Urban Institute: Helping families to weather financial crises helps the cities where they live

A black family playing a board game. The family is made up of a mom in an orange shirt and two young boys and a dad wearing a blue button up. One boy wears a striped red and white shirt and the other boy wears a white t-shirt.

Photo courtesy of Wikimedia Commons.

At a recent Urban Institute (UI) symposium examining “inclusive growth” by promoting “resident financial health,attendees were reminded how far our society has come and how far it still has to go. 

 In the 1960s, when the Great Society federal anti-poverty programs were launched, a hallmark was the call for maximum feasible participation” of individuals from poor and minority communities who were previously excluded from decision-making. But in the next decade a retrenchment occurred, with issues of poverty and racial inequality frequently remaining in the background. Now, more than half a century later, those issues have come to the forefront once more, given statistical evidence of widening inequality and punitive measures foisted upon the poor.  

 Alleviating income inequality and the racial wealth gap depends in large part on better policies crafted in the chambers of Congress and city councils but also in the households of individual families.  As one speaker told the symposium, the fiscal resiliency of cities starts with household resiliency.”  

 Achieving that resiliency at the family level is not easy, given the high costs of housing, medical care, and transportation. 

 Policymakers intent on reducing racial wealth gaps have a two-fold task. The first is acknowledging the obstacles lower-income Americans face.  

 Introducing a panel discussion on “The Connection Between Financial Health and Inclusive Growth,” the Urban Institute’s Diana Elliott referred to results from a set of just released studies examining the impact of eviction and unpaid bills on city budgets.  

 In Chicago, Urban Institute calculations show that evictions and unpaid utility bills cost  the city government an estimated minimum $68 million annually. Sixty-two percent of Chicago families have less than $2,000 in savings and thus are considered “financially insecure.” Thirty-four percent of Chicago residents have no credit score and 13% are only near prime credit,” the rating that shows them to be a good risk.   

 New York and Los Angeles have similar percentages of families that are “financially insecure.”  

 Similarly, Columbus, Ohio, a city that is generally considered middle-class because it benefits from the twin economic drivers of Ohio’s state government and the Ohio State University, suffers from economic woes. In Columbus, 57% of the city’s 355,000 families are considered ‘financially insecure, according to the Urban Institute. 

 Because eviction is identified by UI’s research as a leading cause of homelessness, financial health of residents is indeed cause for concern. Compared to financially healthy families, insecure families facing an income disruption are 14 times more likely to be evicted. This ends up costing local governments thousands of dollars for providing homeless services. But even if the worst case scenario fails to occur, families facing such economic disruptions are more likely to miss utility bill payments or housing payments. The latter can reduce property tax revenue for city governments, inhibiting their ability to provide useful, even essential services for residents.  

 Takeaway lessons from UI’s research indicate cities should provide strong financial literacy and coaching programs to bolster the financial resiliency of families. Cities should offer financial interventions to help families reduce their debt without losing their homes or essential services such as water or electricity.   

 Increased financial literacy instruction and coaching specifically tailored to meet the needs of low-income families is essential to improving their financial security. That often involves acquainting people with better options than the predatory payday loan industry. Greater emphasis is placed on meeting people where they normally congregate, often schools and community centers.  

 A March 2017 brief by the Center for Financial Security at the University of Wisconsin-Madison examined several programs seeking to better reach their clientele. For instance, WiNGS Dallas, a financial literacy and coaching program in Texas, deemphasized the Internet and placed greater emphasis on personal meetings and phone calls to reach its largely Spanish-speaking clientele. This approach ran contrary to the conventional wisdom. At one time, staff members even took their clients to banks with Spanish-speaking personnel to open bank accounts.    

 In Fort Worth, Texas, the Pathfinders’ program uses  matched savings or savings rewards program to encourage clients to save money. Pathfinders also will help clients to obtain a small loan to start building up their credit.  

 Frequently, cities and their elected leaders exhibit the can do spirit that seems to bypass elected leaders in Congress.  

 St. Petersburg, Florida, mayor Rick Kriseman, first elected to his office in 2013, explained how his interest in promoting greater equity and inclusivity in his city was piqued when a resident invited him in for a bottle of water and described how difficult it was to get hired. Kriseman was moved to insist the city vision include the statement that St. Petersburg is “a city of opportunity where the sun shines on all who come to live, work and play.”  

 One way St. Petersburg helps lower-income residents is through its participation in the National League of Cities’ LIFT-UP program. Residents who default on utility bills are not subjected to aggressive collection tactics; instead, financially insecure families receive financial coaching to show them how to realistically handle their debt. This benefits both the city and its residents. A 2016 NLC story showed that St. Petersburg residents who were in the program saved, on average, $140 in avoidable fees during the year of their enrollment in LIFT-UP while being 53% less likely to have their services suspended.  

Kriseman said that though some of the “old guard” and other defenders of the status quo in his city might not appreciate reorienting the direction of St. Petersburg, for the most part, “getting the community on board” increased the likelihood programs promoting greater family financial resiliency and inclusive growth will continue.   

Kriseman admitted that his city is not counting on great support from the federal government. To some, that is a very big missing piece of the puzzle to promoting greater equity and inclusivity financially and in closely related areas such as housing.  

Issues |Income Inequality

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