Investors Target Social Impact Housing

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Center Creek Capital Group has secured nearly $30 million of capital in its first closing for its latest affordable Single-Family Rental fund, Center Creek Housing Fund III (CCHF III).

Center Creek Housing Fund III offers investors and the community a win-win: For investors, CCHFIII will seek to provide market-rate returns from single-family rentals, one of the best performing real estate sectors since the onset of the pandemic. 

At the same time, CCHFIII offers traditionally underserved low- and moderate-income residents the access to quality, robust affordable housing as well as Center Creek’s financial literacy programs.

“Center Creek has proven that investors don’t have to choose between achieving financial returns and driving social impact—they can do both,” Dan Magder, managing partner of Center Creek Capital, said in prepared remarks.

“We believe CCHF III’s scale will drive competitive economic returns for our investors that can meet or exceed industry benchmarks, while also enabling us to carry out our mission of using housing as a delivery mechanism to promote racial equity and economic inclusion for thousands of individuals and families.”

Value-Add Boosts Distressed Single-Family Housing

Center Creek acquires distressed single-family properties and makes value-added renovations. It also offers services promoting racial equity and economic inclusion. 

This includes Center Creek’s Pathway 2 Homeownership Program, which helps low- and moderate-income individuals and families buy the homes they are renting, and Center Creek Internet Connectionswhich provides in-home broadband and a tablet or computer to access the internet to bridge the digital divide. Based on Center Creek’s focus on serving low- and moderate-income residents, banks that invest in CCHFIII may qualify for credit under the Community Reinvestment Act.

“Affordable housing is critical to addressing issues of racial and economic equity,” said Marta Self, executive director of the Regions Foundation, in prepared remarks. “But also impactful are Center Creek’s financial literacy program and the opportunity to help renters become homeowners through Pathway 2 Homeownership. These programs help families who have been underserved historically to build wealth over time that they can pass onto future generations.”

Center Creek operates in markets across the Southeast United States, including Atlanta, Birmingham, Tampa, and Jacksonville. CCHF III will seek to expand the platform’s footprint to markets in North Carolina, South Carolina, and Florida. 

“Over the past 15 years, we have worked with more than 200 impact private equity funds, and Center Creek Housing Fund III demonstrates two important truths about impact investing,” Shawn Lesser, co-founder and managing partner of Big Path Capital, said. “You don’t have to sacrifice returns to make a positive impact, and even the largest institutional investors can invest at scale in a way that creates positive change across their local communities.”

Demand for Creative Housing Solutions

Rochelle Mills, president & CEO, Innovative Housing Opportunities, tells GlobeSt that demand for housing solutions that improve social and economic conditions is growing.

“I’m hearing the topic discussed more in commercial real estate circles, with large and small organizations, among traditional lenders and investors,” Mills said. “Certainly, Silicon Valley has the resources and the social imperative to make bold gestures in this direction. But the conversation is occurring at the mainstream level in small businesses where people are more openly questioning the way housing has been done to date.

“COVID-19 opened people’s eyes to housing in ways that are more personal than before. There are more sophisticated groups entering the debate on housing efficiency, equity, acceleration, etc. including YIMBY (Yes in My Backyard) and YIGBY (Yes in God’s Backyard) groups that are getting more engaged in influencing policy and advocating for change.”

Mills said California has the greatest demand because of its “runaway” housing prices throughout the state. 

“The housing crisis is real,” she said. “We’re not just talking homelessness, but also those who are tiptoeing on the edge of a housing crisis because they are spending more than 30% of their incomes on rent (sometimes as high as 70% when you factor transportation costs). 

“The rising cost of land, the built-in inefficiencies of the entitlement processes, and the labor shortage have created a perfect storm that makes producing enough housing difficult to do efficiently even if public support existed. Limited dollars pit the north against the south; the Bay Area and metropolitan areas against rural areas, but the struggle is real throughout the state.”

Mills said the way to solve the housing crisis “is to build housing. Period.”

Santa Ana, Calif.-based Innovative Housing Opportunities pairs housing with services and case management so that it can equip people to move in, move up, and move on to housing independence.

“If the housing doesn’t exist, the cycle of moving up and on can’t be completed,” Mills said. “We are doing our part to increase the inventory and build vibrant, resilient residents and communities in the effort.”