Housing USA: Enterprise’s “Equitable Path Forward” for Home Industry Diversity

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For decades, racial discrimination has been a real problem in housing – both for those building it and those living in it. Reversing the trends that limit housing access, and spurring economic mobility, has become a salient goal for the affordable housing industry.

To that end, Enterprise Community Partners, a national affordable housing nonprofit, launched an Equitable Path Forward (EPF) initiative in 2020. The five-year, $3.5 billion program aims, according to the website, “to help dismantle the deeply-rooted legacy of racism in housing – from the types of homes that are built, where they’re built, who builds them and the wealth that is generated from them.”

In short, Enterprise wants to ensure that there is more diversity among real estate developers. The initiative will invest $3.1 billion in outside debt, equity and grants and is spearheaded by a “Growth Fund” that targets minority businesses involved in affordable home development. It will provide them financial support, including unsecured credit lines on terms aimed at supporting the developer’s growth, guaranties to assist these developers in accessing otherwise difficult financing sources, as well as project-level financing through private equity, Low Income Housing Tax Credits and New Markets Tax Credit investments.

Shelterforce reports that Enterprise is specifically targeting minority-owned and led firms for investments from EPF.

“Entities that receive financing and other support under EPF must have greater than 50 percent of their board members be self-identified people of color, or their CEO/executive director/managing partner must be a self-identified person of color. Enterprise is also tracking the racial composition of its borrowers’ boards and staffs over time, presumably to confirm that the fact that they are led by people of color is not symbolic or temporary,” writes Shelterforce CEO Miriam Axel-Lute.

Enterprise is offering a “Standby Guaranty Facility” to ensure access to institutional funding sources. Community Investment Guarantee Pool has provided $5 million in second-loss guarantee support and Charles and Lynn Schusterman Family Philanthropies is providing $10 million in third-loss support for the facility. The program has lofty goals, with Enterprise president and CEO Priscilla Almodovar stating that, “Our vision is nothing short of dismantling the legacy of racism in housing. By investing in these housing providers who are on the ground and engaged with their communities, Equitable Path Forward will lead to a new and needed level of responsiveness, investment and equity in the communities that get built.”

EPF seeks to correct a disparity between those who create affordable homes and those who live in them. As Lori Chatman, president of Enterprise’s Community Development Financial Institution, Enterprise Community Loan Fund, states by email: “Black people make up nearly half of those living in federally subsidized homes, but just two percent of real estate development companies  are Black-led and 1.5 percent of real estate assets under management are controlled by minority-owned firms,” she says. “Even among community development corporations, only 16 percent are minority-led.”

Through the EPF Growth Fund, Enterprise injected $1 million into the Aequo Fund, a Maryland-based community investment firm which, aims, among other things, to improve financing for developers who struggle to attain it from traditional sources. Enterprise’s investment will be directed at minority housing providers “to grow their portfolios and create affordable homes at the same time.” The investment is targeting affordable housing rehabilitation projects in Buffalo, Richmond, Baltimore and Philadelphia.

Chatman says that Aequo looks to use the funds in part “to help jumpstart the careers and portfolios of the next generation of BIPOC developers, who in fact are focusing on community and homeownership approaches.” Aequo’s founder, Ernst Valery, has worked with the city of Baltimore on redevelopment initiatives, and once took legal action against Wells Fargo based on allegations of the bank’s discriminatory behavior.

Aequo intends to improve access to homes by reducing credit checking-based barriers for applicants. Its alternative methodology, described by Yahoo Finance, will use “better-contextualized data to businesses for the one-in-three Americans living with a criminal record, and consumers with thin credit files.”

“Through the Aequo Fund, Enterprise is making a catalytic investment in a BIPOC developer, who will use that capital to help jumpstart the careers and portfolios of the next generation of BIPOC developers and create more equitable impact in their communities,” Chatman said when the investment was announced. Enterprise recently closed new EPF deals in other markets nationwide, including New Orleans and Los Angeles.

Enterprise hopes these efforts will lead to a reexamination of the lending standards used by CRA-motivated banks and other institutional lenders for multifamily affordable housing. A representative speaking to Shelterforce cited liquidity requirements as one major barrier for less established developers. “We know most institutional investors require developers to have $1 million of liquidity and $5 million of net worth. We also know based on many years of experience that developers with less liquidity don’t necessarily perform worse than developers with more liquidity.”

Enterprise’s EPF program is a sizable investment in advancing racial diversity in housing development. If the $3.5 billion fund can create a sizable number of new BIPOC affordable home developers, it will play a small part in bridging a racial wealth gap that’s existed for centuries.

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.