Turns Out Investing in Disinvested Communities Isn’t Very Risky

How risky is an organization that specializes in making loans to affordable housing and other community development projects in low and moderate income neighborhoods? Many of those neighborhoods themselves were once declared risky simply because black people or immigrants lived there, and therefore lenders discriminated against making loans in those neighborhoods — the practice known today as redlining.

A credit analyst who has worked at all three national credit rating agencies has rated 11 certified community development financial institutions. All but one are nonprofits. They’ve gotten pretty high ratings, meaning they’re relatively low-risk investments on Wall Street, and investors are buying it. Of those 11, nine CDFIs have ventured out to the bond market so far, and they recently hit a billion dollars in bonds sold as a group.

While there are now over 1,000 CDFIs across the country, so far only the largest CDFIs can afford to get rated and issue bonds.

Read more at Next City, which covers the investments, technology and  policies shaping cities.