Threats to Black Businesses
and Neighborhood Well-Being
Given the important role that Black-owned businesses can play as neighborhood assets that are associated with positive well-being outcomes, it is vital to address the structural barriers they continue to face. To investigate these threats, we conducted four focus groups with business owners and residents across the City of Atlanta. The major threats they shared include access to capital and commercial affordability challenges in rapidly gentrifying neighborhoods.
Access to capital barriers
Although most entrepreneurs use personal or family wealth to start their businesses, Black entrepreneurs in Atlanta have fewer resources to do so. Instead, Black entrepreneurs are more likely to rely on personal credit cards to fund their businesses.23 Barriers to bank loans and other sources of capital stemming from chronic of systemic racism and ongoing discrimination in financial markets continue to create barriers to business financing. Even after controlling for creditworthiness, Black entrepreneurs experience higher rates of loan denial and pay higher interest rates than white-owned businesses.24
Nationally, only 20 percent of Black business owners are approved for loans, lines of credit, and cash advances, compared to 33 percent or more for all other racial-ethnic groups.25 In Atlanta, majority-Black neighborhoods receive lower business loan amounts compared to other neighborhoods. According to our 2023 report, “Building a Beloved Economy: A Baseline and Framework for Building Black Wealth in Atlanta,” the more Black residents there are in a neighborhood, the fewer business loans there are.26
Commercial (Un)affordability and Neighborhood Retail
Retail nestled within Atlanta’s neighborhoods was once a standard amenity in Atlanta. However, that amenity is beginning to fade as small Black-owned retailers are priced out of their neighborhoods. If Atlanta intends to combat displacement and help generate community wealth, policymakers and leaders in the capital ecosystem must prioritize supportive policies and investments that promote neighborhood retail.
As rents in the city continue to rise, so does the need to address commercial affordability for small business owners. More work needs to be done to establish a straightforward definition of commercial affordability that reflects the conditions Black businesses face in rapidly gentrifying neighborhoods. A general rule is that businesses should pay at most 10 percent of their annual revenue toward rent.27 However, our analysis shows rent increases in majority-Black neighborhoods may be making affordability a challenge for small Black businesses, compared to other neighborhoods.
Between 2013 and 2023, small businesses in majority-Black zip codes experienced a higher rate of increase in commercial rents compared to those in majority-white zip codes. Specifically, rents in majority-Black zip codes rose by approximately 93 percent, whereas rents in majority-white zip codes increased by approximately 68 percent. This indicates that, relative to their initial values, commercial rents are rising faster in majority-Black zip codes. However, it is essential to note that the absolute increase in rent over the 10-year period was $11.11 in majority-Black zip codes, compared to $15.91 in majority-white zip codes, reflecting the lower initial rent levels in majority-Black zip codes.
Also, between 2013 and 2023, the commercial rents in majority-Black zip codes experienced a compound annual growth rate of approximately 7 percent, compared to approximately 5 percent in majority-white zip codes. This indicates that, on an annual basis, commercial rents in majority-Black zip codes have been increasing faster than those in majority-white zip codes. Small business owners are faced with the instability of commercial rents in majority-Black zip codes, leaving businesses vulnerable to displacement.
Using cost modeling and available market data, we estimate that the median monthly commercial rent for physical space in majority-Black neighborhoods is $6,802. Keeping constant with the 10 percent rule for commercial rents, most Black-owned businesses (62 percent) can afford only $4,167 or less in rent. The commercial space available for rent in majority-Black neighborhoods is not only too expensive but also offers too large a footprint for small business owners. The median square footage available in majority-Black neighborhoods as of the first quarter of 2024 is 3,516 square feet, which is significantly larger than the square footage that business owners stated they need in our conversations.
“I will say that was another thing that brought us to that space. It’s the size, it is very difficult to find small real estate available and that made the rent affordable.” – Atlanta business owner
Commercial vacancies in neighborhoods impact well-being outcomes in addition to their impact on affordability for business owners.28 Vacancy trends reveal that available space in Atlanta’s majority-Black neighborhoods has steadily declined since 2013 and is currently lower than in all other neighborhoods. While this may signal an influx of capital into these neighborhoods, it also implies more competitive rental markets, adding to the pressures existing legacy businesses face.
We are unable to report on what is contributing to lower vacancies in Atlanta neighborhoods, but we can look at trends in the broader real estate market that warrant more analysis and more transparent real estate transaction data. For instance, commercial real estate in majority-Black neighborhoods is often undervalued compared to similar properties in predominantly white areas. This devaluation results in significant aggregate wealth losses for property owners in these communities. This undervaluation makes these properties attractive to larger institutional investors who are based in other neighborhoods, parts of the city, or even, in some cases, the country.29
Investors might hold properties with the intention of long-term gains rather than immediate resale or leasing, which could skew vacancy data if these properties are not listed as actually vacant. This strategic holding can be part of a broader investment strategy anticipating future appreciation in property values.30 Future studies will identify which businesses are taking over vacant commercial spaces in majority-Black neighborhoods and examine implications for neighborhood well-being when those businesses are not locally owned.
