How can residents steer the course of market-driven development in their neighborhoods while also building wealth? Neighborhood Investment Trusts provide residents with tools to pool small-dollar investments into large-scale capital that can be invested in revitalizing properties in their communities.
The Kresge Foundation’s American Cities Program is convening a network of community development organizations and foundations in 13 cities to explore and seed Neighborhood Investment Trust models.
“For Kresge, this community of practice represents an opportunity to explore a number of ideas that are important to us: mechanisms through which residents can benefit directly from revitalization of their neighborhoods; the potential for distributive ownership of local real estate; and new cross-sector problem-solving tables that enable community leaders to engage with their public and private-sector counterparts,” said Rip Rapson, president and CEO of The Kresge Foundation.
The term Neighborhood Investment Trust refers loosely to several types of investment partnerships that connect and enable residents to become shared owners of properties in their communities. Promising models include Community Investment Trusts, Neighborhood Real Estate Investment Trusts and Community Development IPOs.
In 2017, the Portland-based Community Investment Trust (CIT) purchased a $1.2 million strip mall and sold shares to residents with low incomes in increments of $10 to $100. Shares were sold to 140 families, each of whom have received an average dividend of 9.3%. Of these families, the majority are people of color, more than half are immigrants, 53% are renters, and 68% are first-time investors. Additionally, 65% report being more civically engaged, and 33% have an improved credit score, and 95% re-subscribe to the CIT annually.
“Inclusive community development practices ensure residents share in the prosperity that comes with economic development and growth,” said Chantel Rush, managing director of Kresge’s American Cities Program. “The best neighborhood investment trust models also provide an opportunity for community members to shape the trajectory of their communities.”
The Cleveland-based Fund for Our Economic Future and MetroWest Community Development Organization are participating in the Kresge-led network and partnering to explore the creation of a Community Investment Fund in the city’s Clark-Fulton neighborhood. With a major hospital planned for the Cleveland neighborhood, a trust would enable current residents to benefit from future investments and subsequent property value increases.
“There is real sweat equity in being one of the last neighbors holding down a blighted community,” said Bradford Davey, director of regional development at the Fund for Our Economic Future. “We believe there is real worth and real wealth there. Our endgame is to grant residents power, wealth, or both.”
Mercy Corps, an Oregon-based nonprofit organization that connects people to resources and opportunities to build strong, stable livelihoods that can withstand future challenges, received a $115,000 Kresge grant to conduct a feasibility study exploring the creation of community investment trusts in Fresno, Milwaukee, Memphis, and Minneapolis.
Mercy Corps previously led the creation of a community investment trust in Oregon’s most diverse and high poverty neighborhood. The study is expected to yield a ten-step process that will support local organizations develop CITs in each city.
Two digital convenings of the network were held in 2020 to enable network communities to share progress and learnings. The network will gather again this spring. Elwood Hopkins, presidential fellow at Kresge and managing director of Emerging Markets, Inc., is coordinating the network’s convenings and providing technical assistance to each organization.
“One of the most powerful ways for prosperity to be shared in an economy is for low-income households to have an ownership stake in rising property values,” says Hopkins. “Neighborhood Investments Trusts hold the potential to transform how we think about community development financing, real estate markets, and urban policy. And as we confront an imminent post-COVID land grab, the potential for these structures is magnified.”
In addition to Mercy Corps, Kresge-funded organizations participating in the network are listed below:
- Trust Neighborhoods is exploring a resident governance structure for neighborhood trusts within Kansas City and Tulsa, Oklahoma;
- The Chicago Community Trust is exploring the creation of a real estate investment trust as part of its racial wealth gap in home ownership initiative;
- Neighborhoods of Hope Community Housing is implementing a home ownership equity model in neighborhoods in Kansas City, Missouri; and
- The Fund for Our Economic Future is partnering with MetroWest Community Development Organization to explore the creation of a Real Estate Investment Trust in the city’s Clark-Fulton neighborhood.