability strategy.
Sarah Chenven is Deputy Director of Credit Builders Alliance.
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