The State of Bank Reinvestment in New York City: 2018

The CRA is one of the most important laws we have to bring banks to the table to reinvest in our neighborhoods. ANHD produces this report each year 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.  However, communities suffer when banks don’t invest enough, lend inequitably, or invest irresponsibly in a way that fuels displacement. 

Executive Summary

Each year, the Association for Neighborhood & Housing Development (ANHD) produces this report to help communities, banks, legislators and bank regulators and allies understand the impact of the Community Reinvestment Act (CRA) at a local level. This year’s report comes at an especially important moment, as regulators are contemplating some of the biggest changes to the CRA in over 20 years.

Passed in 1977, the CRA is one of the most important laws we have to encourage banks to lend equitably and to partner with nonprofits and governments to support community development in low-income communities. Under the CRA, banks have a continuing and affirmative obligation to safely and responsibly help meet the credit needs of the lower-income people in the neighborhoods in which they do business. If a bank takes deposits or does business in a neighborhood, it must provide all of its services equitably and support community and economic development efforts that benefit the same populations.

Since its passage, the CRA has leveraged trillions of dollars in low-income communities nationwide. Each year, billions of dollars are reinvested in New York City, where the CRA has fostered one of the most comprehensive ecosystems in the country to build and preserve affordable housing and support community development.  ANHD estimates that since the CRA’s passage, over 330,000 units of affordable housing have been built in New York City, thanks in part to private loans and investments leveraged by the CRA.  The CRA has led to numerous CRA agreements and partnerships, including new products and practices that have benefited low-income and immigrant communities. 

At the same time, there is more to be done to protect the communities and people that the CRA was designed to support. Historically redlined communities – low-income, people of color, immigrants – still have trouble accessing basic bank accounts and obtaining home and small business loans. Racial disparities in lending persist, and bad actor landlords too easily get access to speculative financing that exacerbates harassment, poor living conditions, and displacement.

Barely 10 years have passed since the great recession of 2008, which was a direct result of irresponsible behavior by financial institutions that targeted and misled poor borrowers and, disproportionately, people of color with expensive and unsustainable loans. Congress was forced to bail out large banks in order to stabilize our financial system, and then enacted systemic and consumer protections through the Dodd–Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).   Ideally, at the federal level we would be working towards ways to build upon these advances, but instead we are defending them as forces in Washington roll back these protections by reducing oversight, rolling back consumer protections, and reducing transparency.

Within this context, ensuring the reforms being proposed to the CRA is all the more critical. While we know there are many areas where the CRA can be updated and improved upon, some aspects of the new “modernization” efforts proposed by the Office of the Comptroller of the Currency (OCC) could have disastrous consequences, particularly if the OCC decides to reduce CRA down to just one large numerical goal, while also and reducing the focus on branch locations reaching lower-income people and communities. We strongly urge the regulators to preserve the fundamental place-based approach of the CRA, with its focus on lower-income people and communities, and to expand it so as to increase access to credit, banking, and resources for low-income people of color and immigrant communities.  

This report analyzes the CRA activity from calendar year 2017 for 24 banks that operate in New York City, including some of the largest banks in the country. We include some additional data in the narrative to provide more recent context.

Summary of Trends & Findings

Deposits and the Reinvestment Quantity & Quality Indexes: Local deposits continue to increase, but reinvestment declined sharply, down nearly 30%. Deposits overall are up less than 1% from the prior year, and up 25% from 2014 to 2017, reaching $1.23 trillion. From 2016 to 2017, deposits increased 4.6% among retail banks and 5.9% outside of Manhattan.  Half of all banks increased deposits but decreased reinvestment in New York City. And only five banks reinvested over 5% of their local deposits, down from 11 in 2016. Ten of 24 banks had a quality score over “3”.

Branches and Bank Products: The overall number of branches among banks in this study is down by just three, and down 7% in lower-income tracts. Some banks closed branches, while others opened; the distribution of branches remains inequitable. Core Manhattan is inundated, while lower-income neighborhoods still lack sufficient branches and ATMs. The Bronx is still the most unbanked area in the City, though 2017 saw a net increase of three branches. Five branches closed in lower-income tracts overall and 11 opened. Some new accounts appear more accessible to lower-income New Yorkers, but many remain out of reach. Overdraft fees declined slightly but were still well over $6 billion. At six banks, including two of the largest banks, overdraft fees accounted for over 40% of the banks’ service fees and at two banks, they make up over 10% of consumer transactional deposits. While many banks accept New York City’s municipal identification card, IDNYC, as secondary identification, no bank in this study accepts it as primary identification. 

Multifamily Lending: This category of lending declined sharply again among the banks in this study, both overall and this year in lower-income neighborhoods (down 26% overall and 29%, in LMI tracts). This is distressing but in-line with general commercial mortgage lending trends. The number of multifamily loans qualifying for community development declined 29% and the dollars were down 36%. While percentages of buildings documented as being in physical distress remain low, we know from experience that many buildings where harassment and displacement occur do not appear on distressed lists; if a landlord successfully displaces tenants, the building may never fall into distress.  Rising rents and sales prices – especially in historically more affordable neighborhoods – increase the pressure on lower-income tenants, putting them at risk of displacement. But banks and non-bank lenders continue to lend to known bad actor landlords. Responsible lending by banks should not fuel displacement; banks can work with tenants and tenant organizers so they can proactively ensure that tenants in their buildings are protected and respected. New tools exist to identify bad-acting landlords and hold banks accountable for supporting them, but they must be enforced.

1-4 Family Lending: The number of home purchase loans among banks in this study was relatively stable from 2016-17, hovering over 14,150 loans but still below the 16,300 in 2013 levels. Lending to lower-income borrowers decreased by 8%, barely staying over 1,000 loans, well below the 1,400 loans in 2013. As CRA-regulated banks are pulling out of 1-4 family lending, the rise of non-bank lenders continues, particularly in refinance loans Federal Housing Administration (FHA) lending. This trend threatens to undermine CRA goals because nonbank lenders are not covered by the same regulatory oversight, including the CRA. Nearly 30% of home purchase loans and over 55% of refinance loans were made by non-bank lenders, as well as over 90% of FHA home purchase loans and refinance loans. Meanwhile, racial disparities persist. 22% of New Yorkers are Black and 29% Hispanic, yet fewer than 8% of home purchase loans in NYC went to Black or Hispanic borrowers.  The vast majority of banks in our study performed worse than that; at each of the “Big Four” banks (Wells Fargo, Chase, Bank of America, and Citibank), fewer than 5% of their home purchase loans were to Black borrowers, and at or below 7% were to Latino borrowers of any race in 2017. 

Community Development Lending & CRA-Qualified Investments: The amount of money dedicated to community development loans and investments decreased by nearly 30%.  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.  Additionally, LIHTC dollars are down 25% from 2016.   The uncertainty leading up to the eventual tax cuts at the end of 2017 likely drove much of this decline.  In 2017, lending to nonprofits decreased in volume and dollar amount. However, in the midst of this decline, we are pleased to note that the number of community development loans to neighborhood-based community development corporations (CDCs) increased.

Economic Development & Small Business Loans: The dollar amount of community development loans, investments, and grants for economic development all decreased in 2017.  As in prior years, the investments are concentrated in just a few banks: the majority made no investments for economic development, 13 made community development loans for economic development, and 14 made grants. But quality matters as much as quantity, and there is some positive news on that front. We are pleased to see 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. Among banks in this study, small business lending increased close to or over 50% overall and in low- to moderate-income tracts. However, much of that was driven by Chase’s credit card loans which now capture revenue size; excluding Chase’s credit cards, the number of loans decreased, and the dollars increased much less.

CRA-Eligible Philanthropic Grants: Grants were up 2.7% by volume, but down 8% by dollar in 2017.  The trend of consolidation, with larger grants going to fewer organizations, continues, but not at the same scale as in prior years.  Most banks continue to dedicate less than one tenth of one percent of their local deposits to grants. Grant-making to neighborhood-based organizations decreased 14% by volume but increased 43% by dollar in 2017; much of that increase was driven by a large grant at one bank. At four of the largest banks and almost all of the smaller banks, at or over a third of grants were to neighborhood-based organizations.

Summary of Recommendations

Banks should maintain and increase the quantity of investment in low- and moderate income (LMI) communities and benefiting LMI people. CRA investments have been a critical tool in these communities and they must continue.

Improve bank practices and CRA exams to better emphasize the quality of investments, not only quantity. Impact on community can and should be measured.   The CRA must prioritize and promote activities that enable LMI people, immigrants, and people of color to access deep, permanent affordable housing, affordable homeownership, quality jobs, and ultimately better financial stability through the range of CRA-eligible activities. The CRA must do a better job at preventing displacement and penalizing activities that fuel displacement. 

Nonprofit mission driven developers, CDFI’s, and local neighborhood-based organizations are uniquely situated to identify and respond to local emerging and long-term needs.  Banks should ensure that their CRA dollars are directed to such organizations.

Although the CRA is race-neutral – focusing on LMI communities as opposed to communities of color – the law was passed in 1977 on the heels of other major federal civil rights legislation that explicitly aimed to end discrimination on the basis of race, including the Fair Housing Act (1968) and the Equal Credit Opportunity Act (1974). Both the CRA and the Home Mortgage Disclosure Act (1975) were, within this broader context, seen as tools to support and stabilize low-income communities of color.  But today, racial disparities remain in lending, and multifamily lending to bad actors who displace tenants disproportionately impacts low-income people of color.  The CRA should explicitly evaluate how well banks are serving people and communities of color, in addition to examining how well they are serving LMI people and communities.

A continued focus on branches and affordable, accessible, culturally sensitive products and services are critical for the communities the CRA is designed to serve.

To perform these deeper qualitative assessments and foster ongoing relationships with local nonprofits, CDCs, and other actors, banks should create and maintain strong and locally based community development teams. With this expertise, banks will be able to leverage CRA investments more effectively and have a greater impact on LMI communities.

Ensure that any efforts to reform the CRA build upon and strengthen the core of the existing law it, particularly the place-based focus and commitment to LMI communities.  Reform efforts must not weaken the law in any way.


2018 Chart: How Well Are NYC’s Banks Serving Our Communities?


2018 Reinvestment Quantity Index & Quality Score


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