A coalition of housing, community development, and nonprofit organizations is warning that proposed changes to the Community Reinvestment Act (CRA) could reduce private investment in affordable housing and other critical resources, particularly in rural areas and smaller markets.
More than 475 organizations joined a letter urging the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. to protect community development outcomes as they look at CRA updates.
“CRA is an irreplaceable policy that harnesses the power of the U.S. banking system to expand access to housing and economic opportunity,” said Sarah Brundage, president and CEO of the National Association of Affordable Housing Lenders. “Blunt changes to CRA may have unintended consequences. With any updates to CRA, we should ensure that we are enhancing the outcomes of CRA, not suppressing them.”
The changes proposed include lowering the small bank threshold from $1.649 billion to $1 billion, eliminating the intermediate small bank sub-category, and creating a separate intermediate bank category covering banks with assets between $1 billion and $10 billion. This means banks with assets between $1.649 billion and $10 billion that are currently subject to the large bank investment test would instead be evaluated under the intermediate bank community development test.
“Taken together, changes to income-targeting, community development definitions, evaluation standards, and other provisions could significantly shift where CRA-motivated capital flows and reduce the focus on low- and moderate-income communities, resulting in less affordable housing supply, fewer jobs for low- and moderate-income workers, and reduced access to vital community resources,” said the Oct. 13 letter. “The final rule should preserve a clear and meaningful focus on the low- and moderate-income households and communities CRA was intended to serve.”
In 2024, CRA incentivized more than $430 billion in loans and investments in low- and moderate-income communities, an amount that’s six times the combined budgets of the Department of Housing and Urban Development, the Department of Agriculture’s Rural Housing Service, the Small Business Administration, and the Community Development Financial Institutions Fund, according to the letter.
Enterprise Community Partners, Local Initiatives Support Corp., Low Income Investment Fund, National Low Income Housing Coalition, and National Multifamily Housing Council are among the organizations that signed the letter.