This is possible because of State Union’s partnership with the BND, which works as a “bankers’ bank, partnering with local financial institutions to leverage the state’s deposits in ways designed to strengthen local banks and credit unions.” In the case of the aforementioned mortgages, for instance, the BND helped by buying up some of these mortgages, similar to how Fannie Mae, the U.S.-government sponsored enterprise that makes mortgages available to low- and moderate-income borrowers, operates.

There are other examples of how the BND helps local financial institutions. Participation loans is one:

In a participation loan, the loan originator covers part of the principal amount borrowed, then it brings in other lenders behind the scenes to cover the rest, and everyone shares in the interest paid on the loan. Participation loans let small banks share the risk with larger institutions, while keeping the larger institutions in the background. Most borrowers don’t know that the Bank of North Dakota is involved through a participation loan unless they ask, says Gary Petersen, chairperson for Cornerstone Banks.

That’s intentional. It allows local banks to leverage a deeper pool of money while maintaining their relationships with their clients. According to its 2018 Economic Development Report, the Bank of North Dakota made 491 commercial loans totaling $971 million and 402 agricultural loans totaling $182 million. The vast majority of those were participation loans in partnership with local financial institutions across the state.

The BND’s success in helping local banks support and grow local businesses also comes with a notable side effect: the partnership model and the accessibility to capital it allows encourages the creation of new financial institutions. As a result, North Dakota has more banks and credit unions per capita than any other state in the country. This is precisely the sort of financial decentralization that would benefit the rest of America and is particularly pertinent given existing economic and racial inequality, as the recent protests over the killing of George Floyd have reminded us. In fact, according to 2013 remarks by Martin Gruenberg, the former chair of the Federal Deposit Insurance Corporation, the role of minority depository institutions, or MDIs (i.e., banks owned by minorities), play a crucial role in economic advancement:

In 2011, the median African-American MDI made 67 percent of its mortgage loans to African-American borrowers. The median Hispanic MDI made 65 percent of its mortgage loans to Hispanic borrowers. And, the median Asian-American MDI made 57 percent of its mortgage loans to Asian-Americans.  By contrast, the median non-MDI lender made less than one percent of its mortgage loans to each of these three groups.

Yet the number of MDIs has been steadily decreasing in past years, particularly following the 2008 financial crisis and the passage of Dodd-Frank, which imposed numerous burdensome regulations on all financial institutions. The number of African-American-owned banks has dropped by half, for example. Support from state banks could radically change this dynamic, and lead to the proliferation of new financial institutions that would help ordinary Americans across the country.

Understandably, the BND and its model has garnered attention across the United States. In New Jersey, a 2018 feasibility study for a public state bank estimated that every $10 million invested in lending could yield between $16 and $21 million in gross state product, as well as raise state earnings by $3.8 to $5.2 million and create many new jobs. In California, the state legislature opted to go even further with the idea last year, passing a law making it possible for local municipal/city governments to start their own public banks.

Yet there are a number of hurdles preventing the creation of public state banks, particularly when it comes to the matter of cost. A 2010 feasibility study in Massachusetts estimated that it would take about $3.6 billion to start a bank in the state. The city of Los Angeles realized that, unlike the BND, it cannot initially fund its own public bank using state bonds, and city bonds can only be used for infrastructure projects, thus requiring either allocated funds from the city’s budget or outside money from philanthropists.

It is here that the federal government can help. In 1862, Congress passed the first of the Morrill Land-Grant Acts, which distributed federal land to states and other localities for the purpose of creating agricultural and mechanical colleges. Supported by additional acts in 1890 and 1994, these colleges would grow into the state university system, as well as Cornell University, the Massachusetts Institute of Technology, and a number of other prestigious institutions. Congress should take inspiration from these examples and pass a law donating federal land and/or granting federal funds to the states for the purpose of creating a public state banking system that can encourage and facilitate economic growth and development.

THIRD AND finally, it is imperative that America reclaim the ability to build in urban areas by passing either national or state urban zoning codes. Doing so would unleash the true economic potential of America’s cities, resulting in significant growth, unlocking new opportunities for millions of people, and paving a path to the middle class. This is especially important, given the economic might of major U.S. cities: data from the Bureau of Economic Analysis indicates that a mere twenty-three metropolitan areas account for over half of U.S. GDP, and that share continues to rise. Yet these same metro areas are also plagued by a deep inequality that is threatening our nation’s stability.

Consider the most pressing problem currently plaguing the San Francisco metropolitan area, home to Silicon Valley and America’s tech giants: a lack of affordable housing. San Francisco has the highest median price for a one-bedroom rental (at the time of writing, a little over $3,600 a month) in the country. The average family home costs just shy of $1.45 million. Building a single new apartment unit takes about $700,000, which is three times what it was a decade ago. The situation is so bad that even the tech giants’ own highly-paid employees cannot afford to live there—to say nothing of the blue-collar working class needed for any normal city to even properly function. It is clear that something must be done to lower housing prices, and the best way to do that is to build new units. Yet despite this undeniable need, constructing new apartment buildings to meet demand appears to be impossible, due to restrictive zoning codes. It is a situation that is unfortunately common in major urban areas across the country.

These restrictive codes are the legacy of a 1962 Supreme Court decision on a case called Village of Euclid v. Ambler Realty Co. In essence, the decision affirmed that municipalities have the constitutional authority to decide and regulate what can be built on select strips of land. In practice, this means that each zoned strip of land has a single and specifically allowed use—such as residential, commercial, agricultural, industrial, and so forth. These categories can be rather restrictive: a single-family house and a multifamily home are considered separate uses. Likewise, detached homes and semi-detached homes must be kept as separate categories. As it happens, these rules were used to enforce a discriminatory, racist agenda in the 1960s, as poor minorities (in particular and especially African Americans) rented housing rather than owning it. As such, multifamily homes were simply banned from zoned single-family areas, resulting in white suburbia that used legal measures to keep African Americans and others out. And, to a certain extent, the effectiveness of these measures remains viable to the present day.

The consequences of this decades-long policy are evident: easily-enforceable suburban sprawl that limits land-use and prevents urban density, perpetual housing discrimination against minorities, a near-total absence of mixed-use developing, and plenty of opportunity for low-level corruption through developers pushing for zoning modifications that allow highly-profitable (but not necessarily useful to the broader public) projects.

Is a better way possible? Certainly. A strong contrast to the exclusive Euclid system is something like Japan’s inclusive zoning system, which is enshrined in national law, though local application of the law is left to city governments. This system is made up of only twelve zones (rather than hundreds, as in the Euclid system) of varying density and purpose—from low-density, mixed commercial and residential zones to exclusively industrial zones. By allowing zones to have more than one purpose, the system maximizes land usage. For example, a building can have a commercial store on the first floor, but multiple residential units above it, up to a rational height limit.

The outcome of this system is clear: Japan has some of the densest cities in the world, with millions of inhabitants living in a relatively small amount of land but without the burden of unbearably high rent prices due to lack of supply and excessive commuting times (normally a result of having to live in the more-affordable outer limits of a city). Moreover, the use of mixed-use zoning creates economic opportunities for many new businesses that see regular foot traffic. Combined with well-planned public transit systems, this style of zoning allows for walkable and livable environments, reducing a reliance upon automobiles, thereby saving people money and further attenuating the need for stagnant occupied space (parking lots and the like) in urban settings.