The nation is in the grip of an affordable housing crisis that will only be exacerbated by the COVID-19 pandemic and its desolation of the global economy. A severe shortage of homes for working-class and low-income families is rapidly increasing housing prices and rents across the country, pushing homeownership increasingly out of reach of many Americans and making rents so high that it is, all but impossible, for renters to save the capital needed for a down payment on their first home. There is an immense affordable housing crisis in America and real estate crowdfunding may be a community-led solution to this rampant and wide-ranging crisis in affordable housing that is driving homelessness in the United States.
Affordability Has Multiple Components
The “affordability” of housing isn’t all about the housing itself: As rising rents and home prices push low- and middle-income households farther from major urban centers where the greatest number of jobs and the most robust public transit systems tend to be. Lower housing costs in suburbs and exurbs get offset by increased spending on transportation.
Transferring the Crisis
There’s more to consider than just the rent. A report from Harvard’s Joint Center on Housing Studies examined household expenditures at varying income levels and showed that as housing costs decreased, the share of income spent on transportation increased by up to five times. And that’s not to mention increased time spent commuting to and from work, which eats into leisure and sleep. Among the working poor, who already feel burdened by an ever-growing affordability crisis and stagnant wages, this can be a tradeoff that’s hard to stomach. So, what seems to be a solution is only the transfer of issues that impact other aspects of our lives. There is no escaping this affordable housing crisis.
Real Estate Crowdfunding and Local Investors
The real estate crowdfunding solution will create multiple pathways for non-accredited investors to become passive real estate investors while increasing homeownership, creating increased affordable housing units, increasing neighborhood density and building wealth through short term real estate investing. Crowdfunding offers an amazing array of benefits for real estate investment and development. It makes fundraising a simple process, boosts branding, increases odds of institutional investment, garners more supporters and publicity, and can enable real estate investors to accomplish far more.
Real Estate Crowdfunding Adds Flexibility to Investing
Real estate crowdfunding is relatively new but gaining in popularity. Most non-accredited investors are only aware of real estate investment through direct investment when it comes to real estate—buying a property to do a fix and flip or long-term rental or investing in a specific project via private money loans. But most of us are limited in the number of projects we can invest in at any one time using this traditional direct real estate investment model. Real estate crowdfunding expands the reach of individual investors through low minimums, diversification, and increased deal flow that opens real estate investing to a much broader range of individuals.
Expanding the Investor Base
Real estate crowdfunding allows regular (non-accredited) people to become real estate investors and they can specifically invest in projects that will increase the amount of affordable housing that comes online. You may not have the funds for a direct investment to fix and flip a new affordable housing project on your own, but with real estate crowdfunding you can be one of several investors who help get the project off the ground. Real estate crowdfunding, unlike direct investment, that requires purchasing, owning, and managing property (and all the headaches that come with), crowdfunding is a totally passive investment that has multiple due diligence steps to protect investors so they can put their investment dollars to work without the stress and sweat equity that comes with owning property.
Rev Up Detroit
Rev Up Detroit is an initiative for the training and development of a community of retail real estate crowdfunding investors. Rev Up Detroit, the brainchild of Chris Holcomb, a long time real estate developer in the Detroit area with a goal of increasing home ownership, creating affordable housing units, while providing pathways for inclusive community-led investment, and building wealth through passive crowdfunded investment opportunities in Detroit, Michigan. The goal and training fall in line with Bill Huston’s goal of creating local crowdfunding ecosystems that trains community investors, stakeholders, entrepreneurs and real estate developers crowdfunding at the local community level.
The United States was experiencing a massive affordable housing crisis that was impacting every large and medium sized city across the country and then the advent of the COVID-19 pandemic that has caused immediate short term damage to the global economy which will only exasperate the affordable housing crisis. We are living in extremely uncertain times with the paramount goal of slowing and eliminating the spread of COVID-19, and in this current crisis there is not much thought about the long-term economic impact. We do know that we are all in this together and that crowdfunding will be one collaborative solution to the small business and affordable housing crisis currently at hand and as a long-term solution. If you want to know more about how to use real estate crowdfunding to build wealth please schedule a free 10 minute call with Bill Huston @ ProjectCrowd!