Partners (Number 3, 2006)

Vol. 16, No. 3, 2006


CLTs Keep Housing Affordable

Keeping Pace in a Changing Environment

EITC Boosts Local Economies

Split Refunds Link Tax Time to Savings

Banking the Unbanked on Both Sides of the Border

Bringing HBCUs Back to Their Communities

CDFI Investing Made Easy with CARS

Post-Katrina Housing Woes Challenge Residents and Planners

Spotlight on the District—Alabama and North Florida



Keeping Pace in a Changing Environment

Juan Sanchez This year marks the 25th anniversary of the Federal Reserve System's Community Affairs function. Established in 1981 by the Board of Governors to support the Community Reinvestment Act (CRA), this office also reflects the Board's recognition that markets don't always work well in low- and moderate-income communities without assistance.

Initially each Reserve Bank designated an individual to help develop safe, sound, profitable programs for low- and moderate-income communities. The Community Affairs Office provided technical training, developed community contacts, and channeled information for and about financial institutions. While we all shared the same mission and objectives as defined by the Board, each of our 12 Reserve Banks had wide latitude in structuring this function to address issues unique to its District. Now the Atlanta Fed maintains a community development professional in each of its six locations to provide fuller insight into local concerns and more direct involvement with communities.

While the overall mission of the Community Affairs Office has remained the same, our work has inevitably evolved to stay relevant in an ever-changing marketplace. During the 1980s, affordable housing programs began providing significant subsidies for both rental and owner-occupied units. The Federal Low-Income Housing Tax Credit, the HOME program, specific state programs and many other initiatives promoted the construction of decent housing for lower-income families.

Initially demand was low. The absence of historical data made these endeavors seem uncertain and risky. Financial institutions didn't understand the various programs fully, and the absence of a viable secondary market hindered generation of new liquidity. But financial institutions, developers, intermediaries and nonprofit organizations soon realized the utility of these products, quantified the risks and developed vibrant markets. These once under-utilized programs now contribute to the profits of financial institutions and other stakeholders.

During the last decade, new interest in economic development sparked the creation of New Markets Tax Credits and several innovative SBA products. While these products are not quite as much in demand as housing programs, their value is clear, and a mainstream industry is emerging. The Fed has provided training, helped to customize programs and informed our community partners about these initiatives.

Our Community Affairs function has also matured rapidly in response to economic, regulatory and marketplace issues such as rising housing costs, higher foreclosure rates, ever-more-complex mortgage products and recovery from natural disasters.

In the end, better functioning markets along with higher homeownership rates and increased employment lead to more stable neighborhoods and stronger local economies. Stronger local economies collectively translate into a stronger national economy, and that's clearly a goal of the Federal Reserve as the nation's central bank.

Juan C. Sanchez
Community Affairs Officer