Community//

Building a Nonprofit Real Estate Company with True Impact

Want to build a sustainable nonprofit real estate company? Here are people-centric measures you'll need for the venture...

A real estate worker offers you a key to your new home.
A real estate worker offers you a key to your new home.

The shortage of affordable housing has affected communities in urban and rural areas, big and small. According to a 2018 CityLab report, not one state has enough housing for low-income renters. The crisis is especially dire because around 9.7 million extremely low-income (ELI) renters spend more than 30 percent of their income on rent; 8 million of those renters are considered severely cost burdened, forced to pay more than half of their salaries.

But across the country, community-based, nonprofit real estate companies have emerged to meet the challenge and curb the housing shortage and support underserved communities.

As America’s broken housing sector calls for more organizations and assistance to meet the needs of rent burdened communities, emerging entrepreneurs need a blueprint to create companies with a truly positive social impact. To build sustainable nonprofit organizations that are effective, leaders should consider using several community-focused measures:

Invest in Social Services

The Kresge Foundation reports that public housing as a platform for social services contributes to the stability of low-income families and give them more opportunities for independence. For nonprofit developers, incorporating social services into your business model goes a long way.

By integrating property management and social services for residents, nonprofits can help deter factors like lease violation and promote resident-centered decision-making. One way to do so is by investing in human capital and extending employment programs for residents. For example, nonprofit companies can offer training and employment to residents within their own organizations which not only helps sustain company growth and recruitment, but puts on a path for professional development.

Transparent communication may allow service providers to identify personalized services or coaching that, if provided early enough, can prevent evictions and help them gain financial independence more quickly.

Ensure Community Involvement

Community engagement and support is crucial for building a sustainable nonprofit real estate business. Interacting and getting to know those who live in the community keeps leaders in check with what the community —  and your company — need to succeed.

During the planning process, community feedback toward integrating the housing as a cohesive part of the neighborhood and will build more sustainable, affordable housing developments. Research from the Federal Reserve Bank of Dallas indicates how nonprofits should interact and invest in local communities where they seek to develop.

Nonprofit real estate organizations should focus on these key areas of community engagement:

  • Target community representatives to serve as an informed Board of Directors
  • Ask community members to serve in leadership positions on your development team
  • Use surveys and community data to gain feedback during the planning and development and finalization stages (and after)
  • Work with and support community-based organizations like the Chambers of Commerce
  • Plan regular community meetings to strategize clear and creative ways to communicate with community members

Speaking at the Affordable Housing Forum at the 2018 NACo Annual Conference, Hon. Deborah Kafoury, the Chair for Multnomah County, Oregon spoke on the importance of community unity and engagement when it comes to affordable housing crisis, saying, “We need to tackle the systems that are pushing our neighbors onto our streets instead of just scrambling to help them once they’re there, and that must push us out of our comfort zones. But, when we’re united at the local level — even when we have to butt heads or hack through ‘politics as usual’ to get there – we can do far more together than we’ll ever do alone.”

Nonprofits companies like Neighbor Works and Project Access that offer social programs with full-time staff in specialty built on-site community centers indicate the need for quality housing can have on the workforce, especially when they solidify goals with high benchmarking standards.

Establish Private-Public Partnerships

According to the McKnight Foundation, collaboration is critical to financing affordable housing and its services. Some nonprofit developers often establish partnerships to produce affordable housing units to help offer resources and skills to the development process. Place-based partnerships with a geographic focus on particular cities, for instance, are common, according to Jim Grauley, the senior vice president for the Bank of America Community Development Corporation.

But partnerships are most successful when each party brings a unique ability to the project like a mixed-use project experience where the nonprofit offers expertise and the for-profit partner offers a background in commercial real estate. Since the market and government fall short of helping affordable housing succeed, so a private sector partnership offers solutions that focus on the preservation, rehabilitation and quality affordable housing — especially when combined with strong social and community programming.

The Urban Land Institute established major principles for establishing successful private-public partnerships. Among them, both parties must establish trust, align their mission and objectives, align their cultures and figure how to work together to organize projects. During the development stages, strategize how you can manage day-to-day operations and decision-making responsibilities. It’s also key to finalize each partner’s share of project equity, structure your deals by determining an equitable split of benefits, designate and determine the length and exit strategy before entering into a partnership.

Think Sustainably about the Future

High-quality development creates valuable returns for the community, as well as for your nonprofit organization. Affordable housing development is as an investment and high-quality units last for long-term. High-quality construction offers many benefits. In the short term, property management makes for more durable and attractive units. Rental properties encourage these long-term perspectives because, often, property management offices who are affiliated with the development companies, manage these units.

Additionally, it’s crucial to invest in sustainable development resources and practices as you consider how you’re going to develop these affordable housing units. Preservation and rehabilitation strategies increase the longevity, safety and beautification of the community and properties while maintaining affordable rents. Green initiatives, in particular, promote health, wellbeing and a responsible environmental footprint that improves efficiency and saves on long-term building cost. In Seattle’s 120-acre Highpoint mixed-income projects, for example, the final cost of using green elements was estimated to be $1.5 million, only 3 percent of the $43 million Phase One rental housing budget. They produced benefits such as lower utility expenses (estimated at 20 percent less, or a savings of $371 annually for a three-bedroom unit) and a healthier environment for tenants.

The director of initiatives at Enterprise Community Partners, Krista Eggers says, “People with low incomes are the ones who need it the most.” She continues, “If your income is very low and you live in housing that has low utility bills and is healthier, “you are going to benefit at a greater incremental degree … than if you have a lot of disposable income.”

The Urban Land Institute’s research on sustainable and affordable housing reports that green affordable housing units are naturally energy-efficient and significantly reduce the amount of electricity and natural gas consumed by its residents. It costs less to operate, and so homeowners can afford to pay more for the green units. Incidentally, building sustainably also paves the way for social programs like resident green education resources. When you add value and purpose to communities, you do the same for your nonprofit company.

Everything that you do is an investment in the community which can further build and maintain your nonprofit’s reputation. Whether you’re building community relationships, sourcing sustainable materials or developing investments within the public-private sector, it’s important to retain focus of the double bottom line. When your nonprofit maintains the importance of a people-centric approach in your work, it can streamline the path for future projects and wellbeing for in-need communities.

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