Capital investments are fuel for the engine of community development and revitalization, but this fuel flows unevenly across Baltimore, a phenomenon driven by poverty and especially by race.
We examine differences in the flow of community investment into Baltimore neighborhoods between 2004 and 2016. Tracing capital flow by race and poverty status, we find that predominantly white neighborhoods received more than three times the investments that majority-Black neighborhoods received during this 13-year period. Capital flows into low-poverty neighborhoods were nearly double that of high-poverty neighborhoods.
By any objective measure, Baltimore’s disparities in neighborhood investment are alarming.
In this report, we measure neighborhood disparities in private and public capital flows, including loans for home purchases, small-businesses, and commercial real estate. We examine trends among mission-driven entities such as community development financial institutions and other investors seeking both social and financial return. And we look at aggregate investments and the uses and sources of capital.
Investment from all sources in neighborhoods that were less than 50 percent Black was $26,533 per household per year, compared with $8,160 per household per year in predominately Black neighborhoods.
Investment from all sources in low-poverty neighborhoods was $17,540 per household per year, compared with $9,442 per household per year in high-poverty neighborhoods.
Capital investment gaps exist across all measured categories
The average single-family real estate loan amount per household in predominantly white neighborhoods was $16,811, compared with $5,600 in predominantly Black neighborhoods.
Commercial real estate loans per household averaged $2,308 in white neighborhoods and $626 in predominantly Black neighborhoods.
Small-business lending per household averaged $473 in white neighborhoods and $71 in predominantly Black neighborhoods.
Can investment disparities be reversed? Lessons from the East Baltimore Development Initiative
Our report includes a case study of the East Baltimore Development Initiative (EBDI), an intensive, place-based effort to redirect public, private, and mission-driven capital to distressed neighborhoods around the Johns Hopkins medical campus in Baltimore. From 2004 to 2017, EBDI spurred more than $1.04 billion in investment into area development projects.
Although the initiative is not yet complete, our data show that the EBDI’s target neighborhoods experience more robust community development than other similarly distressed areas of the city, including more per-household property revitalization and more commercial real estate lending, public sector investment, and mission lending.
We show that the EBDI demonstrates the potential of targeted efforts to bring capital to a high-poverty, predominately Black area that had been overlooked by market investors. This study did not, however, evaluate the extent to which residents benefited from these investments or the residents’ roles in that process.
Why these findings are important
Baltimore is one of the most segregated cities in the United States, and segregation and income seem to go hand in hand. Social and economic inequalities are mirrored in neighborhood blight.
Capital flows determine whether residents have access to the amenities, services, and resources they need to improve the neighborhood conditions that give rise to persistent disparities in health, education, crime, and community policing.
We learned that neighborhood investment in Baltimore is highly concentrated in ways that reinforce patterns of racial and economic inequality.
Racial differences in neighborhood investment flows cannot be fully explained by demographic, income, and credit differences between groups, suggesting that broader forces, such as the legacy of structural racism, are at play.
Also, although our research cannot pinpoint causality, we suspect that a mutually reinforcing relationship prevails—wherein existing patterns of race and poverty influence investments, and the allocation of investment itself keeps people in poverty and reinforces segregation patterns.
Our study underscores the need to more evenly distribute capital investments across racial and economic lines and to double down on the public and philanthropic commitments necessary for expanding the footprint of community development to protect the city’s future.