Community reinvestment by NYC banks falls sharply

A new report from the Association for Neighborhood and Housing Development shows that bank reinvestment in New York City has declined sharply.
The biggest declines are in Community Development Lending, Multifamily Community Development Mortgages, and CRA-Qualified Investments
As regulators and legislators are debating the future of the Community Reinvestment Act (CRA), the ANHD said the report aims to help communities, banks, legislators, bank regulators and allies understand the impact of the Community Reinvestment Act (CRA) at a local level.
“Quality bank reinvestment has the potential to impact all the work ANHD does to build and preserve affordable housing, support equitable economic development, increase access to homeownership, support small businesses, and increase access to banking,” said the Association.
“However, communities suffer when banks don’t invest enough, lend inequitably, or invest irresponsibly in a way that fuels displacement.”
According to the ANHD report, reinvestment declined sharply, down nearly 30 percent. This includes sharp declines in community development lending, multifamily community development mortgages, and CRA-qualified investments. These are loans and investments that can be used to help build and preserve affordable housing, support equitable economic development, and provide community services.
The most notable decline was in Low Income Housing Tax Credits (LIHTC), one of the most important sources of financing for affordable housing in New York City. Among banks for which we have data from 2013 to 2017, LIHTC investments are at their lowest level in five years.
The report noted that some new branches opened in low-income neighborhoods, but the distribution of branches remains persistently inequitable. Banks in this study took in over $6 billion in overdraft fees in 2017. No bank in this study accepts New York City’s municipal identification card, IDNYC, as primary identification to open a bank account.
Racial disparities in home lending persist. 22 percent of New Yorkers are Black and 29 percent are Hispanic, yet in 2017, fewer than eight percent of loans to purchase a home in New York City went to non-Hispanic Black borrowers and fewer than eight percent to Hispanic borrowers.
Two banks have now adopted ANHD’s Responsible Multifamily Lending best practices, endorsing lending guidelines to protect tenants. NYS Department of Financial Services issued guidance to all state-charted multifamily lenders that closely match ANHD best practices.
But the Association said more must be done to enforce and expand these guidelines noting “Banks continue to lend to landlords who harass and displace tenants. Banks in this study hold the loans on over 400 buildings on the new Certificate of No Harassment pilot list, all of which exhibit signs of distress or potential displacement of tenants.”
Community development loans to mission driven nonprofit Community Development Corporations (CDCs) increased and banks continue to engage with nonprofit developers and the City to use and support the City’s new Industrial Developer Fund to support affordable manufacturing space, according to the report.
As regulators contemplate CRA reform over the coming months, ANHD said it believes that some of the ideas proposed by bank regulators at the OCC would have terrible consequences for the low- and moderate-income people communities the CRA was meant to serve.
“We strongly urge the regulators to keep the fundamental spirit of the CRA and to expand upon it, so as to increase access to credit, banking, and resources for low-income, minority, and immigrant communities,” added the association.