The blog of the Urban Institute
January 31, 2019

What the Bay Area and Cleveland reveal about trends in federal community development funding

January 31, 2019

Capital flows help explain why communities look the way they do. They define how much money is reaching developers to build or rehabilitate commercial real estate or multifamily housing, how much is reaching businesses to buy equipment, and how much is reaching consumers to buy homes.

To make up for shortfalls in private capital markets, the federal government sponsors and provides incentives for community development capital in areas that most need them. Our tool, “Community Development Financial Flows,” tracks these federal flows to all US counties (and Puerto Rico) with more than 50,000 residents across housing, small business, impact finance, and other community development. (Each component is explained in greater detail in the feature.)

Private capital flows have clear geographic winners and losers, but, perhaps more surprisingly, so do federal community development financial flows. Across the nearly 1,000 counties we studied, federal community development funding is not evenly distributed among counties on a per capita basis. Although there is much variation, these disparities played out in four ways nationally: 

  • Large counties get disproportionately more funding.
  • Even among large counties, there are stark differences in funding per capita.
  • Some counties appear to get no funding from certain sources.
  • The level of distress that a county experiences generally does not directly relate to funding.

To further explore trends, it’s helpful to look closer at regions of interest. Greater Cleveland and the Bay Area, for instance, provide examples of metropolitan areas with wide variance in community development funding.

How the Bay Area and Greater Cleveland compare in combined community development funding

Five of the Bay Area’s nine counties rank above the 80th percentile of combined community development funding, while two Bay Area counties fall in the lower 60th percentile. Of the five metropolitan statistical areas that compose metro Cleveland, Cuyahoga County ranked in the 98th percentile while the other four counties were no higher than the 51st percentile on combined funding.

table 1

On average, as is the case nationally, counties with larger populations in these two regions receive more federal community development funding per capita than do smaller ones. The counties housing the four principal cities in these regions—San Francisco County, Cuyahoga County (Cleveland), Alameda County (Oakland), and Santa Clara County (San Jose)—made up four of the five counties on this list receiving the most combined federal funding. Comparatively, less populous counties, such as Napa County, California, or Geauga County, Ohio, fared less well.

Delving deeper paints a better picture of investment trends

But combined investment levels don’t tell the entire story. To fully understand a given county’s federal community development resources, it’s useful to examine flows by type.

Even for counties that rank highly on combined flows, there are still, more often than not, areas where they punch below their weight. These sectors can be targeted by local government and philanthropy looking to build capacity. For example, while San Francisco County ranks first in the state and in the 100th percentile nationally on combined funding, it has low levels of small business funding per small business employee (41st percentile).

Meanwhile, Lorain County, Ohio, sits in the middle of the pack nationally in the 51st percentile of combined funding, despite being in the 70th percentile on housing. The county’s middling performance is driven by a lack of small business funding (34th percentile). Local efforts might do well to direct more resources toward small business financing. Boosting housing funding should be the top concern of those in Geauga County, which falls in the 16th percentile of federal housing funding.

By considering each sector, this tool is an effective way to consider both where capital gaps might currently exist, as well as areas where effective federal funding options could be paired with other economic development resources.

Most notable is how Opportunity Zones can be leveraged. With Cuyahoga County’s lagging small business score (65th percentile), Opportunity Zone–driven investments to small operating businesses could help fill the gap left by lackluster lending. But much work is needed for Opportunity Zone capital to be useful in these communities and for these purposes.

In comparing counties across regions such as the Bay Area or Greater Cleveland, as well as in other states and regions, we can better understand where federal community development funding is going and assess whether these investments are properly targeted. Local actors can look at their county’s federal allotment and direct their own efforts to fill gaps accordingly.

These federal investments are a much-needed shot in the arm for struggling communities, giving new life to projects that would not exist absent these supports. How strong is your county, region, and state on community development? Are they getting enough capital? Conduct your own analyses with our downloadable county- and state-level data available in the “About the Data” section of the feature.

Construction cranes hang over a building under construction on October 5, 2018 in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

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As an organization, the Urban Institute does not take positions on issues. Experts are independent and empowered to share their evidence-based views and recommendations shaped by research.