Building Wealth and Stabilizing Neighborhoods with Community REITs
Neighborhoods throughout Chicago face the destabilizing forces of gentrification and disinvestment. An exciting new model has the potential to combat those forces by organizing capital of the community-based kind rather than the profit-maximization kind. Portland has pioneered a community-based real estate investment model that could be imported and scaled in Chicago. Read more about it here.
The Community Investment Trust, developed by Mercy Corps, enables people from the 4 zip codes surrounding the investment property to invest as little as $10/month and pays annual dividends. In this case, it was a small strip mall and the annual returns for investors were over 9%, at the time the article was written. Because of a provision in the Securities Exchange Act of 1932, small investors residing in the same state as the business can invest as long as a bank will guarantee the investment and enable any investor to cash out at any time.
What’s exciting about this model is that it enables people of modest means to buy real estate assets that can appreciate over time and yet can provide stability for some of the naturally occurring affordable housing and commercial space. It could potentially be used by a group of neighbors to buy a two- or three-flat owned by an absentee landlord. Or, community organizations could use it to secure commercial space that is affordable for the long term. Chicago has all the resources we need to do this: nonprofit organizations to connect with community organizations and provide technical assistance (like Community Investment Corporation, Chicago Community Loan Fund, or Chicago LISC), progressive banking institutions (like First Women’s Bank or North Side Federal Credit Union), social impact investors, and a plethora of community-based organizations.
So, what are we waiting for?