Real estate development is an overwhelmingly white industry. For Black developers it’s often difficult to get access to investment, equity, and opportunities. A newly launched accelerator program from Amazon aims to grow opportunities for Black real estate developers.
Black American real estate developers are getting much-needed business development support from online retailer Amazon through a two-year accelerator program as well as the Enterprise Community Loan Fund Inc.
The Amazon Housing Equity Fund is donating $21 million to fund the accelerator program. The purpose of the program is to increase equity and inclusion in the real estate development industry. In addition, the Enterprise Community Loan Fund Inc. will fund grants up to $200,000 to qualified minority real estate developers. The grants will be available to participants in the Amazon Housing Equity Fund needing financial assistance with capacity-building and pre-development expenses.
Insufficient capital is among the biggest obstacles for Black real estate developers. That funding shortage can hinder growth prospects for those business owners and hurt their ability to compete with larger developers to win fruitful projects and cover operating expenses.
Like other small business owners, real estate developers need access to capital to start, run and grow their businesses. However, the lack of diversity within the industry makes it difficult for Black real estate developers to successfully build professional networks.
Challenged by racism, institutional bias, and a lack of connections, Black real estate developers are limited in opportunities. “This makes it harder for Black-led firms to get loans for their projects, Diarra McKinney of Rosewood Strategies, a D.C. development firm, told Planetizen. When the loans do come through, “the terms are not the same; the interest rate will be much higher. And you don’t know why that is. It’s all behind the scenes.”
She added, “Developers also need equity, in the form of investments from friends, family or private firms, to close their deals. And that can be even harder for Black developers to procure than bank credit. The asset management industry, which includes institutional investors and private equity groups, is overwhelmingly white. And family and friends, even well-off ones, simply may not have the extra funds to invest in a real estate project.”
The Urban Land Institute, which describes itself as “global network of professionals in every sector of real estate development and land use, from private enterprise to public service,” reports that only 5 percent of its U.S. members are Black, while 82 percent are white. This large gap reveals the lack of diversity existing in the real estate development industry —especially at the project management level. As cities across the United States continue to be developed, it is essential for the labor force — especially at the leadership level — to compete and win development projects.
“With this accelerator program, we are laser-focused on lifting up emerging real estate developers of color. We want to foster their professional growth through education and training, as well as improve their access to capital, which can be elusive to developers of color,” said Catherine Buell, director of the Amazon Housing Equity Fund in a press release. “If we are going to bring about lasting, holistic, and meaningful change to how affordable housing is developed, developers of color need to be a part of the solution.”
Amazon is collaborating with three organizations dedicated to social impact and economic justice. These organizations include the Local Initiative Support Corporation (LISC) in the Puget Sound region of Washington; Capital Impact Partners in Arlington, Virginia; and the Urban League of Middle Tennessee in Nashville. Amazon will partner with these organizations to develop curricula and strategic networking opportunities speaking to each communities’ needs.
The program will support up to 30 participants and provide:
- Virtual and in-person classroom options teaching real estate fundamentals, trends in affordable housing, public policy and financing options
- Mentoring opportunities
- Networking opportunities with real estate industry leaders, developers and researchers
- Access to capital for pre-development related expenses including architectural and engineering costs; permitting, survey and site-planning fees; as well as market and feasibility studies
“Developers of color bring enormous opportunity for creative and inclusive solutions to community-focused real estate development, but systemic issues continue to create multiple barriers to their success,” said Ellis Carr, president and CEO of Capital Impact Partners and CDC Small Business Finance in a press release. “Through this program, we are partnering with Amazon in helping open doors for people of color who can then pay their experience forward.”