“Building” on SOCAP 11: Urban Housing and Infrastructure (Part 1)

Hard to believe it’s been two weeks since SOCAP11 – the conversations following our panel “Investing in Home: The Role of Housing and the Built Environment” continue and are generating insights into how social enterprise, impact investment and housing/urban investment intersect (and don’t yet). Many of us are reaching out to talk about how the SOCAP platform might help us all to find each other better and to learn more about our respective models. Plus, we would all benefit from a platform to educate and promote social enterprise and impact investment in this sector.

Our panelists – Bert-Ola Bergstrom, Guilherme Cavalcanti, Greg Giornelli – exemplify this spirit. All are deeply engaged in transforming urban communities in challenging conditions in the US, Sweden and Brazil. Although their approaches vary (see below), all three leaders (and their organizations) recognize that history and reality call for more than just housing and more than just infrastructure. Comprehensive solutions are needed to help marginalized urban areas generate their own economic dynamism and become more vibrant, resilient and productive communities. As a quick recap:

-        Bert-Ola Bergstrand partnered with Peter Lundstedt from Familjebostader, the municipally-owned but independently operated affordable housing developer and manager in Sweden. Bert-Ola leverages social enterprise approaches for community-building. The neighborhood where he works with Familjebostader is challenging because of high rates of immigration, unemployment and transitional residence, mixed ownership and limited economic opportunity, and they require special attention to security, communication, opportunity and social and cultural life. While Familjebostader focuses on infrastructure, the company’s integration of social and environmental elements into their business model creates space for social entrepreneurs to work to enhance physical infrastructure with lively community and empowered citizens.

-        Guilherme Cavalcanti’s organization CESAR PAR didn’t intend to promote an infrastructure solution to Recife’s deteriorated inner city buildings and slums when it brought 200 enthusiastic and entrepreneurial students from their former office in a sterile disconnected university campus. By creating a media and technology research center and incubator in this difficult place, the organization had an infrastructure impact through the proliferation of businesses and the engagement of local residents. Guilherme showed us the impact of the physical rehabilitation of built infrastructure in the center that has resulted. More importantly, CESAR PAR has created jobs and community without displacing local residents.

-        Greg Giornelli leads Purpose Built Communities’ unique effort to integrate education and services into mixed income, mixed use developments in marginalized inner city neighborhoods, starting in Atlanta and moving to 7 other cities in the US, including New Orleans. Purpose Built Communities has tangible evidence that their holistic approach has yielded dramatic decreases in crime, improved graduation rates and lower unemployment rates. Purpose Built’s unusual approach stems from their leadership in a comprehensive, multi-stakeholder approach that private developers and public housing authorities would find difficult to manage and coordinate over long planning and development times.

Messy, difficult business. Investing in physical infrastructure may be straightforward. Conventional developments aren’t often evaluated by whether the infrastructure truly works over the long term for the people who live there. How do residents commute? Is there open space? Is it safe? Are schools, health care and shopping nearby? Are social services easily accessible? Are there strong community networks? Some of these questions are answered by green building standards like US LEED. Many others aren’t. All the panelists attested to challenges that defy straightforward business and financial solutions and require the will and mission to work with communities rather than in them, among which:

-        These are long-term commitments of 7-10 years and more.

-        Capital structures should mix grant, debt, guarantees and equity. US and European public incentives are better designed. Incentives in emerging markets vary but are still limited.

-        Institutional frameworks must adapt to non-linear processes among organizations that didn’t previously interact under one roof (housing + schools + services or innovation center + education + infrastructure).

-        Replication is challenging due to lack of funding, limited visibility of holistic models and the exceptional nature of organizations that can lead and coordinate multidiscliplinary projects.

A new kind of investor. In follow-on conversations from the panel at SOCAP and since, many of us are coming to grips with the fact that new models need a new kind of investor and a different universe of partners. We all came to SOCAP because real estate, affordable housing, green building, smart growth and the whole range of relevant conferences don’t marshal the same range of themes or have such an ambitious scope. Many housing enterprises want to know about innovative water, health, food, energy and education responses but wouldn’t necessarily encounter them at a strict sector-driven conference.

Looking past partners, I think the number one question among this group at SOCAP11 was this: Can you think of an organization or individual who might be interested in investing in how we do this differently?

While there seems to be interest at the margins, many of us wondered if these comprehensive community investment approaches are too complex or don’t have enough sex appeal relative to the exciting, smaller scale, highly-targeted approaches that dominate SOCAP – the rice-husk generated rural electricity, the mobile technologies, the indigenous textile producer, the improved agricultural marketability, etc. As a result, the average size of the “impact investment” commitment tends to be smaller than the high up-front capital expenditures necessary for these projects with few exceptions.

“Impact investor” is certainly the most promising label for the new breed of investor that this space needs. More likely, the right response will require some financial engineering to facilitate the aggregation and syndication of progressive, comprehensive approaches to urban investment. Alternatively, impact investors can promote intermediaries that manage and advise on such models in partnership with private partners (who may nonetheless be short on project equity).

I believe everyone also looks forward to reaching out more creatively to the impact investment and social enterprise worlds to connect the dots between “them” and “us” and partner with social enterprises in other sectors to “house” a range of community-responsive approaches within these holistic organizations.

Many thanks to Bert-Ola Bergstrom, Guilherme Cavalcanti, Greg Giornelli, Fiona Hovenden, Peter Lundstedt, Sam Moss, and Karen Huang.

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