Research Report Measuring Lending Gaps in Mortgage and Small Business Loans in Chicago’s Communities
John Walsh, Karolina Ramos
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In Chicago, the distribution of mortgage and small business lending is shaped in part by race and place. Disparities in lending in Chicago have been well documented, with mortgage and small business loan originations more readily flowing to predominantly white neighborhoods that have high average incomes, widening gaps in capital access for households of color and households with low and moderate incomes.

This report builds upon work exploring national trends in neighborhood-level lending by quantifying mortgage and small business lending relative to consumer demand by race and neighborhood location and demographics in Chicago’s communities. In addition, we provide a qualitative analysis of the challenges and needs among communities of color and communities with low incomes addressed in interviews with five Chicago community organizations and lenders engaged in community development financing, small business and housing programs, and grantmaking.


Disparities in lending affect the financial well-being of individual people and households and the economic resilience of broader communities. Limited capital, wealth, and financial security constrains community members’ abilities to invest in their own futures and contribute to their local economy and tax base.

One of the primary efforts in reducing disparities in access to financial service provision is the Community Reinvestment Act (CRA). Passed in 1977 and revised in 1995, the CRA was intended to remedy America’s history of redlining and other racist lending practices. In 2021, Illinois passed legislation to become the fourth state with a state-wide CRA. Around the same time, the three federal CRA regulators released a joint proposed update to national CRA rules. The criteria set in state and national regulations will influence the behavior of lenders, and as legislators modernize the rules, it is important to document the nuances of lending disparities in the status quo.


Mortgage lending

  • Mortgage lending in Chicago’s predominantly nonwhite neighborhoods, 28.0 percent of all lending in the city, is not keeping up with the share of homeowners that these areas represent (36.4 percent). The implication is that predominantly nonwhite neighborhoods are falling further behind in accessing homeownership.
    • Racial differences in lending are being largely driven by disparate service to Black households, as they make up 22 percent of Chicago’s homeowners but receive only 14.5 percent of purchase mortgage lending.
  • Low- and moderate-income (LMI) neighborhoods (home to 47.2 percent of homeowners) and middle-income neighborhoods (home to 20.1 percent of owners) in Chicago both receive mortgage lending disproportionate to their share of homeowners (39.6 percent and 18.4 percent, respectively). This disparity in LMI and middle-income areas is driven entirely by lending gaps in predominantly nonwhite areas, as demographically mixed neighborhoods and predominantly white neighborhoods at these income levels receive lending greater than their homeowner share.

Small business lending

  • Originations of small business loans in Chicago’s predominantly nonwhite neighborhoods (25.2 percent of all lending in the city) are lagging the share of active businesses in these areas (28.3 percent of all active businesses).
  • In Chicago’s low-income neighborhoods, 68.9 percent of active businesses work in predominantly nonwhite areas, but lenders originated only 56.4 percent of loans to small businesses inside those areas. In middle-income areas, the gap is starker: 16.7 percent of businesses are in predominantly nonwhite areas, but only 9.4 percent of loans to small businesses were originated in these areas.
  • Expanding community reinvestment coverage to banks that have a large lending presence but no physical branches would provide a significant boost to the share of lending evaluated in low-income neighborhoods in Chicago.

We offer concluding remarks on the implications of these results for ongoing CRA regulatory updates. The data we assembled for this analysis are available for download from the Urban Institute Data Catalog. We provide lending and demographic variables aggregated at both the census tract and community area levels.

Research Areas Housing finance Neighborhoods, cities, and metros Economic mobility and inequality Race and equity
Tags Financial products and services Capital flows Community development finance and CDFIs Small businesses Single-family finance Community Reinvestment Act
Policy Centers Housing Finance Policy Center Research to Action Lab
Research Methods Quantitative data analysis Data collection Community Engagement Resource Center
States Illinois
Cities Chicago-Naperville-Elgin, IL-IN-WI
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