Home ownership has traditionally been considered a part of the American dream, providing economic benefits such as wealth accumulation, access to credit and a built-in saving system. Home ownership also provides housing security and a connection to place. But many Americans may never own a home. The challenges for first-time home buyers, skewed worse for minorities, include coming up with a down-payment, overcoming regulatory burdens and obtaining adequate credit.
The alternative to home ownership is renting a house or apartment, which has a lower barrier to entry. Renting provides more flexibility by allowing tenants to move without penalty at the end of a lease. On the flip side, it decreases housing security. A landlord might suddenly decide to sell, causing tenants to have to vacate. Or gentrification could cause rents to increase until they become unaffordable. And saving money without the advantage of a mortgage can be daunting.
Max Levine’s organization, NICO (Neighborhood Investment Company), wants to create a new housing typology – something halfway between renting and home ownership. Modeled as a B-Corp, NICO has launched what they believe is the world’s first neighborhood REIT (real estate investment trust) in Echo Park, Los Angeles.
Echo Park, like many other neighborhoods today, has experienced a significant amount of gentrification. This means that many members of the community are excluded from home ownership. NICO wants to help them to build wealth and belonging and let them participate as primary financial stakeholders. Using a REIT structure and applying it at the local level allows every day people to have a financial stake in their own neighbourhood.
Shares in NICO sell for as little as $100 and stakeholders can choose to make either a one-time investment or a long-term commitment through monthly payments. Open to both locals and non-locals, the REIT offers two classes of shares with some additional benefits attached to those for local shareholders. In addition, each of the tenants in the buildings owned by NICO have been given $1,000 worth of shares.
Listen in to my conversation with Max Levine as we unpack this interesting new model.
Image courtesy of Max Levine/NICO Benefit Corp.