FINANCING COMMUNITY: Methods for Assessing Residential Credit Disparities,Market Barriers,and Institutional Reinvestment Performance in the Metropolis

ABSTRACT: Many urban areas in the 1980s have witnessed the revitalization of a community reinvestment movement, one directed at encouraging private financial institutions to make loans in low and moderate income communities and particularly in minority communities. Research has played a strong role in promoting reinvestment efforts by documenting metropolitan housing finance patterns. Accompanying the growth of community reinvestment activity will be expanded research opportunities to investigate how credit patterns underlie metropolitan development trends and to help promote more responsibile community reinvestment activity. To aid the continuation of research efforts, this paper addresses a series of methods used to assess housing credit disparities and market barriers to finance. It discusses data availability and the strengths and limitations of these data, methods for measuring credit disparities, techniques for assessing racial bias and market barriers in lending patterns, and methods for assessing the community reinvestment performance of individual financial institutions. The final part addresses a more comprehensive research agenda that focuses on investigating the housing market institutional sources of residential investment disparities, particularly by race. Knowledge of metropolitan credit patterns and market barriers to credit can be enriched by studies of the housing market processes that lead to uneven credit flows and, thus, to metropolitan-wide inequality.