Breaking Barriers for Under-Resourced Developers

Author(s): Tasha Hall-Garrison, Charles Linton

Real estate developers without access to wealth face many barriers to entering the industry, let alone advancing their careers. These developers, referred to as “under-resourced” in this report, typically have limited access to capital and focus on developing in disinvested neighborhoods. Many of these under-resourced developers are non-white—and Black and Hispanic developers in particular are underrepresented in real estate development. This underrepresentation is not surprising given their underrepresentation in the real estate sector more broadly as well as in homeownership, which is one of the most effective ways to build wealth.

Many developers seek to work in the communities where they grew up to build properties that meet community needs. Their lived experience and community ties position them to lead redevelopment efforts with care and cultural competency. For many of these developers, this means working in disinvested neighborhoods with a high number of vacant properties, as these are disproportionately located in historically segregated neighborhoods. In these neighborhoods with weak real estate markets, the obstacles are even greater, especially when it comes to developing parcels that meet key needs. It is nearly impossible for anyone to develop green, affordable infill housing, despite this property type being in high demand in urban areas grappling with systemic vacancy. But this is especially a challenge for under-resourced developers.

To understand and address this issue, the Center for Community Progress created the Raising the Roof initiative. Raising the Roof brought together a cohort of 10 developers from the Metro Atlanta area to discuss the barriers they face working in real estate development. This report is a summary of the challenges these developers encounter and offers recommendations for how key partners (such as land banks, financial institutions, philanthropic organizations, and local governments) can support under-resourced developers across the country in building more green, affordable infill housing.

Community Progress makes the following recommendations to address the ongoing challenges these developers face:

1. Elevate the visibility of under-resourced developers, and build a development network tailored to their needs.

Those looking to partner with under-resourced developers often cannot find them, and those developers looking for resources frequently cannot access supporting organizations. This would be solved by creating professional organizations for under-resourced developers. These organizations could provide access to potential partners and mentors, offer education and networking opportunities to developers at different career stages, and create a website for potential partners to connect with them.

2. Cultivate emerging developers’ skill sets.

Developers without access to wealth do not have up-front financial resources or close social ties to other experienced developers. This prevents them from improving their skill sets and advancing in the field. Financial institutions should provide technical assistance and development coaching for under-resourced developers so that they can navigate processes—like applying for loans—more effectively.

3. Enable developers to produce more product earlier in their careers.

Lack of access to adequate, flexible capital early in their careers as well as the perception of under-resourced developers as “risky” causes them to advance in their careers more slowly than their better-resourced peers. These developers should be provided with easier access to up-front and working capital. Financial institutions should consider loosening loan eligibility criteria so that more underresourced developers are eligible for loans. They should also provide more supportive loan products, increasing affordability through financing assistance and offering more flexibility in predevelopment funds and working capital.

4. Make production of green, affordable infill housing in disinvested areas achievable.

In disinvested neighborhoods, the cost to develop green, affordable infill housing is simply too high to keep end products affordable. For under-resourced developers to complete these projects in their communities, development costs must be reduced through development cushion and lower acquisition costs. This can be achieved by leveraging government partnerships, revising zoning requirement where appropriate, and providing flexible and cushion funding. Local governments can waive or lower fees, prioritize inspection of affordable units, and offer tax abatements and/or direct subsidies. Land banks and community land trusts are also strong potential partners to support affordability goals.

5. Increase adoption and durability of green systems in affordable infill housing units.

Currently, both installation and maintenance of green systems are a barrier to developers’ use. Green building contractors are difficult to source, and green building has higher upfront costs. While these practices generate cost savings long term they are poorly understood by end users. The sector and its partners must popularize the use of green systems through up-front capital and expanded education and partnership.