Real estate investors who care about sustainable development and diverse communities may want to take a closer look at community development finance. It is also a good way to support women in real estate, as this field skews heavily female.
Last week, I spent an unfortunate number of hours interviewing developers about their luxury condo developments in New York City. While all of them were more than delighted to talk about the indoor sky-lit lap pools, upscale onsite gyms, and overstuffed entertainment options so that one would never need to leave the building and god forbid mingle on the street with scum like me, none of them bothered mentioning that they all relied on major tax breaks from the city that will expire in 10-15 years, doubling or tripling each unit's real estate tax bill. Nor did they mention that there is a limited market that can afford such apartments, and at some point there will be far more supply than demand, and then what would happen? Thank goodness the taxpayers of New York are contributing to smart development and growth. Sigh.
In the course of these interviews, I noticed that nearly all of the developers were male. This was interesting to me, as I spent nine years working in community development and in my experience almost half of the senior staff at community development corporations are female. I mentioned this to Veronica Hackett, Managing Partner of The Clarett Group. She speculated that women are drawn to community development because they are more socially conscious. But in my general dealings with women, I find that they are not much more socially conscious than men overall, so I don’t buy that as an explanation. I suspect the difference comes down to corporate culture. It’s not that community developers don’t put in ridiculous hours and make personal sacrifices to complete a project, but I think the hours can be more flexible and superiors tend to understand a bit more if you have to leave because your sick kid is being sent home from school, for example.
My curiosity on this topic led me to do some Internet research about women in real estate. A 2005 article in Real Estate Weekly featured 50 women who were pioneers, current leaders or rising stars in the real estate field. Many of these women worked in several aspects of real estate over the course of their impressive careers, but I did notice that 20% were brokers. Another 15% apiece were in development/construction, real estate law, or architecture. Only 5% worked in real estate finance.
And that is where another striking difference hit me. In my short community development career, nearly all of the loan officers who patched together extremely complicated and impressive real estate financing packages were women. A quick look at the biggest nonprofit community development financial institutions (CDFIs) says it all. At Enterprise Community Partners' New York office (their largest local office and my former, former employer), five out of seven of the senior financing management are women. The Local Initiatives Support Corporation (LISC) New York office is also headed by a woman, and at least 50% of the finance staff is female. The entire Low Income Investment Fund (my former employer) is smaller than the New York staffs of LISC and Enterprise, but all of its senior finance staff is female, and 50% of their loan officers are women. Other leading CDFIs, like the Illinois Facilities Fund and Nonprofit Finance Fund, were founded by women and continue to be run primarily by women. On the for-profit side, a good portion of the lending staff in the community development departments of banks are women.
Pondering this situation, it strikes me that people who want to invest in real estate and in women may want to look into the community development field. Whether providing grants, program-related investments (PRIs), or below market debt to these organizations, investors may benefit from a triple bottom line: sustainable, sensible development for communities, supporting women-run organizations, and earning a small return on an investment, in addition to doing the right thing.