This is a guest post from Drew Ades, President and CEO of the Housing Partnership Equity Trust and the Housing Partnership Network.
There is a clear crisis in America for affordable housing, with over 12 million households paying more than half their income on rent. This problem is growing, with rents continually rising, wages mostly stagnant and the supply of affordable housing simply not keeping pace.
Investors typically shy away from affordable housing, citing the risk as a reason to opt for investments in commercial and luxury housing properties. But in its own small way our REIT that is entirely focused on affordability and governed by non-profit community housing organizations has just proven that impact investors can do the right thing for society, mitigate their risk and still make a decent return.
This month our two-year-old Housing Partnership Equity Trust, whose lead investors include large financial institutions like Prudential, Citibank, and Morgan Stanley as well as the MacArthur and Ford foundations, paid its first round of quarterly dividends – returning more than $1.3 million to investors. By the end of this year, HPET will have a portfolio approaching 2500 residential rental units with a value approaching $250 Million and is well on its way towards acquiring and preserving $1 billion in apartment buildings over the next five years with a combined 12,500 or more units available to police and teachers, waiters and nurses aides and people on fixed income.
Among HPET’s investors are more than a dozen non-profit community housing groups who collectively already own or operate over 65,000 apartments units and operate in more than 30 states. These non-profits are also partners in our deals, providing local expertise and a proven infrastructure built around providing high quality housing to low income residents.
HPET’s non-profit partners have the same technical resources needed to efficiently buy and refurbish units as for profit operators, but they lacked the access to fast and flexible equity that understood their market. HPET works with the Impact Investor market to solve this problem.
Impact investors – both high-net-worth individuals and institutions – that want a return on their money but also want to make a social difference are the ideal partners for these kinds of projects. It took a bold early capital commitment from the MacArthur Foundation to provide guaranteed liquidity and minimize risk for other investors, coupled with smart leadership from the Housing Partnership Network, to get the idea of a non-profit owned fund like this one up and running.
Debra Schwartz, managing director of Impact Investments at MacArthur says the REIT is working as she envisioned and is proof that this sort of business model can work in other social ventures outside of housing.
However, this is only a start. HPET plans to acquire 3,000 new units next year, assuming we continue expanding the investor base. This model offers a scalable, innovative and viable private sector approach to address the growing affordable housing crisis. We’re in it for the long haul.
About Drew Ades:
Drew Ades is President and CEO of Housing Partnership Equity Trust in Washington, D.C., hpequitytrust.com