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Financial Industry Perspectives
contains articles by the
Supervision and Risk Management
Division reporting on a variety of banking issues and topics.
Financial Industry Perspectives will now be distributed exclusively online. Instead of publishing an annual collected issue, new articles will be published on a periodic and continuous basis. You can subscribe to receive E-Alerts when new issues become available. |
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2007
Home Financing in Kansas City and
Its Contribution to Low- and Moderate-Income Neighborhood Development
By James Harvey and Kenneth Spong
In recent years, the flow of home financing to low- and moderate-income neighborhoods in the Kansas City metropolitan area has experienced a notable increase. This article looks at a key question surrounding this lending -- What is the effect of such financing on neighborhood conditions and local residents?
The article uses a variety of demographic and housing variables from the 1990 and 2000 U.S. Censuses, as well as city and county statistics, to analyze the effect of home purchase lending on neighborhood conditions. Among the findings are that median housing values rose from 1990 to 2000 at much the same pace in low- and moderate-income neighborhoods as in other parts of Kansas City. This outcome implies that housing in lower-income neighborhoods has been as good of an investment as in the rest of the metropolitan area. Another finding is that the low- and moderate-income census tracts in Kansas City with the highest rates of home lending generally experienced rising homeownership rates, substantial increases in new home construction, and other signs of neighborhood progress.
This article thus suggests that increased home financing -- by supporting homeowners and rising housing values -- can help to stabilize or improve conditions in lower-income neighborhoods. This progress in low- and moderate-income neighborhoods is also likely to reap further benefits by attracting new homebuyers and by encouraging lenders to provide additional financing.