An estimated 500,000 Texans – primarily Mexican-Americans living along the border – live in communities that lack access to basic necessities such as clean drinking water, paved roads or electricity, according to a report published by the Dallas Fed earlier this spring.

The study sheds light on more than 2,200 communities known as “colonias” where the poverty rate is almost three times the national average and residents –who lack the income or credit to obtain other forms of housing – often build their own homes.

Kinder Institute senior editor Ryan Holeywell spoke with report co-author Emily Ryder Perlmeter, a community development analyst at the Dallas Fed, about the conditions in the colonias and how they’ve changed over the last 20 years.

This interviewed has been edited and condensed.

Ryan Holeywell: What, exactly, is a colonia, and why is this something the Fed wanted to study?

Emily Ryder Perlmeter: It’s the Spanish word for “neighborhood.” In this context, it’s a neighborhood that lacks what people consider basic living necessities – sewer systems, drinkable water, electricity or paved roads – really anything considered safe or sanitary housing.

A few states have colonias. They’re generally within 150 miles of the border with Mexico. Texas has the highest concentration of colonias, with an estimated half-million people living there.

In 1996, the Federal Reserve’s community affairs department released a study that tried to draw attention to the fact that there are American citizens in our state who don’t have access to things considered basic necessities. These are communities that look much more like third-world communities than American communities.

About two years ago, we decided to do a follow-up study. There’s been so much more attention and funding in these areas. We wanted to see where they are now.

RH: Who lives in colonias, and what sort of circumstances led them there?

ERP: About 73 percent of colonia residents are American citizens. For children, the rate closely mirrors the citizenship rate of Texas and the U.S. as a whole – about 94 percent. So it’s an increasingly American population. They’re typically Mexican-American – about 96 percent. It’s also a young population. The average age is 27, which is about a decade younger than the U.S. as a whole.

A lot of these communities started off as farm worker and migrant settlements. There’s a lack of affordable housing opportunities. There would be landowners who were able to split their property into lots and sell their land to people with low income and few alternatives. There wasn’t a lot of oversight. The residents actually purchased the land without any infrastructure and without housing units. Then they used found materials and pieced together these tiny houses, and as they got more money, they could add to their home.

They didn’t own the land. They make the purchases through a “contract for deed” sale. That meant they don’t own the title to their home or any improvements they make. They’re not building equity. In the end, the thought is they’d get the deeds, but the people who owned the deed could basically take the land back at any time with hardly any repercussions.

A lot of this has changed as various bills passed over the last 20 years. Contracts for deeds are still legal, but they have to be recorded. A lot of the time, it doesn’t actually happen. When you have an unrecorded contract for a deed, the level of informality is so severe that you basically have no government protection or legal recourse. There’s nothing that says you own the house. They’re pushing unrecorded deeds. They don’t even need to provide a clean title.

RH: Why do people wind up living in these conditions?

ERP: Many buyers won’t meet the requirements for a traditional mortgage or mainstream banking institution. Their credit scores are too low, or they have no credit, in addition to not having the proper income.

The other thing we found, in cases where they might have the option to go with a traditional loan, is that a lot of families – especially immigrants – have had negative experiences with mainstream banking. They may not trust them or speak the same language.

RH: Has the state made progress in improving the colonias?

ERP: Progress has definitely been made. Whereas things were largely uncounted before, the Texas Secretary of State has started recording the level of infrastructure within the colonias and putting a ton of funding into improving the infrastructure. It’s tens of millions of dollars, and they were able to account for the improvements they made.

Since 2006, about 100 colonias have moved out from being categorized as “red,” which have the worst conditions. Definitely many more colonias have access to potable water, legal plats and drainage. There’s still a lot of work to be done and a significant number of colonias that need to move on from the “red” category.