How One, Simple Solution Can Help Ease the Affordable Housing Crisis
by Anne Segrest McCulloch, Social Impact CEO
For me, it comes down to a stark reality. Working households in America struggle to find affordable places to rent. That sad fact is the starting point for any discussion about housing and about our economy.
If the people who are the backbone of our economy can’t afford decent places to live, what then? When working families are living in cars, what does that say about all of us? When young people who are new to the workforce and working families with children have to compete, often unsuccessfully, for the same, limited number of housing units, what does that lead to? I think that the affordable housing crisis and the widening income gap that drives it has left families on both sides of the divide feeling powerless to address these obvious symptoms of a society in crisis. And, with every new news story, the sense of powerlessness gets worse.
This feeling of powerlessness, however unfounded, is the fundamental threat we face in America today. And the problems that result from it are staggering. Resentments grow, both in the folks who face these challenges, as well as among those who are more comfortable. Communities become further segregated by income. Cultural differences grow into hard divisions.
Our job as Americans is to strengthen our nation, but this is not a picture of strength.
The good news: there is a way forward. There is something we can do right now to secure affordable housing for low- and moderate-income families. It’s time-tested and doable and goes on every day across this country and around the world. But, big caveat upfront: what I offer is not magic. This isn’t an all-encompassing, silver-plated solution. It is a practical approach to defeating powerlessness and delivering results.
That way forward is impact investing of private capital. Private capital is powerful — in the time it took to read this far, thousands of investors have pursued positive financial returns on billions of dollars across countless strategies and ventures. However, today’s investors can achieve more than just financial returns, they can also drive social impact.
In cities and towns across the U.S., there is a stockpile of older apartments that can be preserved with affordable rents and improved. But not for long. The demand for housing at the higher end of the market is strong and developers are converting these units into more expensive rentals and condominiums, decreasing the supply of affordable housing. At the same time, properties that don’t attract ongoing investment are being lost to deterioration and demolition (according to some industry experts the number of lost units is as high as 125,000 units a year). These properties can be revitalized and stay affordable if they are acquired by owners who have the skills and the commitment to doing so.
Our company, Housing Partnership Equity Trust, is one of those owners. HPET is a national, social-purpose real estate investment trust created by nonprofits to raise capital for affordable housing. We attract capital from private investors who want to put their investment dollars to work solving critical problems. To create a return on their money, HPET partners with 14 mission-driven, nonprofit housing developers who have decades-long track records in acquiring and managing affordable housing and together we acquire apartment buildings to provide homes for families, seniors and others with modest incomes. Our combined expertise makes investor dollars more effective, builds local support and delivers a higher quality of life to residents.
Since 2013, HPET has invested nearly $300 million in a total of 3,105 apartment units for an average return of 8–10%. Our investors have included Charles Schwab Bank, Citi, Morgan Stanley, Prudential, the Ford Foundation, and the MacArthur Foundation, along with individual private impact investors. They all recognize that if you want to change lives, you start where people live, one unit at a time.
But the time to act is now. The more private capital flows to purchasing, improving and preserving affordable apartments, the more we can change outcomes. And, the way we get those investments flowing is by showing there is indeed very real power in private impact capital — to overcome powerlessness and deliver results.
Anne Segrest McCulloch is President and CEO of Washington, DC-based Housing Partnership Equity Trust (HPET), a social-purpose real estate investment trust (REIT). HPET acquires and preserves affordable housing in partnership with leading nonprofit apartment owners.