Inclusive Development Expands Beyond Affordable Housing
Last year, the nation was forced to confront the realities of racial injustice and social inequality after protests erupted across the country. And like many industries, when the real estate development community examined its own record, it was clear it fell short in many ways.
Increasingly, inclusive development — one that is respectful of communities’ needs and the lives of the residents who already live there — is becoming a priority for industry decision-makers.
“People think that if you don’t work in affordable housing, you don’t have a role to play in advancing social equity. That is just not true,” said Charu Singh, a managing director at Emergent Capital Partners, who is speaking at Bisnow’s New York City Sustainable Development and ESG Investing event this Thursday. “Because of this education that America has received over the last few years, the industry is better primed to have more dynamic discussions about equity.”
Singh handles her company’s portfolio in emerging markets in Asia. The firm's portfolio includes many industrial facilities, and she said being mindful of the culture and lives of the workers in those facilities and the impact those assets have on the surrounding area are crucial.
Too often, she said, discussions about development are linked to housing, whereas there are several other issues that real estate should consider, such as job opportunities, security and wage equality. The Black Lives Matter and #MeToo movements have made the conversations more meaningful, but now she is encouraging developers to think beyond where and how they build.
“As real estate developers, we tend to be really focused on materiality or brick-and-mortar, and development is really about people, it’s human processes that make those products,” she said. “There is a tremendous opportunity and flexibility to think about where we can be most impactful.”
She is urging companies to start small if need be, and think about the kinds of changes they can make within their own firms in the initial stages.
Some developers have pledged to improve the diversity within their own organizations and committed to greater efforts to engage women- and minority-owned businesses. Many have set hiring targets and begun working with organizations to identify talent from a greater array of backgrounds than before.
There is serious work to do. Bisnow analyzed the leadership of 24 of the nation's largest private commercial and multifamily development companies earlier this year and found just 7% of top-level executives are people of color.
A lack of diversity in the development community, and displacement caused by gentrification in the past, have caused significant distrust of developers within some urban communities. That distrust has played out multiple times in New York City, chiefly as community groups rail against rezonings the city says will spur the kinds of housing neighborhoods desperately need.
In June, the city changed its rezoning application methods to require racial impact statements as part of the process. Lawrence Hammond, the director of ACCESS, the Community Preservation Corp.’s targeted lending program for developers of color, said when developers have a personal investment in a local community, neighbors find them far more palatable than an outsider coming in to create housing.
“I believe intentionality around creating an ecosystem of development that is inclusive of various people who are within the community resonates better,” Hammond said
CPC established the $20M ACCESS program, which stands for Acquiring Capital and Capacity for Economic Stability and Sustainability, last year, and it includes both funding and technical support to Black, indigenous and other people of color who are developers and real estate entrepreneurs. Its target is housing projects in communities of color, and Hammond said it has already deployed $4M of capital.
One of its loans was $465K of construction and permanent financing to a husband and wife in Poughkeepsie who are planning to turn a vacant property into a mixed-use building with five new rental apartments and ground-floor commercial space for the couple’s catering business.
“Black and Brown developers, they don’t have the friends and family, the parents that set them up in the business for success,” he said, adding that providing both funding and support knocks down some of the barriers that have kept minority-owned businesses out of the industry. "I think the benefit of the additional resources that are being provided, it gives opportunities for others to fill some of the voids that may have existed.”
The issue of climate change, and which buildings and where are affected by weather events, is also becoming an issue of inclusivity, Windels, Marx & Mittendorf partner Michael Clain said. He said C-PACE loans, which are low-cost, long-term debt provided to commercial landlords to upgrade their building's energy systems, will help finance improvement to buildings that are not market rate.
“It’s not just about building communities that have high-end apartments and affordable rate apartments, it’s about making sure that at every income level, the amenities and the quality of the buildings are similar,” Clain said. “If you have a flood in an area, you don’t [want] that the high-end condos are fine, you want the [buildings] to be built to the same standard, irrespective of the income level of the residents.”
Clain, Singh and Hammond are all speaking at New York City’s Sustainable Development & ESG Investing event Thursday, Sept. 30.