New census tract data affects CDFI certification, SSBCI eligibility and more

The U.S. Department of the Treasury’s Community Development Financial Institutions (CDFI) Fund released a file and map summarizing core economic data for each census tract. Policymakers and practitioners should be aware of these changes for both what the data reveal about local economic trends and the impact the changes could have on future program eligibility. Importantly, tract-level economic distress is integral to CDFI certification and business eligibility for portions of Treasury’s State Small Business Credit Initiative (SSBCI), as well as being a common reference for federal programs that prioritize distressed regions. The new data makes numerous changes from the 2018 update, including nearly 23,000 new census tract IDs and more than 11,000 tracts with a different economic distress status.

The CDFI Fund update identifies 40,529 census tracts as eligible investment areas. These tracts are designated due to meeting one or more of the following conditions: a poverty rate of 20% or above, an unemployment rate 1.5 times the national average, a median family income of 80% or below the regional median or has a high level of population loss (for details on the calculations, see the CDFI Fund area eligibility data file). The data file helpfully provides each tract’s score on each eligibility measure and the regional benchmark to which the score is being compared. The majority of these tracts, 24,082 were previously eligible, 10,385 eligible areas have new tract IDs, and 6,062 were tracts that were not eligible as of the last update. Eligible tracts can also be viewed on the CDFI Fund’s mapping tool.

Of the 44,866 census tracts that are not eligible CDFI investment areas: 5,009 were eligible previously, 27,351 had no change, and 12,506 are new tracts.

The inclusion of nearly 23,000 new census tract IDs expands the total number of tracts by approximately 11,000 to 85,395 and makes some year-over-year comparisons challenging. These new tracts were largely created by splitting 11,479 existing tracts into 22,871 tracts, each of which has a new census tract ID and geographic boundary. ESRI, the company that operates the popular ArcGIS mapping software, has a discussion of these changes and a tool for comparing 2019 and 2020 tracts in any given region.

The CDFI Fund certifies entities to operate as CDFIs, and working with individuals and companies in eligible target markets is important to several aspects of the certification process. The updates to the eligible investment areas are, therefore, integral to this program.

Treasury’s SSBCI also uses the location of a business or its owners in a CDFI investment area as a qualification for using the program’s set-aside for “socially- and economically-disadvantaged” businesses. The agency’s rules require states to abide by CDFI eligibility as of Jan. 1 in each calendar year. Therefore, it appears that these changes, published on Jan. 5, 2023, will not affect SSBCI eligibility until 2024.

CDFI data is also useful for other programs that consider regional economic distress as eligibility or competitive criteria. These include EDA’s public works and economic adjustment assistance programs, , Housing and Urban Development’s Community Development Block Grant, and USDA community facilities program.