Association for Public Policy Analysis & Management

Baltimore is the 30th-largest US city by population and is a study in contrasts. It has a low average income compared with other wealthy Northeast cities, has nine colleges and universities, and is a magnet for people pursuing higher education but has undergone decades of population loss. A large social sector provides important services to residents and buoys the local economy: nearly every third job in the city is with a nonprofit employer. But this also illustrates the city’s limited economic vibrancy.

A new study investigates the distribution of capital flows into the city, and quantifies the role that mission finance actors and the public sector play in local development. In the first such analysis to our knowledge, we bring together over two dozen sources of data to look across a range of asset classes for all neighborhoods in the City. We find that investment across Baltimore is uneven—fragmented by race, income, and geography. The investment flows studied include mortgages for homes, apartment buildings, commercial real estate, and other property types. We also have information about property purchases and investments in construction and rehabilitation, and we include information about city, state, and federal programs.

We find that private sector investment in Baltimore is highly concentrated. Neighborhoods that are less than 50 percent African American receive nearly four times the investment of neighborhoods that are over 85 percent African American. Low-poverty neighborhoods receive one and a half times the investment of high-poverty neighborhoods.

Public investment provides opportunities to counteract segregation of resources. Indeed, we observe this in the distribution of local, state, and federal spending in Baltimore. Mission lending (notably via community development financial institutions) is also more evenly distributed and more prevalent in high-poverty areas and areas with high concentrations of African American people than private investment.

Public and mission investment strategies can be focused locally—Baltimore is home to what may be the nation’s largest contemporary place-based revitalization effort. East Baltimore Development Inc. is seeking to redevelop the neighborhood north of John’s Hopkins Medical Campus, northeast of downtown. We explore the extent to which EBDI has catalyzed a greater volume of investment compared to other areas of Baltimore.

We find that EBDI has invested over $1 billion since it began in 2004. The community has seen appreciable more construction activity and real estate lending than other similarly disinvested neighborhoods, with mission finance and pubic sources playing an outsized role. While the targeted community has attracted many resources beyond which would otherwise be expected, certain community development investment flows have lagged behind citywide levels, most notably small business lending.

The study’s implications include that it is possible to catalyze significant capital flows into disinvested neighborhoods as a part of a place-based strategy. However, even while making available considerable public, philanthropic, and concessionary (subsidized) financing, capital flows into the EBDI target area are still below those available to low-poverty and majority-White neighborhoods