Greetings Agents of Impact!
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In today’s Brief:
- Ownership paths to affordable housing
- Guarantees for community lending
- Serving smallholder farmers profitably
- When impact gets complicated
Featured: Ownership Economy
The Call: Unlocking and preserving broad-based ownership to make housing more affordable. Rapidly rising property values across the US work against lower-income families on at least two fronts. Higher prices mean higher rents. And the appreciation in property values mostly accrues to wealthier owners, landlords and investors. Support for first-time home buyers is only part of the answer. The preservation of existing homeownership is also a vital tool for keeping housing affordable. This week’s Agents of Impact Call explores emerging ownership models that are walking the difficult line between preserving affordability and creating pathways to wealth creation for low-income families. “To help families build wealth and protect hard-fought gains over generations, funders should also prioritize homeownership preservation,” writes Robert Wood Johnson Foundation’s Ruth Gao (RSVP).
- Renter equity. Over the next few years, restrictions on rents will expire on hundreds of thousands of units of housing built with Low Income Housing Tax Credits, Section 8 subsidies, and other incentives, “threatening to hemorrhage affordable housing supply when Americans need it most,” as the AP put it in a recent report. Affordable housing developers have had trouble competing with buyers intent on flipping units to market-rate rents. Help may be on the way: Institutional and impact investors have warmed to affordable housing as a surprisingly steady and low-risk part of their core real estate portfolios. “I am amazed by the growing number of highly sophisticated and impact-driven owners, operators and investors who recognize the win-win potential of affordable rental housing,” Bob Simpson of the Multifamily Impact Council writes in a guest post on ImpactAlpha. Even more far-reaching: models that transfer ownership to tenants over time.
- Mobile homeowner co-ops. Roughly 22 million Americans live in manufactured homes, which makes up approximately 7% of the US housing stock. The share is higher for those who are poor, elderly, disabled or live in flood zones, as hurricanes Helene and Milton demonstrated. Nearly three out of four residents own their mobile homes, but most pay rent for the property on which they’re situated. Since the financial crisis, ROC USA, a nonprofit cooperative in New Hampshire, has helped 18,000 residents in more than 240 manufactured home communities purchase the land beneath their homes, through co-ops that enable long-term affordable ownership. “These are homeowners who worked hard to buy their homes and love their homes and their communities,” says ROC USA’s Paul Bradley. ROC USA’s subsidiary, Integrity Community Solutions, is raising a fund to compete with private equity buyers to buy whole portfolios of manufactured home communities.
- Community ownership. A movement of community-led initiatives such as community land trusts, housing cooperatives, and other shared equity models has grown to ensure rising home values benefit residents rather than speculators. In May, Common Counsel raised $10 million for the Community Ownership for Community Power fund to provide operating support for community ownership organizations in California. The grant fund precedes a planned $100 million fund to “strengthen the capacity of community ownership organizations to acquire, govern and scale permanently affordable strategies for land and housing,” Common Counsel’s Jazmin Segura tells ImpactAlpha. In Washington DC, Grounded Solutions Network is linking shared equity strategies with a real estate investment fund to acquire affordable homes in fast-developing cities and move those homes to affordable ownership over time. Ground Solutions’ Homes for the Future Fund recently acquired an investor portfolio of 283 homes in Minneapolis. The group expects to close a $12 million Atlanta-based fund in the first quarter of next year to purchase 40 homes. Community control, says Culbertson, helps ensure such efforts “straddle affordability and wealth creation.”
- Answer the Call. Share this post. And join hundreds of other Agents of Impact this week for “Preserving home ownership and affordability,” with Common Counsel’s Jazmin Segura, Grounded Solutions Network’s Devin Culbertson, Impact Community Capital’s Michael Lohmeier and ROC USA’s Paul Bradley, Wednesday, Oct. 16, at 10am PT / 1pm ET / 6pm London. RSVP today. This Agents of Impact Call is supported by Robert Wood Johnson Foundation.
Dealflow: Inclusive Communities
US Treasury guarantees back nearly $500 million in bonds for large-scale community projects. Two finance partners for community development financial institutions, or CDFIs, secured guarantees from the US Treasury Department’s CDFI Bond Guarantee Program for $498 million in new bond issuances. Community Reinvestment Fund, a Minneapolis-based CDFI, will issue bonds of $325 million on behalf of three other community lenders. Among the lenders that will deploy the proceeds of the bonds are Community Development Trust, a CDFI and public real estate investment trust that will use $150 million to invest in charter schools and affordable housing. Chicago-based IFF will secure $75 million to invest in real estate, charter schools, community nonprofits and day care facilities in 10 Midwestern states. The Reinvestment Fund in Philadelphia will secure $100 million for similar projects in its hometown, Baltimore and Atlanta.
- Affordable housing. Opportunity Finance Network, a CDFI finance intermediary, will facilitate a total of $173 million in bond loans to seven of its network members. The OFN members participating in the bond proceeds include the Greater Minnesota Housing Fund, which is focused on affordable housing preservation and renovation, and supports developers of color in the sector. New York-based Nonprofit Finance Fund lends to nonprofits and social enterprises in education, health, homelessness and housing, workforce development, and other social sectors. Santa Fe-based Homewise is a mortgage lender and home-buying coach focused on narrowing the racial homeownership gap in New Mexico.
- Catalytic capital. The guarantees, the largest ever from the Treasury’s CDFI program, come as community lenders look to leverage billions of dollars in catalytic funding from the US Greenhouse Gas Reduction Fund. The Bond Guarantee Program, administered by the Treasury’s CDFI Fund, was started in 2010 to help community lenders in underserved communities secure long-term and affordable capital to finance large-scale projects. It has guaranteed nearly $3 billion in CDFI bond issuances.
- Share this post. Opportunity Finance Network convenes its annual conference in Los Angeles next week (ImpactAlpha is a media partner).
Farmworks secures investment to link Kenya’s farmers to markets. Few startups have cracked the code for how to build a sustainable business securing and growing the livelihoods of 500 million smallholder farmers and their families. For Yi Li, founder of Nairobi-based Farmworks, the answer is a relentless focus on operational costs. “We are really good with cost control,” which includes scrutinizing the number of kilometers each of its trucks travel per liter of fuel, Li told ImpactAlpha. “That’s how you build a profitable business in this market.” Farmworks supports more than 4,000 Kenyan farmers to improve growing practices and increase sales of harvested goods. The company sells about 1,100 tons of onions, tomatoes and other local staples monthly in Kenya, and exports high-value crops like French beans and snow peas. It raised an undisclosed amount of equity financing from Truvalu Group, a Netherlands-based impact investor for small agribusinesses and farmers in emerging markets. Truvalu’s Peter Owaga said Farmworks is “building the next generation of regenerative, climate-smart farmers.”
- Local vs. export. Farmers bring their harvested produce to Farmworks’ drop-off centers, from which the goods are trucked to local sellers. Farmers that own trucks can earn extra as pick-up and delivery drivers. For export products, Farmworks contracts with buyers and manages growing processes, like crop spraying, to ensure the products meet international standards. “It’s a much higher-touch model, but we have high enough margins to maintain a bigger workforce on the contract farming side,” explained Li.
- Business pivot. High-touch agribusinesses, even tech-enabled models, are costly and resource-intensive because of the remote communities they serve, the perishable nature of the goods, natural growing seasons, lack of reliable infrastructure and, increasingly, climate change. The market is littered with startups that have pivoted, such as Nigeria’s Hello Tractor and Kenya’s Twiga Foods, or shut down, like London-based WeFarm, Kenya’s iProcure, India’s Doodhwala, and Peru’s Favo. Farmworks itself began as a farm in 2020, growing local staples and export crops. It soon moved to support, rather than compete, with local farmers. “If I compare our partner farmers’ costs and yields with our farm’s from that time, theirs are better, because they’ve been doing this for much longer,” said Li. The company is digitizing its field operations as it scales. “I don’t believe you can easily digitize farmers,” Li said. “But I can digitize my own employees so we get accurate and timely information from the field.”
- Check it out.
Dealflow overflow. Investment news crossing our desks:
- Rubio Impact Ventures backed Female Invest to address the retirement gender-wealth gap. (ImpactAlpha)
- Italy-based Kyip Capital secured €30 million ($32.7 million), anchored by family office Fondo Italiano d’Investimento, for its health and wellness-focused Kyip Impact Mission fund. (Impact Investor)
- Agri-Business Capital Fund, managed by Bamboo Capital, provided $1 million in subordinated debt to Colombian microfinance provider UNI2 Microcrédito to lend to small scale farmers, particularly women and youth. (Bamboo Capital)
- Paris-based baCta secured €3.3 million ($3.6 million) to make lab-grown rubber as an alternative to rubber made from fossil fuels or climate-vulnerable rubber trees. (EU-Startups)
- Paebbl in Rotterdam raised €22.8 million ($24.9 million) from Capnamic, Holcim, Amazon’s Climate Pledge Fund and other investors to sequester carbon in concrete and other building materials. (Founders Today)
- Danish fund manager PSV Hafnium raised €38.2 million ($41.6 million) for a new fund to invest in early stage ventures in the Nordics developing deep tech to support the climate transition. (Silicon Canals)
Signals: Impact How-To
Stuck in the mud: When impact gets complicated. You might wonder why it took so long, but impact investing has its own title in the “Little Book of…” series by trade publisher Wiley. Impact Engine’s Priya Parrish’s “The Little Book of Impact Investing“ joins finance primers by experts such as Vanguard founder John Bogle and hedge fund manager Joel Greenblatt. The book, meant for the impact curious, includes chapters ranging from “Hold on, what about ESG?” to “How impact can drive returns.” In an exclusive excerpt on ImpactAlpha, Parrish explores, “What happens when impact investing doesn’t achieve the hoped-for goals, when no matter how good the team or innovative the idea, the project just isn’t a success.”
- Pivot points. Impact Engine’s portfolio company Edovo, which provides secure tablets and devices to educate incarcerated individuals and reduce recidivism, is one example. The company generated several million dollars in annual revenue, but there was a limit to what correctional institutions would pay for the infrastructure. In balancing impact and profits, the board decided to return capital and convert to a nonprofit to lean into impact. Such examples are often used by detractors to insist that “doing good” and financial returns do not mix, Parrish says. “I hope what I have to say will provide food for thought without diminishing inspiration,” she writes in a note. “I’m a believer, and my wish for the book is that it helps you become one, too.”
- Keep reading, “Stuck in the mud: When impact gets complicated,” by Priya Parrish, excerpted with permission from “The Little Book of Impact Investing.” And listen to our 2023 podcast conversation with Parrish, “Scaling purpose-built impact firms.”
Agents of Impact: Follow the Talent
Don’t miss these upcoming ImpactAlpha partner events:
- Oct. 17-18: The REAL Summit (New York)
- Oct. 21-24: OFN40 (Los Angeles)
- Oct. 23-24: The GIIN Impact Forum (Amsterdam) – Save 10% off with code “GIINPressImpact”
- Oct. 28-30: SOCAP24 (San Francisco) – Use code “s24_ImpactAlpha” to save $250
Jamie Rowles, previously with Founders Forum Group, joins Regeneration.VC as partner… Locus (formerly VCC Social Enterprises) is looking for a vice president of impact investment services… The US International Development Finance Corp. has an opening for managing director to focus on environmental and social assessment.
Schmidt Family Foundation is recruiting an impact investing portfolio manager in San Francisco… MBX Capital seeks a network and investments director in New York… Chan Zuckerbeg Initiative is hiring a special projects senior program manager in Redwood City, Calif.
Nia Impact Capital is hosting, “Democracy vs. autocracy: Impact on people and portfolios,” with Democracy Investments’ Julie Cane and R. Paul Herman of HIP Investor, Wednesday, Oct. 23… Pivotal Ventures, through its philanthropic foundation, launches a $250 million open call to provide grants to organizations working to improve women’s mental and physical health.
👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.
Thank you for your impact!
– Oct. 16, 2024