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| Posted: December 9th, 2013
In 2007 a new Giant grocery store opened in Southeast Washington, D.C., becoming the only major supermarket in the area. Two years earlier the historic Tivoli Theater, newly restored, had opened at the corner of a new neighborhood square in the rapidly-developing Columbia Heights neighborhood. Across town, the renovated, 70-year-old Atlas theater stood as the anchor project in a large-scale H St. neighborhood redevelopment.
All three buildings are part of the federal New Markets Tax Credits (NMTC) program, an ongoing public-private effort to invest in underserved American communities. So, how successful were these and thousands of other NMTC investments? Did they direct money to projects and communities that wouldn’t have gotten it otherwise? Did they create jobs? Did they improve services, access to amenities, and the vitality of communities?
The Urban Institute recently completed the first formal, independent evaluation of the program, which between 2002 and 2010 supported 3,060 projects through allocation of $12.9 billion in tax credits. Projects took many forms, including office, retail, mixed use, hotel, social services, educational, arts/cultural, manufacturing/industrial, agricultural/forestry, brownfields, health facility or equipment, and housing. They occurred in hundreds of communities throughout the U.S.
1. What is the NMTC program?
Administered by the U.S. Treasury Department and the IRS, NMTCs are intended to incentivize private investment capital to low-income and economically distressed communities. Federal tax credits are competitively allocated to intermediaries that select projects to invest in, directing capital from investors to businesses or nonprofit organizations. As an incentive, those choosing to invest in NMTC projects receive a reduction in their federal income taxes over a period of seven years.
2. What did the Urban Institute find in its evaluation?
Our evaluation focused on a randomly selected sample of projects initiated during the first four years of the NMTC program, allowing focus on projects that had been completed and, therefore, where results had taken shape.
After detailed review of the economic and community development literature and based on the evidence gathered under this study, we concluded that NMTCs have become an important part of the toolkit to promote economic development in some low-income neighborhoods. We found that, in its early years, the program generally operated as intended: it encouraged investments in low-income areas for a diverse range of economic and community development projects.
There were many different kinds of projects and they produced a wide variety of outcomes. Some projects needed the public subsidy, while others didn’t. Most projects are still thriving, though some are not.
- We estimated that in its first four years the NMTC program created or retained approximately 136,000 permanent jobs and 151,000 construction jobs.
- 80% of project representatives claimed that their projects enhanced the local tax base.
- 10% of projects encouraged support for small businesses, start-ups and nonprofits
- 88% of projects brought quality-of-life improvements to their communities–parks, playgrounds, shopping centers, health clinics, and other amenities.
- 36% of projects were expected, based on their design and scale, to have had the potential for positive area-wide spillover effects, and roughly one-third were undertaken in conjunction with larger-scale development initiatives in their communities.
When considering how closely these investments were tied to the NMTC program itself—i.e. would they have happened without the NTMC financing?—we concluded that:
- 3 or 4 of every 10 projects would likely not have proceeded without NMTCs;
- Approximately 1 of every 10 projects would likely have proceeded without NMTCs, but probably in a different location or on a delayed schedule;
- Approximately 2 of every 10 projects might have been viable without NMTCs.
3. What conclusions did the Urban Institute reach about the NMTC program?
As is generally the case with respect to any new program, in its first four years the NMTC program was a work in progress. The evaluation clearly shows many positive outcomes during that period, but also identifies areas where there might be possibility for improvement.
The Urban Institute does not take positions such as whether the program should be extended permanently, temporarily, or discontinued. But our hope is that this first formal evaluation of the NMTC program will serve as a useful input to the policymaking process and a foundation for further research about the program’s activities and outcomes.
Atlas Theatre image from Flickr user Black Stove ((CC BY-NC 2.0)
Filed under: Economy |Tags: development, investment, New Markets Tax Credits, NMTC, public private, Urban Institute Add a Comment »
| Posted: December 5th, 2013
As my last post indicated, average college tuition prices can be quite misleading because of the considerable variation across and within states, even within the public sector of higher education.
But there is much more to the story. Most students receive financial aid that reduces the prices they actually pay. The federal government provides Pell Grants to low- and moderate-income students—now including over a third of all undergraduates—as well as tax credits for parents and students who pay tuition—now about $17 billion a year and extending up the income scale as high as $180,000.
State governments also provide grant aid that does not have to be repaid. Like published prices, grant aid varies dramatically across the country. Some states provide aid only to students with financial need. Others ignore the students’ financial circumstances and look only at their high school GPAs or at standardized test scores. In 2011-12, state grant aid per undergraduate student ranged from under $200 in 12 states to over $1,000 in 10 states.
Colleges and universities across the country provide about as much grant aid to students as the federal government does. Community colleges and for-profit institutions don’t do much of this form of discounting, but it has become more common at four-year publics, and is most significant in the private nonprofit sector.
About half of the grant aid at public four-year colleges goes to meet financial need, with the rest designed to attract students otherwise likely to enroll elsewhere. At private colleges, just over 70 percent of the grant aid goes to meet need.
A distorted picture of student debt and higher ed prices
To understand how people pay for college, we must integrate information about all of this student aid with information about sticker prices. Full-time students at public four-year colleges and universities receive an average of about $5,800 a year in grant aid from all sources and federal tax benefits. That means that the average price tag of about $8,900 for public four-year colleges and universities in 2013-14 amounts to a net price of about $3,100.
The net prices are much less startling than the published prices. But this year’s $3,100 compares with about $1,900 (in 2013 dollars) a decade ago. Moreover, students have to cover their living costs while they are in school. And perhaps most significant, only the incomes of those at the top of the income distribution have begun to grow since the recent economic collapse.
Borrowing is part of the solution for many students, and student debt has increased over time. But the headlines frequently distort the picture. In 2011-12, only a third of all undergraduate students took federal student loans, borrowing an average of about $6,800 that year. About two-thirds of recent bachelor’s degree recipients have student debt. Their debt averages about $27,000. Among undergraduates who began their studies in 2003-04, only 7 percent had accumulated as much as $30,000 in debt by 2009. (Among those who had earned bachelor’s degrees, 15 percent had borrowed this much.)
We will be better able to address the critical problems of college access and affordability if we focus on the realities instead of exaggerating the prices and the student debt issues, and if students have better access to information about the true price of higher education.
Filed under: Economy, Government |Tags: college, cost, debt, price, Urban Institute Add a Comment »
| Posted: December 2nd, 2013
This post originally appeared on Family-Studies.org.
Stagnant wages among men without college degrees and rising unmarried parenthood among high school graduates with little or no college education represent two critical challenges facing the United States. Both trends increase income inequality and prevent people from entering into and remaining in the middle class.
One symptom of the problem is the declining labor force participation of men at middle levels of education and at prime working ages. Nearly half of 25- to 49-year-old men are high school graduates (or GED completers) without an associate’s or bachelor’s degree. Long-term trends as well as current economic weakness have been bad news for this group. For men with no more than a high school degree, joblessness doubled from 7.5% in 1979 to 15.5% in 2007 just before the Great Recession. As of early 2013, 22% of these prime-age men were not employed. Over the same period, married fatherhood plummeted among high school graduate men, falling from 65% in 1979 to 38% in 2013. Especially since joblessness is associated with negative family outcomes, helping young people obtain better jobs and earn more are critical tasks for this generation and for the welfare of the next generation.
Expanding apprenticeship can play a key role. Apprenticeships help young people gain mastery in an occupation as well as other workplace skills; they supply employers with workers who achieve strong technical and employability skills. Studies show U.S. apprenticeships are extraordinarily cost-effective. Analyses conducted for Washington State’s Workforce Board show that taxpayers net almost three times their spending on apprenticeships within two and a half years of the program’s completion, and the combined benefits accruing to participants and taxpayers are about five times the costs. By the time former apprentices reach age 65, benefits to taxpayers reach $23 for each dollar spent.
Apprenticeships train people by combining work-based learning with classroom instruction in a unified program that leads to a recognized and valued occupational credential. Young people, especially young men, who hate sitting through classes all day can spend part of their time making something, learning by doing, and seeing an immediate application of their course work. Trainees earn money and contribute to production while they learn. Apprentices graduate with a sense of pride and identity as a member of a community of practice. Mentoring is built into the apprenticeship process, with employers and trainers having a real stake in the young person’s success.
Expanding apprenticeship is feasible in the U.S., as the recent growth in South Carolina’s apprenticeship initiative is proving. The extraordinary expansion in Britain demonstrates how apprenticeships can succeed in relatively free labor markets. Achieving results in the U.S. will require increases in funding that are minuscule in comparison to college subsidies. Even tripling the federal and state funding for apprenticeships would amount to about 2% of the 2013 increase in funding for college loans. Failing to provide even minimal funding for apprenticeships means neglecting the young people who prefer work-based learning.
The key for a successful and widespread program is to attract large numbers of employers to create apprenticeships that meet occupational standards. Today, only about 20,000 U.S. employers offer apprenticeships compared to over 100,000 employers in Britain, with a population about one-fifth that of the U.S.
To bring the U.S. program to scale, I suggest several initiatives, including:
- national and state leadership and creating a brand (Apprenticeship America?) for apprenticeship,
- developing systems for matching potential apprentices and employers,
- making Pell grants and Trade Adjustment Assistance compatible with apprenticeship training,
- establishing a performance-based, federal-state matching fund to support a business-friendly staff to market and provide technical assistance directly to individual employers. The staff would show the benefits of apprenticeships to firms and assist in the creation of programs at the firm level.
- giving state-level incentives to high schools and community colleges to market apprenticeships and offer the related classroom instruction, and
- building websites to provide reliable information about how to start apprenticeships and where apprenticeship slots are available, and ideally to assist with the process of matching prospective apprentices with apprenticeship openings.
A robust apprenticeship system can generate skill and wage growth for large numbers of young people, especially those who do not obtain a bachelor’s degree. As apprenticeships enhance youth development and employability skills in such areas as communication, problem-solving, and teaching others, the skills required for healthy couple relationships will also improve. With added earnings and the maturation that deepens as people move from apprentice to master, young people will be well-equipped to contribute to the nation’s productivity and, more importantly, to build strong marriages and families.
Apprentice photo from Shutterstock.
Filed under: Economy |Tags: apprenticeships, evidence, families, policy, Urban Institute Add a Comment »
Molly M. Scott
| Posted: November 22nd, 2013
Housing is often the biggest expense for American households. And a widespread shortage of affordable housing means that every month, many low-income people are forced to choose between rent and other necessities. This can lead to many financial hardships, including food insecurity.
So, you might reasonably assume that low-income people lucky enough to receive help paying for their housing would not have trouble putting food on the table.
Well, you would be wrong.
The recent baseline survey for the HOST demonstration in Chicago and in Portland included a series of questions to gauge food insecurity among 366 participating families, almost all of whom receive a large housing subsidy. What we found is startling. Parents reported worrying food would run out, actually running out of food, and cutting the size of meals or skipping meals at more than twice the rate we see in the general population.
You might think, well, those families must not be working, so of course they’re struggling more than everybody else. Again, not true. Food insecurity is actually higher in Portland where HOST participants, many of whom are immigrants and refugees, are more likely to be employed.
Further analyses of the survey data confirm that it’s not just the chronically unemployed who have difficulty putting enough food on the table. Parents who had worked in the past 12 months reported food insecurity just as frequently as HOST parents who stayed out of the labor market entirely. This may reflect both the instability of low-wage employment as well as the difficulties that HOST parents have keeping up with costs as their federal safety net benefits are phased out.
Without a doubt, housing subsidies help a lot of families in important ways. If nothing else, subsidies help them avoid homelessness. But they’re no magic ticket out of the difficulties of poverty, particularly for the working poor.
Filed under: Economy |Tags: food insecurity, HOST, housing, poor, poverty, Urban Institute Add a Comment »
| Posted: November 20th, 2013
President Obama’s chief economic advisor Gene Sperling made a strong call for comprehensive housing finance reform this morning at an event cohosted by CoreLogic and the Urban Institute.
The Obama administration believes that the “risks are simply too great” not to engage in broad reform, Sperling said. That Fannie Mae and Freddie Mac are profitable again and home values are on the rise does not mean that we can stop moving toward reform.
We need to create a system characterized by fair competition among multiple entities, with mortgage-backed securities supported by a fully priced catastrophic government guarantee. If we don't get to that goal, we will revert to a system dominated by government-sponsored entities in which potential competitors would face insurmountable obstacles to entering the market. In that scenario, Sperling warned, the risk is too great that taxpayers will once again bear the cost of financial calamity.
Sperling sees another important benefit of comprehensive reform: its potential to broaden and strengthen the middle class. In his and the Obama administration’s view, this process requires supporting affordable rental housing and making mortgage credit affordable and accessible to all creditworthy borrowers.
“There is more to be done on access to credit,” he said. “Nobody wants to go back to the recklessness that led to this crisis. But we should recognize that the pendulum has swung too far. The credit box is too tight. Too many homes are not getting built."
The Obama administration’s plan for comprehensive reform has several core principles, including putting private capital at the center of the housing finance market, winding down Fannie Mae and Freddie Mac, and providing and protecting widespread access to credit for worthy borrowers, ensuring a nation that is well-housed.
The government must also play a countercyclical role, stepping in to provide access to mortgage capital in times of economic crisis, ensuring that homeowners remain able to borrow. This role will help homeownership remain an important driver of economic growth, both for households and for the broader economy.
Sperling’s “North Star” of reform is creating a broader and more inclusive middle class. Broad-based homeownership and a functional, robust, and stable housing market are critical to that goal.
Photo of Gene Sperling by Matthew Johnson, Urban Institute
Filed under: Economy |Tags: housing, housing finance, Sperling, Urban Institute Add a Comment »
| Posted: November 19th, 2013
This post first appeared on November 18, 2013 in Spotlight on Poverty and Opportunity
Investments in the next generation are threatened in these fiscally austere times. Federal spending on children fell in in 2012, even as many families continued to suffer from unemployment and low earnings. Recent budget deals and long-term trends further threaten spending on children. If it wants to protect children’s programs from future cuts, Congress should take a more balanced approach to deficit-reduction, and include revenue increases in the next budget deal, rather than focusing exclusively on the spending side of the budget ledger.
In the seventh annual Kids’ Share report, my colleagues and I document a $28 billion drop in federal spending on children in 2012, with lower spending on K-12 education, the children’s portion of Medicaid, refundable tax credits, and other programs. This is the second year in a row that federal outlays on children have fallen, and the 7 percent drop this year is the single largest since the early 1980s. Since federal funding is critical for the health, education, nutrition, safety, health, and the overall development of children, these trends are troubling.
Much of the decline results from the depletion of funds provided by the American Recovery and Reinvestment Act of 2009 (ARRA), which increased federal spending on children during the recession. It expanded nutrition assistance benefits and the Child Tax Credit in order to stimulate the economy and support families in need. It also offered relief to states and localities, including enhanced federal spending on Medicaid and child welfare and the creation of the education-focused State Fiscal Stabilization Fund. With these priorities, almost one-quarter of ARRA funds went to children. As these funds have been spent down, spending on children has fallen.
Though the loss of temporary funds designed to fight the recession was expected, the funds are being exhausted even as the effects of the recession are still lingering. Unemployment rates averaged more than 8 percent in 2012, down from their peak of 10 percent but still well above pre-recession levels of less than 6 percent. Many of the unemployed have children, and an estimated 6.2 million children lived with at least one unemployed parent last year, including 2.8 million children living with a parent unemployed for six months or longer.
Child poverty rates also remain elevated: 22 percent of children, or 16.1 million children, lived in families with incomes below the federal poverty level in 2012, compared to a much lower 16 percent in 2001.
The combination of these trends – the decline in spending on children and the continued high levels of unemployment and child poverty – calls into question whether Congress and the president are placing a sufficiently high priority on the needs of children, the poorest age group, as they enact funding bills and budget deals.
The bigger concern, however, is not with current spending levels on children, but future ones. Spending on children is at risk of being squeezed as future federal budgets are increasingly consumed by interest payments on the federal debt and the ever-rising costs for health and retirement benefits under Medicare, Medicaid, and Social Security. With these rising costs, total federal spending is projected to be more than $1 trillion higher in 2023 than in 2012 under Congressional Budget Office projections. Children’s programs will get a tiny fraction of that increase, just 2 cents of every new federal dollar in federal spending, or $20 billion. All the children’s share of the increase will go to Medicaid and other health programs. Excluding healthcare, fewer dollars will be spent on children in 2023 than in 2012, according to our estimates. The largest projected reductions are in federal education programs and refundable tax credits.
And future spending on children may drop well below the level assumed in current law projections. As revenues continue to fall below outlays year after year into the future, the federal debt continues to grow, and there are repeated calls for spending reductions. It is short-sighted, however, to focus exclusively on spending reductions when trying to reduce the deficit. Children’s programs would fare better if Congress enacted a budgetary package that combined revenue increases and spending cuts. Adopting proposals that slow the growth in Social Security and Medicare, while still protecting current recipients most dependent on those benefits, is another step that would help protect future investments in children.
As budgetary discussions continue to unfold, it will be important to keep an eye on how broad budgetary and tax reform packages further affect resources for children and investments in the next generation of leaders, workers, and parents.
School lunch photo courtesy of the U.S. Department of Agriculture (CC BY 2.0)
Filed under: Economy |Tags: children, poor, poverty, spending, Urban Institute Add a Comment »
| Posted: November 15th, 2013
The somewhat radical idea of guaranteeing income to every single American adult with no strings attached has gained attention from people and entities as diverse as Charles Murray, Switzerland, George McGovern, and Matt Yglesias. Would it work? What would be its drawbacks? How big would the income have to be? What might it mean for the rest of our safety net? Check out our Branch conversation below to see what some of our Urban Institute experts had to say.
Continue reading “Thoughts on a guaranteed annual income” »
Filed under: Economy |Tags: guaranteed annual income, poverty, safety net, Urban Institute Add a Comment »
Taz George Lan Shi
| Posted: November 13th, 2013
Homebuyers in San Francisco are willing to take on over twice as much monthly debt, relative to income, as borrowers in Atlanta, so a listing that seems affordable in one city may feel too pricey in another. A new analysis by our colleagues in the Housing Finance Policy Center finds that variations among regional housing markets make a major difference in how cities stack up when it comes to affordable homeownership.
Like the National Association of Realtors’ Housing Affordability Index, we measure affordability by comparing the median house price in an area to the maximum price a median-income family can afford. If the affordable price is less than the median price, the index is less than one, indicating that the area is not affordable; if it exceeds the median price, the index is greater than one, which means homeownership is affordable at the median.
But accurately calculating the maximum affordable price is a tricky process that requires a few key assumptions. Traditional measures of affordability use a standard debt-to-income ratio of 28 percent and a down payment of 20 percent of the house price. These assumptions overlook regional differences and can lead to faulty comparisons of affordability.
Our regionally specific measure better captures differences in the amount that median-income borrowers are willing to pay for a home, and in the size of the down payment they typically make. For each of the 37 largest metro areas, our analysis uses loan-level origination data from CoreLogic to compute average debt-to-income ratios from 2000 to 2003 (a relatively stable period for housing prices) and average down payment on purchase loans in 2013.
Some metros turn out to be less affordable, some more
Not surprisingly, results from the standard measure and the regionally specific measure varied significantly, with some metros shifting far along the affordability spectrum.
Washington, D.C. is considered solidly affordable under the standard affordability measure, but the regionally adjusted measure reveals that D.C. is modestly unaffordable at the median due to its below average debt-to-income ratio of 20 percent. In other words, because D.C. borrowers are accustomed to spending less of their monthly income on mortgage payments relative to borrowers in other MSAs, the current regional housing market is substantially less affordable than the standard, fixed debt-to-income method suggests. The new analysis found that the price a median-income D.C. family can afford is nearly $90,000 less than what the standard method projected, bringing the affordability index down from 1.25 to .84.
With the new methodology, San Francisco’s affordability improved, in part because Bay Area borrowers are accustomed to larger down payments—28 percent in 2013—than other regions. But the city still remains one of the least affordable areas due to the resurgent housing market there.
Industrial, Midwest metros like Detroit and Cleveland, where prices have remained fairly low even during the housing recovery, were some of the most affordable regions under the regional measure.
Refining measures of housing affordability
The Housing Finance Policy Center will continue to study the nuances of housing affordability, especially for low-income households. Replicating the index at lower incomes and adjusting other borrower and loan characteristics (in particular, funds available for a down payment) would yield a more relevant measure for distressed households, and could significantly alter the order of metros by affordability. In the meantime, we will continue to publish our updated and improved affordability analyses in our monthly chartbook.
Filed under: Economy |Tags: affordability, homes, housing, metros, Urban Institute 2 Comments »
| Posted: November 8th, 2013
A few months ago, we released a popular interactive map visualizing poverty by race from 1980 to 2010, which laid out in detail the intersection of poverty, race, and place in communities across the U.S. Since then, we’ve also received a few technical questions about how the map was made, and we’d like to share those so that others can create similar tools. Click here to read the complete how-to guide to creating an interactive dot density slider map.
Filed under: Economy |Tags: how to, map, poverty, race, Urban Institute Add a Comment »