Access to capital, affordable housing and broadband internet access continue to be some of the key economic challenges facing rural communities, U.S. Sen. Mark Warner said Wednesday.
Warner, D-Virginia, spoke at the Federal Reserve Bank of Richmond’s “Investing in Rural America” conference, held at the Hotel Roanoke & Conference Center.
He emphasized the importance of Community Development Financial Institutions, or CDFIs, in providing lending and investment opportunities to underserved areas.
Warner also discussed past and present congressional efforts to increase access to affordable housing and broadband internet connectivity in rural communities.
Rural investment requires capital
In Virginia, Warner said, most capital investment goes to the Richmond, Northern Virginia and Hampton Roads regions. Rural areas are significantly less likely to see such investment.
That’s where CDFIs come in. As of February, there were 22 certified CDFIs headquartered in Virginia, including 14 loan funds, seven credit unions and one CDFI bank, according to the CDFI Coalition. Examples include Virginia Community Capital and the Southeast Rural Community Assistance Project in Roanoke.
Just like traditional banks, CDFIs are federally insured and regulated, but CDFIs differentiate themselves through their community development mission and a requirement that at least 60% of their financing activities must be devoted to low- or moderate-income populations or underserved communities, according to the FDIC.
Many CDFIs are minority depository institutions, or MDIs, which are institutions where at least 51% of the stock is owned by minority individuals, or the institution’s board of directors and community it serves are predominantly composed of minority individuals.
CDFIs’ purpose of serving low- and moderate-income communities overlaps with helping rural America, Warner said.
As COVID-19 disproportionately hit communities of color, it became apparent that federal assistance often was not going to rural, minority-owned businesses because many lacked a traditional banking relationship — Warner described such sectors as “overhit and underbanked.”
The $900 billion COVID-19 emergency stimulus funding package, which was signed into law in December 2020, included $12 billion for CDFIs and MDIs. Those institutions can leverage that money to lend up to 10 times as much into their communities, Warner said.
The question, Warner said, becomes: How do we build on that investment?
“If you’re talking about access to capital, this is broadly bipartisan,” Warner said.
Warner said his future priorities include a CDFI tax credit bill to encourage people to make longer-term investments in CDFIs, providing additional funding support for back-office operations at CDFIs and packaging CDFI loans together to bring them to a secondary market.
Warner said he also would like to see corporate America invest more in rural communities and communities of color.
After the murder of George Floyd at the hands of Minneapolis police in May 2020, companies made “huge amounts of promises” that they were going to try to deal with the racial wealth gap and other issues, Warner said.
“So we’re going back and saying, we want to make it easy for you to put your money where your mouth is, and potentially the easiest way to do that is long-term capital deposits and assistance to CDFIs,” Warner said.
Another piece of the puzzle, Warner said, is making it easier for traditional community banks to lend to underserved communities.
Time to tackle housing
“I’d give Congress an absolute failing grade” when it comes to helping with housing challenges, Warner said.
Warner said Congress provided some assistance to homeowners and renters during the COVID-19 pandemic, and things would have been worse without that help.
But, he said, “Housing has always been that ‘yes, we’ve got to get to it next’ — and we’ve never gotten to it next.”
The good news, he said, is that there is broad bipartisan support for housing programs such as the New Markets Tax Credit, which aims to help low-income communities attract private capital, and neighborhood tax credits that encourage developers to renovate existing housing stock.
Warner touted the potential benefit of creating a program for first-time, first-generation homebuyers to secure a 20-year mortgage at approximately the same monthly payment as a 30-year mortgage, allowing homeowners to build equity more quickly. Warner and other senators, including fellow Virginia Sen. Tim Kaine, introduced the idea in September 2021 as the LIFT Act.
Warner said he’s also looking to draft legislation to provide employer-based tax credits in hard-to-staff industries, such as rural health care, if the employer provides down payment assistance.
Connecting communities with broadband
The Virginia Tobacco Region Revitalization Commission, created in 1999 to boost the economies of localities that traditionally grew tobacco, made record investments in broadband access during the early 2000s, but while it may have connected schools or county offices, much of that access didn’t reach people’s homes, Warner said.
“The one thing that has come out of COVID, we finally have made the case that broadband is not a nice-to-have, but an economic necessity,” Warner said.
In 2023, a home broadband connection should be at least 100 megabits per second for downloads and 20 Mbps for uploads, and really it should be 100 Mbps for both — and it should be affordable, Warner said.
Virginia has about $700 million in federal money between the American Rescue Plan and U.S. Treasury funding that’s being used right now to expand broadband internet access, Warner said, but that pales in comparison to the $65 billion in nationwide broadband funding coming out of the recently passed bipartisan infrastructure bill.
“If we don’t get at least 97 to 98% broadband connectivity within the next three to four years in all of our states … it’s going to be all on us and a failure of execution, because it’s not a failure of bringing capital to the table,” he said.
Having broadband internet access doesn’t guarantee a community’s success, but failure to have broadband means a community isn’t even in the game, Warner said.
“While the challenges are great, I think the opportunities are great as well,” he said.
Small-town challenges
Before he introduced Warner at Wednesday’s conference, Richmond Federal Reserve President and CEO Tom Barkin spoke about the challenges small towns face in attracting and retaining workforce talent.
“Small towns need to recruit talent the way they recruit companies,” Barkin said.
Just as communities pitch their positives to prospective businesses, so too do prospective employees need to hear compelling pitches as to why they should move there, he said.
Small towns need to make it easier for workers to move, including addressing barriers such as increasingly expensive housing, Barkin said.
Small towns need to incentivize talent to move there, perhaps through bonuses or access to coworking space, or by expanding access to affordable child care, he said.
They also must develop their own workforces, Barkin said, calling connecting workers to jobs an “evergreen challenge.”
“It’s trendy to say that after COVID, we’re in a new normal, but I really do think that when it comes to small-town economic development, that the ground has shifted,” Barkin said. “The focus that employers are placing on talent is palpable, and those who can supply that talent will be the winners.”
Warner’s and Barkin’s comments came on the second day of the two-day conference that also was scheduled to host sessions on helping communities leverage their assets for development, helping rural workers overcome obstacles to joining the workforce, and finding ways that the public and private sectors can work together to amplify their impact in communities.
Warner’s remarks were part of a two-day swing through Virginia for the former Virginia governor who currently is serving his third term as a U.S. senator.
Warner’s schedule on Tuesday included stops in Clarke County to discuss agricultural issues, Harrisonburg and Rockbridge County to deliver federal funding checks for water infrastructure, and Botetourt County to talk high-speed internet access in rural communities.
On Wednesday, after the conference, Warner was scheduled to join Kaine in delivering funding to improve the oft-flooded Wiley Drive low-water bridge in Roanoke.