Ninth District Insight

Ninth District Insight Report - Quarter 2, 2014

Published December 1, 2014

Overview and Key Findings: 2nd Quarter 2014

In 2nd quarter 2014, the Minneapolis Fed’s Community Development Department surveyed community development organizations, including developers, lenders, and service providers, to assess the economic well-being of low- to moderate-income (LMI) communities in the Ninth Federal Reserve District, which includes Minnesota, Montana, North Dakota, South Dakota, northwestern Wisconsin, and the Upper Peninsula of Michigan. Respondents were representative of the broad range of organizations that serve LMI communities in the Ninth District, and their responses reflect the economic conditions of more than 200 cities and towns across the District.

Ninth District Insight tracks 12 key indicators related to housing market conditions, employment conditions, consumer credit, business vitality, and the capacity of community organizations to serve LMI households. The 2nd quarter 2014 survey also contained a special topic section on recent government policy changes and budget cuts, including the Affordable Care Act and federal sequestration.

For 2nd quarter 2014, four indicators showed continued overall improvement across the Ninth District: business openings, access to credit for agricultural business owners, access to credit for non-agricultural business owners, and employment and job training opportunities for disadvantaged and dislocated workers. Housing and consumer credit conditions continued to remain unimproved. Among all indicators, lack of affordable rental housing for LMI households showed the greatest Districtwide deterioration. When asked “What single issue or challenge related to the well-being of LMI communities would you say deserves the most attention in 2014,” respondents most frequently mentioned affordable housing, job creation, income disparities, and access to broadband.

See below for issue-specific findings. State-level results for all survey questions appear in the accompanying Supplemental Graphs document.

Housing Opportunities

Homeownership and rental opportunities for LMI households have either declined or remain unimproved. Affordable housing remains in short supply across the Ninth District. When asked about top priorities, respondents consistently mentioned affordable housing as the single most important challenge that must be addressed in order to improve economic well-being in LMI communities.

  • 41 percent reported a decrease in LMI households’ ability to find affordable rental housing that meets their needs.
  • 36 percent said that the ability of creditworthy LMI households to obtain a mortgage has decreased.

“Adequate rental housing is in high demand and [rental] prices are high. Low-income housing is difficult for many to obtain in a reasonable time frame. Recent regulations have forced some lenders to reduce or eliminate mortgages to those with limited income or resources.”—Credit union, rural area, ND

“Federal sequester-related cuts have greatly reduced housing assistance resources in Montana. We have over 600 fewer Housing Choice Vouchers than we did 18 months ago. On the homeownership side, changes in mortgage qualifications, mortgage insurance costs, and a general sense that homeownership is not a high priority for low-income families is contributing to an environment where [ownership housing for LMI households] is difficult.”—Nonprofit housing organization, mixed urban-rural area, MT

“The [overall] rental vacancy rate in our metro area is around 2 percent with affordable rentals being even more challenging to find. Along with this shortage, rental prices are escalating, making it more difficult for families to save a down payment for ownership.”—Nonprofit housing organization, urban area, MN


Across the Ninth District, respondents reported overall improvement in employment and job opportunities for disadvantaged and dislocated workers in LMI communities. However, anecdotal comments indicate that the quality of these jobs (in terms of wages) is often low. More than one-third of respondents reported a decrease in business owners’ ability to find qualified workers. Reasons included lack of technical skills, lack of soft skills, and lack of workforce housing.

  • 48 percent reported increased employment opportunities for disadvantaged and dislocated workers in LMI communities.
  • 37 percent reported a decrease in the ability of business owners in LMI communities to recruit and retain workers with the “right” skills.

“The local state employment offices have hundreds of job postings; however, getting people to apply for the positions or placing the persons with the right skill levels is difficult.”—Community development corporation, urban area, MT

“Unemployment is very low. Unfortunately, wages are also low. It appears that many individuals are working one or more low-wage jobs because they do not possess the skills and/or training necessary to fill higher-paying jobs.”
—Philanthropic foundation, mixed urban-rural area, ND

“Incomes and salaries are inflated in this area, making smaller communities struggle to keep a quality workforce because they can’t compete with the wages. Companies are needing to hire underqualified workers to fill all their openings.”—Community development corporation, rural area, SD

Business Vitality

Respondents reported overall increases in business openings and access to credit in LMI communities. In some parts of the Ninth District, community development financial institution and bank partnerships appear to be playing an important role in helping small business owners gain access to credit. Still, some less established business owners are having difficulty obtaining the financing needed for start-up or expansion.

  • 36 percent reported an increase in the number of new businesses opening in LMI communities.
  • 34 percent reported that the ability of agricultural businesses in LMI communities to obtain the amount of credit they need has increased.
  • 34 percent said that the ability of non-agricultural businesses in LMI communities to obtain the amount of credit they need has increased.

“Banks appear to be loosening lending restrictions. With a surplus of cash, they are working with a number of businesses that would typically be part of our lending scope.”—Community development corporation, mixed urban-rural area, MT

“Non-agricultural business lending has been gradually increasing for about two years, but still is mainly for existing businesses or those with strong guarantors. Start-ups and low-net-worth businesses still have difficulty finding adequate credit.”—Community development corporation, rural area, MN

“Partnerships are key to meeting the needs of rural South Dakota businesses. Banks partnering with local development corporations or regional economic development loan funds to keep the businesses and services in the smaller communities.”—Nonprofit economic development organization, rural area, SD

“Business vitality is getting stronger, but it is at a slow rate. Job training seems to be the biggest issue. Businesses are expanding, but need qualified workers to handle the new machinery.”—Chamber of commerce, mixed urban-rural area, WI

Consumer Credit Conditions

According to comments from respondents, LMI households across the Ninth District continue to be challenged by high consumer debt and low credit scores. The use of payday lenders remains a concern among both financial service and financial education providers.

  • 36 percent said that the amount of consumer debt LMI households are carrying has increased.
  • 38 percent reported an increase in the use of alternative financial service providers among LMI households.

“Low-income households continue to struggle with credit issues and turn to alternative, expensive financial services and products.”—Nonprofit service organization, urban area, MN

“We continue to see the use of payday lenders in our service areas.”—Bank, mixed urban-rural area, ND

Community Organizations’ Capacity to Meet Service Needs

Across the Ninth District, the number of “formerly middle-class” households seeking services has increased. Federal housing program cuts, new mortgage regulations, and the Affordable Care Act continue to create uncertainty for many organizations that serve LMI households. On a positive note, a few respondents reported increased optimism about the sustainability of their operations.

  • 35 percent reported that the number of “formerly middle-class” households seeking assistance has increased.
  • 35 percent reported that optimism about the future sustainability of their operations has increased.
  • 20 percent said their ability to meet the needs of clients seeking services has declined.

“Planning has been difficult in these economic times with the changes in federal programs that can assist LMI families.”—Nonprofit economic development organization, rural area, SD

“U.S. Department of Housing and Urban Development funding cuts have caused us to question the future sustainability of our operations and our ability to provide needed assistance and services.”—Housing authority, mixed urban-rural area, WI

“Funding for services has increased somewhat in the past 12 months.”—Community Action Program, rural area, WI

Data Notes/Methodology

A total of 302 organizations responded to the Minneapolis Fed’s online survey, yielding a 20 percent response rate and 89 percent cooperation rate.1 The survey sample was constructed using a list of organizations from multiple sectors known to have front-line expertise on LMI household and/or community conditions. The respondent pool included 102 community banks, 69 economic developers, 68 housing developers and housing services providers, 34 health and human service providers, 33 financial education providers, 27 employment and job service training providers, 25 small business technical assistance providers, 18 certified CDFIs, 13 university extension service providers, 10 foundations, 5 tribal organizations, and 4 trade associations. Additionally, 35 organizations indicated involvement in some other unspecified community development role in the community.2

Ninth District Insight Survey Respondent Pool vs. Ninth District Population By Geography

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1 The response rate includes the total number of completed surveys divided by the total number of participants who received the email survey, excluding bad addresses (1,535). The cooperation rate includes the total number of completed surveys divided by the total number of participants who started the email survey (338).

2 Respondents were allowed to select multiple roles.

Ninth District LMI Economic Index
A measure of overall change in community conditions from 2nd quarter 2012 to 2nd quarter 2014.