Partners (Number 3, 2008)

Fed Report Confronts Concentrated Poverty

Hurricane Katrina drew the nation's attention to the acute hardships that afflicted low-income communities caught in the disaster, thus focusing a new light on the persistence of concentrated poverty in the U.S. As government officials, community development workers and neighborhood organizers tried to respond to the devastation wreaked by the storm, it became apparent that replacing the physical infrastructure alone would not move the people of this community out of poverty.

Photo of a storefront in Little Haiti neighborhood, Miami
Storefront in Little Haiti neighborhood, Miami

The reality of concentrated poverty revealed by Katrina is mirrored in many cities and rural areas throughout the country, and it calls for a complex response customized to the particular circumstances of each affected community. In an effort to develop successful approaches to the problem, the Federal Reserve Bank has partnered with the Brookings Institute to report on concentrated poverty in America.

What is concentrated poverty?
The phrase "poverty in America" may conjure images of hunger, homelessness, unemployment, low-paid work or poor health. We may think of specific populations who are more likely to live in poverty, such as racial and ethnic minorities, children and single-parent households.

But we are also likely to think of places associated with poverty—poor inner-city neighborhoods, isolated rural areas, or Native American reservations. Concentrated poverty concerns the tendency, in many areas of the United States, for poor populations to be clustered into impoverished communities.

People who live in areas of concentrated poverty must contend with a whole set of circumstances that make it difficult to transition out of poverty: their neighborhoods may be unsafe, their schools may be failing, their housing is likely to be substandard, public and private services may be lacking, and a sense of diminished hope may pervade the entire community.

A large body of research argues that these areas of concentrated poverty place a double-burden on poor families that live within them, making the hardships imposed by their own individual circumstances even worse. Areas of concentrated poverty can have wider effects on surrounding areas as well, limiting overall economic potential and social unity even further.

Brookings Institution partnerswith Fed's Community Affairs staff
In 2007, the Federal Reserve System convened Community Affairs staff from around the country to partner with the Brookings Institution, a nonprofit public policy organization based in Washington, D.C. The goal was to learn more about factors that contribute to pervasive poverty in certain communities and to capture best practices that reach residents effectively and spur economic revitalization.

The partnership was designed to combine the expertise of Brookings in researching poverty with the Fed's unique structure, which provides a regional presence in communities across the nation along with the capacity to conduct research at the local level. Sixteen communities across the U.S. were selected for the study, including two in the Fed's Sixth District: East Albany, Georgia, and the Little Haiti neighborhood in Miami, Florida.

Photo of a house
More than one-third of East Albany households own their homes (compared to 61.8 percent for the larger Albany area), but community leaders are concerned that many of the units are in need of rehabilitation. Greater Second Mt. Olive Baptist Church is responding to this need by renovating 300 housing units on an old military base to provide new homeownership opportunities. The church is the only community housing development organization (CHDO) active in East Albany, and it is the primary recipient of the city's HOME funding, a federal block grant to create affordable housing.

While much research has been conducted about poverty in the U.S. over the past few decades, it has tended to focus on inner cities in the Northeast and Midwest or on isolated rural areas. The current study aims to create a more contemporary picture of the diversity of communities affected by concentrated poverty in the U.S. today.

It considers both urban and rural communities, those in the "Rust Belt" and those in the "Sun Belt," those in small cities as well as large cities. The study looks at a variety of races and ethnicities affected by concentrated poverty, including African American, White, Latino and Native American. The 16 case studies include immigrant communities and neighborhoods left behind by economic disinvestment and migration to suburbs.

The final composite report, "Concentrated Poverty in America," reviews research findings that examine the effects of concentrated poverty on individuals and families, their neighborhoods, communities, and the areas that surround them. The study considers similarities among the selected communities, but it also stresses the differences among them. The variety of circumstances, problems and potentials in pockets of concentrated poverty adds to the complexity of addressing needs.

Report highlights need for customized approaches
Community Affairs specialists analyzed demographic and economic data, interviewed neighborhood residents and business owners, and consulted with community organizations and municipal government representatives to determine the specific conditions that contributed to persistent poverty in particular communities.

They also identified the challenges for individuals, neighborhoods and municipalities. These might include reduced local investment and job opportunities, lower-quality schools, higher crime rates, both physical and mental health problems, extra costs for public services and reduced fiscal capacity, as well as political and societal divisions. In addition they determined what circumstances influenced the capacity to address these issues constructively to bring about lasting improvements.

Rather than seeking the perfect anti-poverty solution, this report highlights the importance of developing strategies that respond to the unique characteristics of each area.

Call for additional research
The project underscored the need for more research to understand and address places of persistent poverty. Studies are especially needed to fully account for the influence of concentrated poverty on residents' economic outcomes and to evaluate the impact of programs and policies aimed at relieving poverty.

While such work will continue throughout the Federal Reserve System through our mission to promote economic development along with fair and impartial access to credit, more partners from various sectors—government, academic, nonprofit, and for-profit—are needed to address this unrelenting and pervasive problem. As this report demonstrates, areas of concentrated poverty are the legacy of previous generations. Therefore, it will likely take comprehensive strategies and many years to successfully address it. Such efforts are imperative as we strive to develop more effective community development interventions.

Impact on the Fed's Sixth District
The Atlanta Fed will use the findings of the report to inform anti-poverty initiatives throughout the Southeast, including our regional Prosperity Campaigns. The study will assist the Atlanta Fed's on-going efforts to collaborate with government, nonprofit and for-profit partners to address challenges in high-poverty communities.

In addition, the Atlanta Fed is working with Brookings' research projects that are already underway to track economic and social development in areas of concentrated poverty, including some Sixth District communities.

"The Enduring Challenge of Concentrated Poverty," is available online at www.frbsf.org/cpreport/index.html. The entire report can be downloaded online, or you may access the subsections for each community. Specific questions regarding case studies focused on communities in the Atlanta Fed's Sixth District can be directed to Ana Cruz-Taura for Little Haiti and Sibyl Slade for East Albany.

This article was written by Ana Cruz-Taura, senior regional community development director at the Atlanta Fed's Miami Branch.