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Policy Summit


keeps spotlight on poverty


Poverty surged back into public awareness on the destructive tides of Hurricane Katrina last year.
But this problem extends well beyond the South. Every region of the country has its share of poverty,
in areas ranging from rural to urban. In fact, Cleveland was recently named – for the second time in
three years – as the poorest city in the United States among those with populations greater than
250,000.* Concentrated poverty – the percentage of poor people living in high-poverty tracts – is of
particular concern to researchers, community development practitioners, and policymakers because
of its harmful effects on people, neighborhoods, and community reinvestment strategies. *See page 4
sidebar for an explanation of how these rankings were arrived at, along with a caution against drawing conclusions without
considering additional factors that were not a part of the poverty rankings assessment.


4th District Profile


In My Opinion

Compliance Corner

Concentrated poverty in the
Fourth Federal Reserve District

Finding new ways to combat
an old problem

Changes to CRA aimed at nonmetropolitan middle-income areas





‘Why does the Fed care?’

research involving patterns of

Community development lens

to the persistent problem of

What is the Federal Reserve

wealth, poverty, and regional

Examining concentrated

poverty. But keeping a spotlight

Bank of Cleveland’s connection

economic development.

poverty through the lens of

on the issue is critical to moving

to concentrated poverty?

Increasingly, research finds a

community development

toward solutions. To that

Federal Reserve Bank of

correlation between levels of

focuses inquiry into which

end, the Federal Reserve Bank

Cleveland President and CEO

poverty and the economic

federal, state, and local policies

of Cleveland examined the

Sandra Pianalto addressed

health of a region.

can be most effective.

challenges of concentrated

this question in her opening

poverty at its annual commu-


here are no simple answers

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nity development policy
summit in June 2006.
“By bringing together the
key players – academics doing
research on concentrated
poverty, community development funders and practitioners
working directly in low-income
communities, policymakers at
all levels – we hope to stimulate

thinking across disciplines and
encourage ongoing discussion
and action aimed at positive,
market-based solutions to
this problem,” notes Ruth
Clevenger, vice president and
Community Affairs officer at
the Federal Reserve Bank of

“Why does the Cleveland Fed care
about this issue? The fact is that
we are committed to the goals of
community development. Our
Community Affairs program helps
us fulfill one of our important
public policy mandates – to
enforce fair-lending regulations
that protect consumers in the
financial marketplace. We also
believe that understanding the
issues behind concentrated poverty
will help us better assess overall
economic performance.”


ver the past few years,

the Cleveland Fed has pursued


“We know that most people

Historically, poverty has

who are trapped in poverty

been addressed through the

cannot participate fully in the

social services sector, which

labor market or the financial

assists low-income families

system,” noted President
Pianalto. “So there is good
reason, just from a macro-

2006 Policy Summit Highlights

economic viewpoint, for the

Check out a summary of the 2006
Community Development Policy Summit

Federal Reserve to analyze
these issues. But our involvement actually reaches much
further – the Federal Reserve
is involved in community
development, especially as the
nation’s fair-lending laws have
evolved over the past few
For the full text of President

Online proceedings include:
• Overview of all sessions
• Opening remarks by Federal Reserve
Bank of Cleveland President and CEO
Sandra Pianalto
• Follow-up Q&A among participants
and conference speakers
• Speaker presentations for downloading
• Keynote address by Dr. William Julius

Pianalto’s opening remarks, go

This year’s policy summit
drew a sell-out crowd of more
than 200 community develop-

Ignoring poverty won’t
solve it
The Plain Dealer credits Fed
President Sandra Pianalto with keeping a
spotlight on the issue of poverty. See text
of editorial and hear WVIZ’s interview with
Dr. William Julius Wilson.

ment practitioners from
Ohio and neighboring states.


What’s the link between
poverty and minimum wage?
Policy summit panelists and other
experts address questions from conference
participants in a follow-up discussion of
issues related to concentrated poverty.

Attendees included bankers,
academics, elected officials,
government representatives,
and nonprofit community

“We know that most people who are
trapped in poverty cannot participate fully
in the labor market or the financial system.
So there is good reason, just from a
macroecomonic viewpoint, for the Federal
Reserve to analyze these issues.”
– Sandra Pianalto, Cleveland Federal Reserve Bank President and CEO

Sandra Pianalto, president and
CEO of the Federal Reserve Bank of
Cleveland, and Richard Walker III,
vice president and Community
Affairs officer for the Federal Reserve
Bank of Boston, listen to discussion
during one of the policy summit’s
sessions. In the background is
David Buchholz of CFED (Corporation for Enterprise Development).

“Who knew economists could
be so interesting!”
Check out this and other
comments from conference evaluations.

Photo Gallery
See pictures from Day 2 of the
policy summit.

are common. Most ghetto residents
cannot afford an automobile and
therefore have to rely on public transit
systems that make the connection
and suburban job locations difficult
and time-consuming.

“The least upwardly mobile in society –
mainly low-income people of color – are
stuck in neighborhoods with high
concentrations of poverty and deteriorated
physical conditions.”
– Dr. William Julius Wilson, from his keynote speech

5th Annual
Policy Summit

To make matters worse, many
inner-city residents lack information

June 21-22, 2007

or knowledge about suburban job
opportunities. In segregated inner-city
ghettos, the breakdown of the

Cleveland, Ohio

informal job information network
aggravates the problems of job
spatial mismatch. The older central

| |

cities feature a severe spatial mismatch between inner-city residents
how the economy’s increasing
internationalization, transpor-

Cleveland, although entry-level

services. Community develop-

tation issues, and lack of jobs

workers are concentrated in inner-city

ment solutions, on the other

have contributed to the rise

neighborhoods, 80 percent of the

hand, focus more on physical

in urban poverty:


and suburban jobs. For example, in

care, and other valuable

entry-level jobs are located in the

One way this is accomplished
is through community development lending. In addition to
providing mortgage loans for
first-time homebuyers and
financing for multi-family
housing units, lending programs
can also include microloans.


he keynote address –

given by poverty expert Dr.
William Julius Wilson, director
of the Joblessness and Urban
Poverty Research Program
and Lewis P. and Linda L.
Geyser Professor at Harvard
University – focused on new
challenges facing the urban

“Sprawl and economic stagnation

suburbs. And the lack of feasible

not only fuel physical decline, they

transportation options exacerbates

also isolate disadvantaged residents

this mismatch.”

of the city from meaningful access to

To read the entire text of

from the Fed work with
researchers at noted academic

social and economic opportunities.

Dr. Wilson’s address, visit

institutions on issues related

With the departure of higher-income

to concentrated poverty, such

families, the least upwardly mobile in


as earnings inequality in

society – mainly low-income people
of color – are stuck in neighborhoods

Ongoing efforts

with high concentrations of poverty

The policy summit is just one

and deteriorated physical conditions.

example of the Cleveland

These neighborhoods offer few

Federal Reserve Bank’s involve-

jobs and typically lack basic services

ment in concentrated poverty,

and amenities, such as good schools,

both regionally and nationally.

banks, grocery stores, retail establish-

A second effort is a partnership

ments, parks, and quality transit.

between the Bank’s Community

Unlike in previous years, labor

Affairs and regional Research

markets today are mainly regional,

teams to launch a joint Visiting

and long commutes in automobiles

Scholars program. Economists


nother effort involves

case studies conducted
on specific issues related to
concentrated poverty – for
instance, the impact of the
minimum wage on poverty.
Check the Bank’s website – – and
the Community Affairs subsite

poor. Dr. Wilson, whose latest

CommAffairs for additional

book, Good Kids from Bad

information and resources

Neighborhoods: Successful

related to concentrated poverty.

Development in Social Context,
was released this fall, noted

with subsidized housing, health


between inner-city neighborhoods

Save the Date!

4th district
Concentrated poverty in the Fourth Federal Reserve District


| |




less than 4.9 percent
5–9.9 percent
10–19.9 percent
20–39.9 percent
40 percent or greater

he Fourth Federal Reserve District,
which includes all of Ohio, western
Pennsylvania, eastern Kentucky,
and the northern panhandle of
West Virginia, encompasses a
diverse range of communities and
economies. Whether urban or rural,
industrial or agricultural, lakeside or
Appalachian, these communities all
have some residents living in poverty.
Just how widespread is poverty
across the District? Where is it most
In the map shown here, some
areas clearly show higher concentrations of people living in poverty
than others. It’s important to clarify
two distinct terms that this map
and graph illustrate: High poverty
refers to a poverty rate of 40 percent
or more within a specific area –
in other words, where nearly one
of every two people has an income
below the poverty level.1

Do numbers tell the whole story?

The poverty level is determined by income,
family size, and the ages of family members.
Using 2005 information, for example, a
family of four with two adults and two
children and an annual income less than
$19,806 is considered to be living in poverty.

Any researcher will tell you that statistics can easily be misinterpreted. For example, Census Bureau data have branded
Cleveland as the poorest big city in the United States, with nearly a third of the city’s residents living in poverty.
“The numbers tell us that Cleveland has many poor people,” noted Mark Schweitzer, assistant vice president and
economist for the Federal Reserve Bank of Cleveland, and Brian Rudick, senior Research assistant. “But the numbers
don’t tell us that Clevelanders have become worse off, that the region’s economy has deteriorated, or even that there
are more poor people in the city than before.”
In a recent piece posted to the Bank’s Economic Research & Data website, the two researchers explain how we
might jump to the wrong policy prescriptions by focusing on poverty solely within the city limits, and they suggest that
we look at the greater metro area for a more accurate picture of the causes of Cleveland’s poverty rate. See the full
text of their posting at


Concentrated poverty
refers to the share
(or percentage) of poor
people living in highpoverty areas.

M umm
tg it



Cu ton

Concentrated poverty refers to the
percentage of poor people living in
high-poverty areas.
In the Fourth District, Census
2000 data reveal 187 census tracts
where the poverty rate was at least
40 percent. These tracts are located
within 42 counties stretching across
all four states within the Fourth
District. The counties range from
high-population urban counties to
low-population rural counties.
A clearer picture emerges when
examining the percent of a county’s
poor population (residents living
below the poverty threshold) that
resided in one of the census tracts
with a poverty rate of 40 percent or
greater. Concentrated poverty shows
how clustered or disparate the poor
are – whether they are huddled
together in high numbers in the
same census tracts or neighborhoods, or spread out throughout
the county.
In the Fourth District, counties in
rural eastern Kentucky and western
Pennsylvania, along the Ohio River,
and within major cities all have areas
of concentrated poverty.
The Fourth District includes a
number of counties that are part of
Appalachia, including counties in
western Pennsylvania, West Virginia,
southeast Ohio, and most of eastern
Kentucky. Many of the Appalachian

Percentage of poor living in high-poverty tracts

Urban Concentrated Poverty

Lu hon

Er land


counties have areas of high concentrated poverty. In particular, three
counties in Kentucky – Owsley,
Martin, and Clay – have fully 40 percent or more of their poor population
living in high-poverty census tracts.
Martin County shows a concentrated
poverty rate of 48 percent. In Clay
County, the concentrated poverty
rate is 46 percent. Owsley County,
Kentucky, has a staggering 100 percent concentrated poverty rate,
which means every one of their poor
residents lives in a high-poverty tract.
Outside of Appalachia, the
Fourth District’s major urban counties
also have concentrated poverty.
Both Cuyahoga (Cleveland) and
Hamilton (Cincinnati) counties in
Ohio, as well as Ohio County, West
Virginia (Wheeling), have areas of

concentrated poverty ranging from
20 percent to 40 percent. In fact,
all but one of the Fourth District’s
14 counties with populations greater
than 250,000 have some level of
concentrated poverty.
While areas of high poverty in
the Fourth District are located
primarily in counties in Appalachia
and in urban counties within major
central cities, all counties in the
District have some portion of their
population living in poverty. In fact,
in 2000 just 13 census tracts – of
the more than 4,500 tracts in the
entire district – reported a poverty
rate of 0 percent. Some of these
zero-poverty tracts are located inside
counties that also have high-poverty


Census tracts are sub-county
areas defined as small, relatively
permanent statistical subdivisions
of a county. They usually have
2,000–8,000 residents and, when
originally delineated, were designed
to be homogeneous with respect to
population characteristics, economic
status, and living conditions.
Census tracts are used to evaluate
information in relatively small
geographic areas and can be used
as a proxy for a neighborhood.

in my

Finding new ways to combat an
B Y C L A U D I A C O U LT O N , P h D

Dr. Claudia Coulton, a nationally known expert on urban poverty and a panelist at the
2006 Community Development Policy Summit, shares her perspective on research efforts
aimed at addressing concentrated poverty.
Why is there an emphasis on
studying concentrated poverty,
versus simply poverty?
Claudia Coulton is the Lillian F.
Harris Professor at the Mandel
School of Applied Social
Sciences, Case Western Reserve
University, and co-director of
the Center on Urban Poverty
and Social Change, located in
Cleveland. A nationally known
expert on urban poverty,
Dr. Coulton has had an impact
on public policy at every level
of government. Her teaching
and research expertise is sought
by policymakers, advocates,
and the media nationwide. Dr.
Coulton was awarded a BA
cum laude in 1969 from Ohio
Wesleyan University, a MSW
in 1972 from the Ohio State
University, and a PhD in social
welfare in 1978 from Case
Western Reserve University.

There is a vast amount of research
on the dynamics of poverty at the
individual level. Starting in the 1980s,
there was a growing interest in
looking at the neighborhoods where
poor people lived. Researchers were
learning that negative outcomes
associated with poverty, such as
lower performance in school and
higher incidence of involvement in
crime, were also concentrated in poor
At the same time, changes in
manufacturing meant that more jobs
were moving out of the cities,
increasingly cutting off inner-city
residents from economic opportunities. These two things – a concentration of social ills in the same areas
of poverty coupled with a declining
opportunity structure – drove interest
and speculation in looking at poverty
not just from the individual standpoint, but also taking into account
where they lived.
We’re examining concentrated
poverty for several reasons: One, to
find out what’s happening to poor
families and children. And two, to find
out the implications for cities looking
to maintain economic viability in the
face of decreasing resident and
business populations and increasing
concentrations of poor residents.



Concentrated poverty is a real concern
to civic leaders. It impacts their cities’
economic status and ability to provide
services and collect taxes.

Poverty has been a problem –
and has been studied – for
decades. What new directions
are researchers pursuing in this
We do know some things about
concentrated poverty: We know
where it’s located, and we know it
tends to be associated with social ills
such as exposure to violence, worse
housing, underperforming schools,
and bad health. What we know less
about is whether this matters to the
individuals and families living in areas
of concentrated poverty. And if it does
matter, how, why, for whom, and to
what extent does it matter?
This line of research attempts to
examine the “neighborhood effect”
of living in concentrated poverty.
Researchers interested in isolating the
impact of concentrated poverty on
individuals and families are asking
questions like, Are the neighborhood
conditions impacting outcomes for
these individuals and families, or do
the individual and family factors play
a larger role?
One promising direction this
research has taken is in studying
individuals and families who move
out of areas of concentrated poverty.

Two well-known efforts have looked
at outcomes for individuals and
families, both with optimistic results.
The Gautreaux experiment in Chicago
found school performance improvements for children and increases in
parental employment for those moving
into lower-poverty areas. HUD’s
Moving to Opportunity, a more
rigorously controlled experiment, found
that movers to low-poverty areas felt
safer, less bothered by crime, and
more positive overall about their
environment. Researchers also found
strong evidence of improved health.
Another new line of concentrated
poverty research will look more closely
at the mechanisms that may correlate
with negative outcomes in areas of
concentrated poverty, such as peergroup pressures, lack of services and
amenities, attitudinal issues, and
social capital. These studies are more
qualitative or descriptive than experimental in nature.
How do policymakers use
the analyses generated by
researchers studying concentrated poverty? Are they
considering the data, and, if so,
how are the data being factored
into their policy decisions?


In housing policy, I think we’ve
seen a pretty clear effect. Research
suggests that the concentrated
poverty found in public housing has
a negative effect on individuals and


Senior Examiner
Federal Reserve Bank of Cleveland


• affordable housing for low- and
moderate-income (“LMI”)
• community services targeted to
LMI individuals
• activities that promote economic
development by financing small
businesses and farms
• activities that revitalize or stabilize
LMI geographies.
These activities still apply.

Effective September 1, 2005,
“revitalize/stabilize” was expanded
to include activities that revitalize or
• distressed or underserved
nonmetropolitan middle-income
geographies, and
• designated disaster areas.
In the distressed nonmetropolitan
middle-income areas, the activity
must either explicitly help to attract
new, or retain existing, residents and
businesses in the community. An
activity will be presumed to revitalize
or stabilize the area if it is consistent
with a bona fide government revitalization or stabilization plan. The
agencies will consider all activities
that revitalize or stabilize a distressed
nonmetropolitan middle-income
geography, but will give greater
weight to those activities that are
most responsive to community needs,
including the needs of LMI individuals
or areas. For example, the plan or
project would produce significant
long-term employment opportunities
for the community, including low- and
moderate-income individuals.
Underserved nonmetropolitan
middle-income areas are sparsely
populated, and they are therefore
considered to have trouble financing
the fixed costs of essential community


needs such as infrastructure
improvements and health facilities.
To qualify under the expanded
definition, the activity must help to
meet essential community needs,
including the needs of LMI
individuals. An example of this type
of activity would be a hospital
expansion program, because it
facilitates essential infrastructure
to the area and benefits the entire
community, including low- and
moderate-income individuals.
Designated disaster areas are
major disaster areas designated by
the federal government. Activities
related to disaster recovery that
revitalize or stabilize a designated
disaster area will be given CRA
consideration for 36 months following the date of disaster designation.
The agencies carefully analyzed
the criteria that were added to the
CRA regulations in order to give
financial institutions CRA credit for
qualified community development
activity. Additional information can
be found at

lthough there were several
changes made recently to the Federal
Reserve Regulation BB, this article
focuses on the revised definition of
community development as it relates
to the revitalization and stabilization
of nonmetropolitan middle-income
geographies, or designated disaster
areas within a bank’s assessment
area. The enhancements to the
community development definition
can benefit all financial institutions
regardless of asset size.
Before the 2005 regulation
change, the definition of community
development included four distinct

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families. There’s been a move toward
using tenant-based assistance rather
than project-based assistance for
subsidized housing. Section 8
vouchers, for instance, give people
the option of moving to areas with
less concentrated poverty. Hope VI,
another federally funded effort to
improve public housing, deliberately
tries to create mixed-income housing.
While there is no research yet
that clearly shows living in mixedincome settings changes the
outcomes for poor families and
children, the real knowledge is that it
is feasible – with certain incentives,
such as tax abatements and well-built
housing – to provide more mixedincome housing as an alternative to
low-income housing projects. Studies
under way will examine the impact
of living in such environments. But
housing is definitely the most visible
piece of policy that’s been responsive
to research on concentrated poverty.
Urban and municipal policy also
has been responsive to research in
this area. Cities with high levels of
concentrated poverty are not doing
as well as cities with more mixedincome levels. Urban mayors are
starting to see that reducing concentrated poverty can help their cities
gain a more even economic footing
with their suburban counterparts.
Regional cooperation among urban
and suburban areas – involving
things such as jobs programs,
transportation coordination, and
sharing resources and services – is
a practice that might help overcome
concentrated poverty.

Changes to CRA aimed at nonmetropolitan middle-income areas


old problem



Conferences + Events

of interest

More information is available at

Ruth Clevenger
Vice President
and Community Affairs Officer
Cassandra McConnell
Community Affairs Manager

Foreclosure Summit:
Implementing Solutions to
Ohio’s Foreclosure Crisis
• November 14, 2006
Toledo, OH

Primary sponsorship provided by
the Toledo Fair Housing Center

Emma R. Petrie
Research Analyst

Dynamics of Poverty:
A Dialogue with Economists, Policymakers,
and Practitioners

Paula Warren
Administrative Assistant

• December 14, 2006
New York, NY


Sponsored by the Federal Reserve
Bank of New York

Jeff Gatica
Senior Advisor
Candis Smith
Community Affairs Advisor

System Research
Conference: Financing
Community Development –
Learning from the Past,
Looking to the Future
• March 29-30, 2007
Washington, DC

CR Report, Summer 2006:
Microenterprise: Creating Wealth
for Individuals and Communities

Sponsored by the Community
Affairs Offices of the Federal
Reserve System

Fifth Annual
Community Development
Policy Summit
• June 21-22, 2007
Cleveland, OH
Sponsored by the Community
Affairs Office of the Federal Reserve
Bank of Cleveland and LISC

Community Development Finance
Research Conference Summary

Joseph Ott
Community Affairs Advisor
Visit us at





P. O . B O X 6 3 8 7


CLEVELAND, OHIO 44101-1387
The views stated in Community Reinvestment
Forum are those of the individual authors and
are not necessarily those of the Federal Reserve
Bank of Cleveland or of the Board of Governors
of the Federal Reserve System.
Materials may be reprinted provided the source
is credited.


Anne O’Shaughnessy
Communications Coordinator

Sponsored by the Federal
Reserve Banks of Philadelphia
and Cleveland and by Rural LISC

| |

Lisa Nelson
Senior Advisor for Applied Research

• October 26, 2006
Harrisburg, PA
• November 14, 2006
Beaver Falls, PA
• November 16, 2006
DuBois, PA


We welcome your comments, suggestions,
and requests for additional copies. Send them
to anne.o' Also feel
free to contact the following members of the
Community Affairs staff if you have questions.

Publications available
to download at

Hold the Date


Development Financing
in Rural Pennsylvania