Officials at Chicago-area lending institutions disputed Monday a study released by the Woodstock Institute that indicated residential lending practices in the metropolitan area favor the suburbs and shortchange most city neighborhoods.
The Woodstock Institute study found that, from 1980 through 1983, the suburbs got more loans and loan money than the city, and, within the city, some neighborhoods received much more loan money than others–particularly minority communities, low-income areas and older white communities.
Such findings, the study contended, showed that Chicago and many of its neighborhoods were, in effect, being redlined.
Some housing experts applauded the study. ”This study verifies what a lot of us have known for a long time,” said Bill Foster, executive director of the Chicago Rehab Network, which runs a program to rehabilitate old housing in the city for the poor.
But lenders argued Monday that the study was faulty and that the lending patterns that it described could be explained by market factors.
Gerald K. Rogers, chairman of the Chicagoland Association of Savings Institutions, which represents 70 savings and loans, said he had not seen a copy of the study but released a statement saying, ”The news accounts appear to show that the study was based on a mechanical analysis of lending without taking into account many loan factors.”
Nonetheless, he added, ”the study certainly deserves examination to determine if there are loan problems affecting residential real estate in the city.”
A number of lenders asserted that loan money is available for communities throughout Chicago but is not being sought.
”This study is only looking at one side of the equation, where the loans are made, and that leads to a lot of erroneous conclusions,” said Joseph Scully, president of St. Paul Federal Bank for Savings. ”Where is the credit demand and who is applying is just as important. We have money available. We`ve tried to price a mortgage product that is attractive and we have spent almost a million dollars to advertise it. What more can we do as a financial institution? We can`t make a loan if we`re not asked.”
Scully said St. Paul Federal is granting credit approvals ”uniformly across all census tracts. We see no difference between upper and lower income neighborhoods.
”We want to serve the needs of the communities,” he said. ”If we fall short we want to know about it. But we feel we`re making the loans when we are being asked.”
At Talman Home Federal Savings and Loan Association, Thomas Gobby, vice president of public and community relations, said: ”We don`t turn people down. If you meet the criteria, you make the deal.
”It doesn`t make sense to us to not put money into where we`re doing business. Talman has mortgages in every one of the 77 communities, and it would not make sense to us not to protect our interest.”
Nonetheless, Gobby acknowledged that Talman distributes only about 35 or 40 percent of its mortgage money in Chicago now in comparison with more than 50 percent in the mid-1970s.
He said this change was not the result of a policy change but of an evolution in the savings and loan as it has grown and merged with smaller ones in the last decade, expanding its operations into the suburbs. Also, many of its customers moved to the suburbs in the last decade, Gobby said.
The study by the Woodstock Institute, a not-for-profit organization that works for the economic improvement of urban and rural communities, examined $10.4 billion in residential loans made by more than 500 Chicago-area financial institutions from 1980 through 1983. The basis of the examination was data supplied to the federal government by the banks and savings and loans on their distribution of loans by census tract.
The Woodstock Institute study found that, during the four-year period, the suburbs received twice as many loans and three times as much loan money as the city neighborhoods, even though the suburban population was only a third larger than the city`s.
Within Chicago, 11 predominantly white neighborhoods had high or adequate investment levels, but 66 other neighborhoods had less than adequate credit, including 47 that were described as having low credit or being credit-starved. Those low credit/credit-starved neighborhoods included every city community that is predominantly minority, even those with median family incomes well in excess of the citywide average. They also included 10 predominantly white neighborhoods, many of them middle-class, such as Mt. Greenwood, Gage Park and Bridgeport.
Despite the arguments of the lenders, the authors of the study contended that the disparities between the city and suburbs and among city neighborhoods could not be explained solely on the basis of income, neighborhood stability, housing costs or the percentage of single-family houses within a community.
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Al Raby, chairman of the Woodstock Institute and director of the city`s Human Relations Commission, said the denial of credit to such neighborhoods will lead to deterioration which, in turn, will threaten other city communities.
”There are a vast number of neighborhoods that do not receive enough credit,” Raby said. ”Many neighborhoods of the city have, in effect, been redlined. The concern is that the city itself may be redlined.
”There is some kind of discrimination, and it seems to be not just along racial lines. It involves much more of the city.”
In fact, Foster of the Chicago Rehab Network commented that redlining
–also known as disinvestment–has gone on so long in many city neighborhoods that ”the solution, unfortunately, is not going to be simply re-investment by the lenders. We need a real federal housing policy.”
Robert Lucas, president of the Kenwood-Oakland Community Development Corp., agreed. ”True, there is still redlining going on,” he said. ”No one is going to deny that. But the biggest enemy to low-income housing in this community is the lack of a federal housing policy that can be used to make deals work. There is no way we can make a deal work with private money alone.”
Raby urged Chicago-area financial institutions ”to invest in the future of Chicago by setting goals for their institutions to substantially increase their new loan originations in Chicago.”
Raby also said the city and other local government bodies should use information on the lending practices of financial institutions in determining where to deposit public monies, and federal regulators should do a better job of enforcing the anti-relining provisions of the federal Community Reinvestment Act.
Since 1983, the metropolitan area`s economy has rebounded moderately, and there has been an effort by several financial institutions to establish programs to improve lending in city neighborhoods.
”But, if you took all those programs, they have not even made a dent in the lending disparities,” said Foster, whose organization is involved in many such programs.
The apparent discrimination against minority neighborhoods is not limited to the city, Foster said. ”If you look at the list of the suburbs as well, you can clearly see the black suburbs at the bottom of the list,” he said.