This DC bill could help bolster affordable housing and protect low-income borrowers

In November 2017, DC Councilmember David Grosso (At-Large) introduced a bill that would likely increase affordable housing investments and low-income lending by banks that do business with the District government. The bill strengthens an earlier responsible banking law called the Community Development Amendment Act (CDAA), which protects low-income and people of color from discrimination. Some local housing advocates say recent moves by the Trump administration to weaken protections like these make its passage more urgent.

What’s in the bill?

The CDAA set standards for banks that do business with the District government, as well as making their past commitment to low-income lending a part of their score when applying for District contracts. If a bank is benefitting from DC tax dollars, the thinking goes, then that bank needs to be benefitting all DC taxpayers.

But that law, passed in 2014, has never had the impact that its supporters hoped. A loophole in the way the law was written allows DC’s Chief Financial Officer to renew District banking contracts without putting banks through the evaluations specified in the law. That means that as long as DC doesn’t change banks, the CDAA’s responsible banking requirements are meaningless.

The new bill from Councilmember Grosso, entitled Strengthening the CDAA, would close this loophole by requiring that any bank up for a contract renewal be put through the full evaluation process. It also adds to the CDAA by raising the importance of a bank’s past lending activity when that bank is applying for a District contract. The bill was introduced with the support of Councilmembers Bonds (At-Large), Robert White (At-Large), Trayon White (Ward 8), Gray (Ward 7), and Silverman (At-Large).

With this kind of evaluation in place, banks that want to compete for District contracts will have more incentive to serve all of DC’s neighborhoods. Banking services in certain parts of the city, especially Wards 7 and 8, are scarce. Residents have few options when looking for a loan, and many are forced to turn to predatory payday lenders. Getting access to non-predatory home loans and other financial services is a crucial part of increasing racial equity in DC.

One of the ways that both the current law and the new bill evaluate banks is their score from the Community Reinvestment Act. The Community Reinvestment Act was passed by Congress in 1977 as an antidote to decades of racist lending policies. It scores banks on their lending in low income communities and allows community advocates to point out racist lending patterns that exist to this day.

Banks care about their score on this test because it determines their ability to do big money-making deals like mergers with other banks. (The Community Reinvestment Act is worth its own blog post, and you should read the one linked above!) The CDAA and Councilmember Grosso’s new bill both bring extra leverage to the work that the Community Reinvestment Act does.

Why this matters now more than ever

Reports emerged earlier this year that the Trump administration is planning to significantly weaken the Community Reinvestment Act, allowing banks to get away with less lending to qualified low-income individuals.

That could create even bigger gaps in access to mortgages and other lending in low-income communities. And those communities are already hurting. Reports from last year indicated that banks were already starting to further limit their lending in low-income communities, even before rumors of a Community Reinvestment Act rollback started.

Local governments will need to fill the hole created by lost Community Reinvestment Act lending, and Councilmember Grosso’s bill to strengthen the CDAA is a great step in that direction. The next step for this bill is a hearing in Councilmember McDuffie’s Committee on Business and Economic Development.

GGWash sometimes organizes around issues affecting our region. Should we consider advocacy around this topic? Let us know!

A version of this post originally appeared in HATDC.