Home Financing in Kansas City and Its Contribution to Low - and Moderate - Income Neighborhood Development FEBRUARY 2007

City for their generosity in providing many of the data sources used in this article. We would also like to thank Micah Scott for his research assistance and help in collecting data. Our research benefited as well from discussions with Kirk McClure with the Graduate Program in Urban Planning at the University of Kansas and with members of the Community Affairs Department of the Federal Reserve Bank of Kansas City. In recent years, many factors have helped make home financing more available in low-and moderate-income neighborhoods. Lower interest rates on mortgage loans have helped to reduce the monthly payments homebuyers face, while high employment rates have enabled more families in lower-income neighborhoods to qualify for home loans and to build up their savings. Affordable housing programs, homebuyer education and counseling classes, community group activities, and new regulatory and legislative incentives have also served to provide a boost to prospective homeowners in low-and moderate-income neighborhoods. Another important factor has been the significant innovations in home financing over the last decade or so that have helped to reduce the down payments on loans, expand the variety of lending instruments, and increase the quality of information available on individual borrowers. Within the Kansas City metropolitan area, these factors have helped to increase the flow of credit going into low-and moderate income neighborhoods. In fact, during the 1990s, home purchase lending in low-and moderate-income neighborhoods increased at a faster pace than for the entire metropolitan area. 1 A key question is what has this increased availability of credit meant for the neighborhoods themselves? Has the lending