“Real estate is a defining issue of America,” noted Avery Ebron, who directs operations at The Guild in Atlanta. Ebron made those remarks at a press briefing last month at the release of the Inclusive Capital Collective (ICC)’s first “black paper,” titled Building Community Wealth: Shifting Power and Capital in Real Estate Finance. Ebron coauthors that paper, along with The Guild’s CEO, Nikishka Iyengar, and Chicago Trend CEO Lyneir Richardson. The report provides an important framework for not only identifying how structural racism disadvantages real estate development by and for BIPOC communities, but also identifying specific changes that could greatly reduce those barriers.
ICC defines itself as a “growing network of community fund managers and entrepreneur support organizations who have been designing and developing shared technical and financial infrastructure for aggregating and deploying financial capital and other resources to entrepreneurs and communities of color in the US.” Founded in the fall of 2019 at a gathering in Denver, the group is being incubated by Zebras Unite Cooperative, which formed in 2015 and seeks to promote capital access for socially minded businesses, especially businesses owned by women and people of color.
Often, discussion of real estate focuses on residential property and the gap between Black and white rates of homeownership. Here, however, the focus is less on residential real estate and more about the actual business of real estate development. As Amanda Abrams wrote in the New York Times earlier this year, “Commercial real estate remains a field in which the vast majority of developers are white.” Abrams noted that a 2013 industry survey found that only 4.4 percent of commercial real estate professionals were Black. A more recent 2020 survey from the Urban Land Institute finds that only five percent of its members were Black, while 82 percent were white.
In their paper, the authors note that, “Current community development practices and institutions tend to focus on outputs (notably affordable housing units) over outcomes that create structural change.” In their report, Iyengar and her coauthors contend that a commercial real estate industry in which Black and other real estate entrepreneurs of color played a larger role would not simply be more diverse and inclusive but would place the goal of community wealth building at its center. A “community centered” real estate market would, according to the authors:
Prioritize affordable operating space for local BIPOC-owned business
Be more democratic and involve community organizers, small business owners, and residents in the development process
Focus on providing space for key community goods, such as groceries and community meeting space
Use infill development to support affordable rental and homeownership that stabilizes existing BIPOC neighborhoods
Create opportunities for Black, Indigenous, and other residents of color to have an ownership interest in commercial real estate
Better link residents and businesses to public resources such as technical assistance, financial literacy programming, and business grants
Redesigning Real Estate for Equity
An important contribution of the report is that it provides a thoughtful list of both obstacles to equitable real estate development and potential solutions. As Joe Neri, CEO of IFF, a leading Chicago-based community development financial institution (CDFI), has explained, one of the many ways structural racism impacts real estate is that appraisals in BIPOC neighborhoods are lower than in white neighborhoods, making it harder to finance projects (since loans max out at a percentage of appraised value), requiring a developer to raise more cash.
As Neri put it, “Old government-sanctioned bank regulations drove down the property/land value for decades, and now current bank regulations prevent investment in those areas where appraised-values are low.” Building on Neri, the ICC report calls for “income-based lending” (i.e., lending based on a percentage of income the project is expected to generate), which is forward-looking, rather than appraisals, which bake in past discrimination.
The authors describe specific loan products that could bring down the cost of financing for BIPOC real estate developers. This includes “patient equity,” which the report authors define as having long time horizons (e.g., 10 years), low interest rates (zero to five percent), and provisions that protect development projects from early costs (such as having interest-only payments for the first 12 to 24 months of the loan). Foundations, the authors indicate, would be the likely providers of such financing, and this funding might be five percent of the project’s value. Another 20 percent of the financing structure could be “friendly debt,” such as low-interest loans from CDFIs. The remaining 75 percent could be standard bank loans. In other words, while the need for philanthropic support is clear, the report also shows how limited philanthropic dollars can leverage more standard commercial financing.
The authors also describe additional steps to overcome barriers—for example, easier access to lines of credit, reduction of zoning restrictions, loan guarantees (perhaps provided by CDFIs or foundations) to reduce interest costs, and partnerships with public land banks to help BIPOC real estate developers obtain low-cost land.
In the report’s conclusion, the authors note that “there are an abundance of Black developers creating equitable and contextualized real estate solutions for their communities—transforming the way real estate development is done and turning it into a vector for wealth creations for all Americans.” In the report’s appendices, the authors document this through case studies of BIPOC-led real estate ventures in four cities—Philadelphia, Chicago, Atlanta, and Florida’s Fort Myers.
At the report launch, Kevin Williams, a member of the Black Squirrel Collective in Philadelphia, spoke to the urgency of the work. “You see a lot of studies and research being done about the plight of minorities in America,” Williams observed. “But you don’t see any follow-up. Somebody writes a paper and says Black people are poor. Yeah, we know that. But has anyone done a follow-up to see what has been done to address that problem?… We need to continue to be vocal…and we have to continue to drive the point that equity has to occur.”
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
