Focus Areas

Homes in Texas colonias range in quality from substandard to well-built—from hybrid dwellings combining RVs or trailer homes with wooden or cinder block additions, to brick or stucco homes built on cement foundations.

A major housing issue for colonia residents is affordability. Recent infrastructure improvements have dramatically increased the cost of lots. If a family is able to purchase a lot, they may not have sufficient funds remaining to spend on home construction and utilities, which can lead to costly renovations to stay up to code or fines. It’s not uncommon for extended families to live together or to build modest homes on the same lot to share expenses. Small-business owners in colonias often base their businesses in the front rooms of their houses or on their lots to reduce costs.

According to the Texas Department of Housing and Community Affairs (TDHCA), the homeownership rate in Texas colonias is 77 percent, as compared to the state average of 64.8 percent. Colonia homes provide a means to secure a brighter future and long-term stability, sometimes becoming an asset for future generations.

While homeownership can serve as a financial asset-building opportunity, this is not always the case for colonia residents. Because land purchases are typically self-financed through contracts for deed (CFDs), the buyer does not gain immediate equity in the property. CFDs are compared to rent-to-own contracts where the buyer doesn’t gain equity until the final payment is made and the title is transferred. Colonia residents continue to rely on CFDs instead of traditional purchase contracts because they may not qualify for a mortgage or may not have a relationship with a bank or credit union.

The need for safe, affordable housing currently exceeds the capacity of housing organizations to build due primarily to lack of capital. A major challenge in colonia housing markets is finding financial institutions willing to lend and county governments willing to get involved.

Success Story Residents working on an LVHC home in El Paso County Despite these continued challenges, some developers have been successful in increasing affordable housing. For example, the Community Development Corporation of Brownsville (CDCB) offers a range of services, including mortgage loan servicing, housing education, down payment assistance and colonias redevelopment. From 1994 to 2013, the organization produced 3,565 single- and multifamily housing units for low-income families in colonias. The Lower Valley Housing Corporation (LVHC) provides affordable housing and services to working families in El Paso County. Since 1990, LVHC has rehabilitated 98 houses and produced 48 apartment units, 304 new houses and 850 self-help houses. CDCB and LVHC are seen as leaders for their successes in the Texas border colonias’ community development industry. Other community development housing organizations serving colonias along the border include: AYUDA, Proyecto Azteca, El Paso Collaborative, Architecture for Charity and Habitat for Humanity.

Forty-two percent of the Texas colonia population lives below the poverty line and another 19 percent are close to it. While the national average for median income is $52,762, colonia households struggle to survive on a median income of $28,928. Roughly 40 percent of households rely on public assistance or food stamps. The charts below show comparisons among counties.

Poverty Is Far Reaching in Colonias
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Colonia Median Household Income Falls Short
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Colonia Residents Rely More on Public Assistance
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

A home-based small business in Cameron County; an example of a store/home combination common to colonias (see Housing section)

Because of these struggles, many Texas colonia residents rely on alternative financial service providers, such as payday and auto title lenders, pawnshops and rent-to-own stores. Although these lenders may be able to provide relatively fast and easy money to families in a bind, they come with extremely high interest rates that make the loans nearly impossible to pay off.

Despite these challenges, many colonia residents have been able to improve their financial well-being through entrepreneurship. Proximity to the border creates a competitive advantage for small-business owners and cost savings for consumers.

Much of this work is part of the border’s informal economy, which means it provides little job security or government protection and regulation; however, it can be what allows a family to make ends meet. In Texas colonias, 43 percent of residents are not in the labor force, so it is evident that many residents support themselves by participating in this informal economy as employers, employees and consumers.

Fewer Colonia Residents Participate in Formal Economy
SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Employment Concentrated in Different Sectors in Colonias than in Texas and Nation
NOTE: A comprehensive list of what each category includes is available at http://www.bls.gov/cps/cenocc2010.pdf. SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Pulgas, or flea markets, are the hub of the informal marketplace and common to colonias. They provide entrepreneurs with flexibility and the opportunity to sell a wide range of products. Community members can also buy basic goods at pulgas at an affordable price. They enable colonia residents to regularly earn an income, stretch their budgets and develop social networks.

Success Story Leticia Jones Some entrepreneurs in the informal economy have been able to move to the formal economy. One example is Leticia Jones, a colonia resident from Garciasville, Starr County, who runs a meal delivery and catering business called Letty’s Comida Casera. She exemplifies how LiftFund, a microlender that helps small-business owners who have limited access to capital, can help businesses grow and create formal relationships with banks. Jones attended a workshop as part of a program called AVANCE at the Colonias Unidas community center in nearby Las Lomas. A senior loan officer with LiftFund explained how to prepare business financials, qualify for a loan, keep a ledger with a formal bookkeeping system, and repair and build credit. Jones has received several business loans from LiftFund and now her future is bright. She began her cooking business out of her home, selling platters to teachers at the schools her children attended. Due to an increase in clientele and her need for more space, LiftFund helped her find a location for her business and receive approval for a loan to cover the rent. With more prep space, she was able to expand the business. Jones says the catering business has had a profound impact on the lives of her children, who help out when needed. Her daughter, a student at University of Texas—Pan American, intends to earn her degree in business administration to formally study what she learned at an early age watching her mother. The business is a true family asset, teaching her children resourcefulness, resilience and discipline as well as entrepreneurial skills that cannot be learned in a classroom.

Looking forward: The digital divide

For more information on improving access to broadband infrastructure for underserved communities, read the Dallas Fed report, “Closing the Digital Divide: A Framework for Meeting CRA Obligations pdf.”

According to the Center for Public Integrity’s Investigative Reporting Workshop, there is a distinct digital divide between low-income and higher-income households. Broadband adoption continues to lag behind for some population segments, including those who are low income, older, disabled, black, Hispanic, Native American or in rural communities. Of the 381 metropolitan statistical areas (MSAs) in the U.S., those with the lowest rates of computer ownership and Internet use by individuals include three Texas border MSAs. See the chart below for a comparison between these MSAs and Austin–Round Rock, which has the highest percentage of broadband and computer adoption in the state.

This is noteworthy because employment, banking and educational opportunities, among others, often require computer and broadband capabilities. Limited access to the Internet can result in further economic, social and political exclusion for historically underserved populations.

To address these issues in the colonias, the Dallas Fed is leading a collective impact initiative, Digital Opportunity for the Rio Grande Valley (DO4RGV), with many community partners, including: ACT, the University of Texas Rio Grande Valley, the University of Texas at Austin, Capital One Bank, Region One Educational Service Center, La Joya Independent School District, Pharr–San Juan–Alamo (PSJA) ISD, City of Pharr, City of McAllen, Doctors Hospital at Renaissance, the Health and Human Services Commission, the Small Business Administration, Verizon, Dell and Kajeet. The Texas Association of Telecommunications Officers and Advisors is a consultant on the project.

The goal of DO4RGV is to design and implement an effective model to close the digital divide in the Rio Grande Valley. Project objectives are to improve:

• Educational opportunity and results for PreK-12 students and their families across the region
• Access to workforce opportunities, including training and job opportunities
• Access to healthcare providers
• Access to the Internet and online banking
• Financial literacy, by providing access to the Dallas Fed’s Building Wealth and Navigate curricula, as well as partner programs

The initial demonstration project will be focused on providing students and families in PSJA ISD with computers, Internet access, bilingual training and technical support. DO4RGV partners will work with local governments, Internet companies, anchor institutions and other stakeholders to provide broadband access more equitably.

Low educational attainment is one reason poverty is persistent and concentrated in the colonias. Educational attainment in Texas colonias is much lower than county, state and national averages (see first chart to the right). Seventy-eight percent of the adult population in colonias has an education level of high school or less, while the average for counties along the Texas border is 59 percent. Only 22 percent of adults in colonias have some college or a college degree or higher, compared with 55 percent for Texas and 57 percent for the nation. The second chart shows the importance of education level and how it generally influences earnings.

Educational Attainment Lags in Colonias
NOTE: Adults 25 years and older. SOURCE: Census Bureau, 2011 American Community Survey 5-Year Estimates.

Median Earnings Increase with More Education in United States
NOTE: Median “earnings” is used as the measurement because it includes only what is earned at a job: wages, salaries and self-employment income. In contrast, median “income” includes earnings plus 41 other components. For details, see the Census website at www.census.gov/cps/data/incdef.html. SOURCE: Census Bureau, 2013 American Community Survey 5-Year Estimates.

Parents want to help their children succeed but are hindered by their own low education levels, lack of experience with the education system and limited English proficiency, which make it difficult for them to be advocates for their children in school.

A number of local efforts are aimed at developing students’ talents, preparing them for the workforce and helping them become civically engaged. Organizations behind some of the most noteworthy efforts are Project ARISE, Llano Grande Center for Research and Development, South Texas College, IDEA Public Schools and Pharr–San Juan–Alamo (PSJA) Independent School District.

PSJA is known for its success in preparing students—starting at the prekindergarten level—for high school graduation and college, focusing on children’s and parents’ strengths and assets, such as Spanish language proficiency. The high school provides dual-enrollment college courses and has seen an increase in its four-year graduation rate from 62 percent in 2007 to 88 percent in 2014.

Organizations like PSJA serve as building blocks to community and economic development in colonia communities.

In colonias—and other underserved communities—health issues are tied to many economic, housing and environmental conditions. For example, homes may lack insulation or be located in a flood zone with mosquito infestations. Complex factors lead to serious health challenges, including limited access to:

• Hospitals and providers.
• Safe drinking water.
• Quality housing.
• Healthy food.

But many individuals and organizations are working to make improvements.

Promotoras are community health care workers who inform colonia families about health-related issues and connect them to resources. For many, they are the difference between having health care and not. At the Brownsville Community Health Center in Cameron County, promotoras in the Mano a Mano program are working to enroll residents in public health care programs. They can be found walking door to door in colonias providing information and promoting healthy lifestyles. The chart below shows many of the health issues these residents face.

Another organization working to improve health in colonias is the new University of Texas Rio Grande Valley Medical School, which will help address the area’s shortage of health care professionals and the prevalence of diabetes and obesity in residents, among other issues.

Success Story Two organizations in Webb County have been successful in addressing the issue of food deserts in their communities. Ein Gedi Ranch, outside of Laredo, aims to improve living standards in nearby colonias by creating self-sustaining agriculture, providing healthy food and educational opportunities. It features a community center, a playground, gardens, chicken and rabbit husbandries and a ceramics operation. Harvested products are shared by residents and sold at farmers’ markets. The organization provides job skills training, computer classes, English as a second language classes and tutoring for students. El Cenizo Agua Viva community garden works to improve the quality of life for colonia residents by increasing access to nutrition and education and creating awareness of the environment. Community members are involved in cultivating fruits, vegetables and herbs and trade with other members of the community or sell them at farmers’ markets. Produce from the garden is used for the Kids Café, an after-school program that provides nutritious meals to local children—sponsored by the South Texas Food Bank.