Building Economic Security in America’s Cities New Municipal Strategies for Asset Building and Financial Empowerment Building Economic Security in America’s Cities New Municipal Strategies for Asset Building and Financial Empowerment January 2011 Acknowledgements CFED thanks the many people whose contributions, support, guidance, advice, knowledge and patience were invaluable to this project. This project was made possible through the generous support of Living Cities and the Surdna Foundation, and we want to thank our program officers Jasmine Thomas, Kim Burnette and Marian Urquilla for their support and wisdom. We would also like to thank the Annie E. Casey Foundation for their additional support. CFED would like to acknowledge the immense contributions of the policy and research committee of the Cities for Financial Empowerment (CFE) Coalition to this report: Caitlyn Brazill, Jerry DeGrieck, Suzanne Donovan, David Friedman, Mitchell Kent, Cathie Mahon and Leigh Phillips. We greatly appreciate the careful attention and time you spent reviewing, editing and improving the content of this report. CFED would also like to thank all of the members of the CFE Coalition for inspiring and providing much of the information contained in this report: Chicago – Cara Castellana, Bill Thanoukos, Bina Patel; Los Angeles – Sophia Heller; Miami – William Porro; Newark – Anthony Santiago, Jacob Daniels, Stephen Pryor; New York – Jonathan Mintz, Cathie Mahon, Caitlyn Brazill, Mitchell Kent, Amelia Erwitt; Providence – Garry Bliss, Bert Cooper; San Antonio – Dennis Campa, Richard Keith, Melody Woosley; San Francisco – Jose Cisneros, Leigh Phillips, Marco Chavarin, David Augustine; Savannah – Daniel Dodd, Suzanne Donovan, Robyn Wainner, Rochelle Small-Toney; and Seattle – Jerry DeGrieck, Diana Stone. Finally, we want to thank the team of CFED staff and consultants that researched, wrote, designed and otherwise contributed to this publication: Ida Rademacher, Jennifer Brooks, Kasey Wiedrich, Genevieve Melford, Michelle Nguyen, Barbara Rosen, Chris Campbell, Kristin Lawton, Amy Radovich and Karen Murrell. About CFED CFED (Corporation for Enterprise Development) expands economic opportunity by helping Americans start and grow businesses, go to college, own a home, and save for their children’s and own economic futures. We identify promising ideas, test and refine them in communities to find out what works, craft policies and products to help good ideas reach scale, and develop partnerships to promote lasting change. We bring together community practice, public policy and private markets in new and effective ways to achieve greater economic impact. Published January 2011 © Copyright CFED, 2011 4 Table of Contents Building Economic Security in America’s Cities: New Municipal Strategies for Asset Building and Financial Empowerment Foreward ............................................................................................................................ 6 Letter from the Co-Chairs of Cities for Financial Empowerment (CFE) Coalition ............................................. 7 Executive Summary ................................................................................................................. 8 I. A New Role for Local Government in Poverty Alleviation ........................................................... 14 Financial Empowerment: An Emerging Approach ............................................................................. 1 5 How Did Cities Get Involved in this Work? .................................................................................. 1 6 2. The Fragile State of Household Financial Security in Cities ........................................................ 2 0 Income and Assets .............................................................................................................. 2 0 Credit and Debt ................................................................................................................ 2 1 Banked Status ................................................................................................................... 2 2 Housing and Homeownership ................................................................................................. 2 3 3. Strategies ...................................................................................................................... 2 6 Strategies to Improve Access to High Quality Financial Information, Education and Counseling ............................ 2 8 Strategies to Increase Access to Income-Boosting Supports and Tax Credits ................................................ 3 1 Strategies to Connect Residents to Safe, Affordable Financial Products and Services ....................................... 3 5 Strategies to Create Opportunities to Build Savings and Assets .............................................................. 3 9 Strategies to Protect Consumers in the Financial Marketplace ............................................................... 4 5 4. Toward an Integrated Policy Infrastructure: Removing Barriers and Leveraging Opportunities .............. 5 0 Aligning Policies to Improve Access to High Quality Financial Information, Education and Counseling ..................... 5 0 Aligning Policies to Increase Access to Income-Boosting Supports and Tax Credits ......................................... 5 1 Aligning Policies to Connect Residents to Safe, Affordable Financial Products and Services ................................ 5 2 Aligning Policies to Create Opportunities to Build Savings and Assets ....................................................... 5 4 Aligning Policies to Protect Consumers in the Financial Marketplace ......................................................... 5 5 5. From Innovation to Systems Change: The Road Ahead ............................................................... 5 8 Invest in Evaluation ............................................................................................................. 5 8 Further Integrate Financial Empowerment Strategies across City Government ............................................. 5 9 Plan for Political Transition ..................................................................................................... 5 9 Endnotes .......................................................................................................................... 6 0 References ........................................................................................................................ 6 1 Appendix 1: Local, State and Federal Policy Alignment for Asset Building .......................................... 6 4 Appendix 2: Municipal Data Profiles for CFE Cities ...................................................................... 6 9 Appendix 3: Data Sources and Measures ................................................................................... 9 0 5 Foreward THE IDEA FOR THIS REPORT AROSE from a growing interest in identifying policies and strategies that enable communities to work more holistically to advance the economic prosperity of their most vulnerable residents. Never has this work been more needed. As the recent economic downturn has revealed, we have become a nation that too frequently lives beyond its means, increasingly only a paycheck away from financial distress. This work and the growing field of asset-building has given us a new way of thinking about poverty -- one based on the depth of overall financial stability not merely based on income. Such a broader view ultimately challenges us to promote greater economic sustainability – one that can sustain us for months versus weeks and over multiple generations. Approaching anti-poverty work from this view point asks that we re-think the social compact between government and its constituents. It demands that we think beyond reactive policies focused narrowly on crisis intervention and preservation of the safety net, to policies that aim to proactively help individuals out of poverty -- in essence offering them a hand up instead of a hand out. Who better than the leaders in our cities to help in this effort? Unlike intervention at the state and federal levels, city leaders are more able to “connect the dots” between disparate disciplines that affect the lives and livelihoods of their residents. From affordable housing, to transportation, to banking services, to consumer protection, cities are uniquely positioned to align their array of services to advance the common goal of building the prosperity of all of its residents. Our hope in supporting this effort is to spread the ideas now bubbling out of a set of innovative places to inspire more communities to develop and replicate policies and practices to build and maintain America’s middle class. We look forward to continuing to advance this work together in the coming years. Jasmine Thomas Marian Urquilla Program Officer Program Director Strong Local Economies Living Cities The Surdna Foundation 6 Letter from Co-Chairs of Cities for Financial Empowerment In March 2008, New York City Mayor Michael R. Bloomberg and San Francisco Mayor Gavin Newsom, formed the Cities for Financial Empowerment (CFE) Coalition to bring together those city governments implementing financial empowerment initiatives. The Coalition, which now includes eleven local governments, came together to share lessons learned, harness specific opportunities, and address common challenges. Since the birth of the field of asset building two decades ago, diverse