Ninth District Insight

Ninth District Insight Report - Quarter 4, 2013

Published April 16, 2014


In 4th quarter 2013, the Minneapolis Fed’s Community Development Department surveyed community development organizations, including developers, lenders, and service providers, to assess the economic well-being of low- to moderate-income (LMI) communities in the Ninth Federal Reserve District, which includes Minnesota, Montana, North Dakota, South Dakota, northwestern Wisconsin, and the Upper Peninsula of Michigan. Respondents were representative of the broad range of organizations that serve LMI communities in the Ninth District, and their responses reflect the economic conditions of more than 200 cities and towns across the District.

The survey included questions on housing market conditions, employment conditions, consumer credit, business vitality, the capacity of community organizations to serve LMI households, and the impacts of recent government policy changes and budget cuts, including the Affordable Care Act and federal sequestration. Included among the questions are 11 key indicators related to LMI community economic conditions that the Minneapolis Fed continues to track over time. To view the performance of these indicators over the past 24 months, please refer to the LMI Economic Index below.

Key Findings for 4th Quarter 2013

For 4th quarter 2013, four indicators related to LMI community economic health showed continued overall improvement across the Ninth District. Among the positives were increased business openings, increased access to credit for both agricultural and non-agricultural business owners, and increased employment and job training opportunities for disadvantaged and dislocated workers.

Housing conditions continue to show overall deterioration and showed little or no improvement. The rental housing supply continues to remain tight in many communities across the Ninth District. Survey responses show some signs of improvement in North Dakota. About 1 in 5 respondents reported an increase in “LMI households’ ability to find affordable rental housing in comparison to 6 months ago.”

Consumer finance conditions overall also remain negative, although responses across the District were somewhat less negative than they were 12 months ago.

See below for issue-specific findings. State-level results for all survey questions appear in the accompanying Supplemental Graphs document.

Housing Opportunities

Homeownership and rental opportunities for LMI households have either declined or remain unimproved. Across the Ninth District, affordable housing remains in short supply. Some community banks reported difficulty with increased mortgage regulation, in that fewer LMI households now qualify. Community banks in rural areas also reported difficulty with getting appraisals.  

  • 50 percent reported a decrease in LMI households’ ability to find affordable rental housing that meets their needs.
  • 33 percent said that the ability of creditworthy LMI households to obtain a mortgage has decreased.

“Housing is a critical shortage in many South Dakota communities and has become a priority that communities must deal with in order to grow.”—Regional economic development corporation, rural area, SD

“Regulatory requirements for single-family home loans have hurt LMI applicants’ [ability] to obtain financing.”
—Community bank, rural area, SD

“The lack of affordable rental units...has made it difficult for low-income individuals and families to access housing, even when being assisted with a [federal] rent subsidy.”
—Community Action Agency, rural area, WI


Respondents reported overall improvement in employment and job opportunities for disadvantaged and dislocated workers in LMI communities. However, anecdotal comments indicate that underemployment and lack of “living wage” jobs continue to plague workers. Communities in the Bakken oil region in both Montana and North Dakota continue to experience worker shortages across several industries.

  • 49 percent reported increased employment and job training opportunities for disadvantaged and dislocated workers in LMI communities.
  • 39 percent reported a decrease in the ability of business owners in LMI communities to recruit and retain workers with the “right” skills.
  • Several LMI communities across the District reported a shortage of manufacturing and skilled-trade workers.

“We have low unemployment [in the region], but we have many people who are underemployed. They either lack skills or the jobs they are currently working pay less than their previous employment.”—Nonprofit foundation, rural area, MN

“We do not have enough trained people in the workforce to meet certain skill needs, such as welding or other manufacturing jobs.”—Community bank, mixed urban and rural area, MN

“The oil development in eastern Montana is impacting workforce availability as far [west] as Billings. Other sectors cannot compete with oil- and gas-related wages.”
—Nonprofit organization, mixed urban and rural area, MT

Business Vitality

Respondents reported overall increases in business openings and access to credit in LMI communities. However, credit access continues to be a challenge for some pockets in the District.

  • 30 percent reported an increase in the number of new businesses opening in LMI communities.
  • 38 percent reported that the ability of agricultural businesses in LMI communities to obtain the amount of credit they need has increased.
  • 26 percent said that the ability of non-agriculturalbusinesses in LMI communities to obtain the amount of credit they need has increased.

“Montana is seeing the start-up of small and [micro] agriculture-related businesses, predominantly food and beverage manufacturers, which are adding value to the state’s agricultural products. We are also seeing some small business expansions.”—State government department, mixed urban and rural area, MT

“Non-agricultural and agricultural business owners both lack adequate resources to obtain financing and access to capital ... Businesses in LMI communities continue to struggle as they continue to need better access to capital, business/advisor relationships, and technical assistance to better position them for success and growth.”—Small business development center, mixed urban and rural area, WI

“Access to capital remains an issue. Business owners find it difficult, while community bankers maintain that the highly restrictive regulations prevent them from making capital more accessible.”—County chamber of commerce, rural area, MN

Consumer Credit Conditions

Consumer debt among LMI households remains high, although conditions show overall improvement in comparison to 12 months ago. Respondent comments illustrate mixed demand for consumer credit, including reports of continued household deleveraging and reports of consumers seeking additional credit. LMI households’ use of payday lenders continues to generate concern among financial education and financial service providers.   

  • 45 percent reported an increase in the use of alternative financial service providers among LMI households.
  • 29 percent said that the amount of consumer debt LMI households are carrying has increased.

“In our market, consumer credit scores continue to deteriorate and the need for nontraditional loan products such as payday loans is increasing to satisfy the need for credit.”—Community bank, rural area, MN

“We are witnessing an increase in members’ willingness to take on additional debt, in reverse of the deleveraging that occurred from 2009 to 2012.”—Credit union, urban area, MT

“Demand for consumer credit appears to be growing a bit. LMI households have reasonable access to most traditional lenders as long as their credit history is decent.”—Credit union, rural area, ND

“[Consumer debt] remains the number one problem facing LMI households in our region.”—Nonprofit agency, rural area, MN

Community Organizations’ Capacity to Meet Service Needs

Fewer community organizations reported an increase in “formerly middle-class” households seeking assistance, but anecdotal comments indicate that the proportion of households that are LMI has increased in some areas. High or rising demand for services coupled with fewer resources continues to be a challenge for many service organizations, especially those impacted by federal budget cuts.

  • 36 percent reported that the number of “formerly middle-class” households seeking assistance has increased.
  • 27 percent said their ability to meet the needs of clients seeking services has declined.

“As resources have decreased, our ability to assist lower-income households has decreased. The economy in our region has not sufficiently recovered. There are many households that were middle-class who are now struggling to maintain basic needs.”—Community Action Agency, rural area, WI

“All of the groups we support have seen an increase in service needs and flat organizational budgets.”
—Community development intermediary, urban area, MN

“Federal program sequestration has reduced the number of households we serve and compromised the financial integrity of our program.”Housing authority, mixed urban and rural area, MN

Government Policy Changes and Budget Cuts

Respondents were asked to comment on the impacts of government policy changes and budget cuts for the LMI communities they serve. Across the District, respondents reported the following issues:

  • Although some businesses have not made any changes as a result of the Affordable Care Act, a number have reduced staff hours, increased the amount employees must contribute to their health insurance premiums, and/or are considering dropping private insurance altogether.
  • Federal government budget cuts have reduced the number of LMI households being served by housing programs, job placement programs, Head Start, and SNAP (the Supplemental Nutrition Assistance Program, formerly known as food stamps).
  • Some community banks expressed ongoing concern about the high costs of increased regulation and oversight required by the Dodd-Frank Act.
  • Some respondents in rural areas expressed concern about the potentially negative local economic impacts of the 2012 Flood Insurance Reform Act and the 2013 Farm Bill. 

Data Notes/Methodology

A total of 326 organizations responded to the Minneapolis Fed’s online survey, yielding a 22 percent response rate and 84 percent cooperation rate.1 The survey sample was constructed using a list of organizations from multiple sectors known to have front-line expertise on LMI household and/or community conditions. The respondent pool included 111 community banks, 104 housing and economic developers, 40 employment and job service training providers, 40 health and human service providers, 35 small business technical assistance providers, 32 financial education providers, 23 certified CDFIs (community development financial institutions), 13 university extension service providers, 11 neighborhood organizations, 9 tribal organizations, 8 foundations, and 7 trade associations. Additionally, 40 organizations indicated involvement in some other unspecified community development role in the community.2

Respondents were encouraged to respond only to topic areas that pertain to their organization’s work and the customers they serve. The survey contained 11 closed-ended questions that asked respondents to compare current conditions to those prevailing six months ago by indicating whether conditions had “decreased,” “stayed the same,” or “increased.” The survey also included 11 open-ended questions that asked respondents to share additional observations regarding challenges and effective solutions. All numbers and percentages reported are for valid cases only. Numbers for the Upper Peninsula of Michigan are suppressed because there are fewer than ten cases.

Ninth District Insight Survey Respondent Pool vs. Ninth District Population By Geography

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1 The response rate includes the total number of completed surveys divided by the total number of participants who received the e-mail survey, excluding bad addresses (1,474). The cooperation rate includes the total number of completed surveys divided by the total number of participants who started the e-mail survey (386).

2 Respondents were allowed to select multiple roles.

Ninth District LMI Economic Index
A measure of overall change in community conditions from 4th quarter 2011 to 4th quarter 2013.