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April 18, 2014

In Indian Country, improved housing starts with a good foundation

April 18, 2014

Why include economic development in a report about housing in Indian Country?  Anywhere in the U.S., the local economy drives economic wellbeing and people’s ability to improve their housing conditions, and Indian Country is no different. Both on and off tribal lands, employment and business opportunities affect housing needs, including people’s ability to afford, maintain, and form new households. Our new HUD-funded study of American Indians and Alaska Native (AIAN) housing conditions provides the latest information on economic development in Indian Country—and why it matters for housing.

In the 1990’s, Indian Country’s economic development improved substantially, attributed in large part to the shift in U.S. government policy furthering self-determination for tribes by allowing them to control more jobs, take over program and activity operation, and better allocate federal funds to meet their needs. With more freedom to select their own path, many chose to strengthen their own governance to foster entrepreneurship.

Until the recession in 2008, Indian Country’s economy continued to prosper and even outperform the rest of the nation in some growth indicators:

  • New business ownership outpaced the rest of the US. The number of Native-owned businesses increased nationally by 7 percent, growing from 102,000 in 1992 to 201,000 in 2002, compared to just 2.9 percent for all U.S. businesses. This growth continued over the next few years and by 2007, there were 237,000 Native-owned businesses.
  • Employment grew faster than the national average. From 2000 through 2007, employment in Native counties (contain all or part of one or more tribal areas) grew by 303,000 per year. The Native American county growth rate was 1.4 percent per year, dwarfing the 0.36 percent average for all non-Native American counties.

AIAN

  • Lending to support economic development increased. Native Community Development Financial Institutions (CDFIs), including loan funds, credit unions, and banks, improve access to capital  by providing credit and other financial services to underserved tribal communities. The number of certified Native CDFIs grew from only three in 2000 to 72 by mid-2012. Since 2002, the Treasury’s CDFI Fund has awarded more than 175 grants totaling $31 million to Native CDFIs, which serve nearly 100 tribal communities.
  • Businesses and economic development activities diversified. Tribally-owned business expanded and diversified both on and off reservations to include more hotels, resorts, golf courses, manufacturing, oil extraction companies, natural resources, and wild game hunting. Gaming has also been an important force behind economic growth in selected areas of Indian Country, though a large share of revenues flow to a relatively small number of tribes and benefit a small percentage of the AIAN population.

And then came the recession. Though their economy was strong through 2007, the recession hit Indian Country hard. From 2007 to 2010, the number of jobs dropped by 3.0 percent per year compared with a 2.3 percent drop annually for the rest of the country.  The effects were uneven across regions: places that performed best earlier in the decade typically faced the sharpest reversal later on. And despite a cushion from federal subsidies, competition for federal and state funds, a loss of private revenue, and the overall need to do more with less took a toll on CDFIs.

Is there hope for housing? The economic progress that began in the 1990s may have stalled in 2008, but the improved economic and government infrastructure provides a much more favorable environment for economic development and entrepreneurship. Native CDFIs have used various federal economic development funding sources, such as New Markets Tax Credits and corporate funding, to support small business lending and attract manufacturing companies to reservations.

The opportunities to expand business financing  as well as entrepreneurial energy hold promise for economic development in Indian Country. New data collection under way in our housing study will further explore the relationship between economic development and housing.

More research is available on the Urban Institute’s new Native American Communities landing page 

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