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Social impact real estate: investing in properties with purpose

Social impact real estate requires effective impact measurement and management - step by step guide to driving effective affordable housing
Best Practices
Written by
Unmesh Sheth
Published on
April 5, 2022

Social impact real estate requires effective impact measurement and management - step by step guide to driving effective affordable housing impact

Social Impact Real Estate is a relatively new concept in real estate investing. It refers to investing in properties that have a positive impact on the community and the environment. This type of investment is becoming increasingly popular among those looking to make a difference in the world while also generating a return on their investment.

In this article, we'll explore the concept of Social Impact Real Estate, why it's worth considering, and how you can get started.

Social Impact Real Estate Concept

Social Impact Real Estate is a type of real estate investment that focuses on properties that positively impact the community and the environment. This can include sustainable, environmentally friendly, and socially responsible properties. It's a way for investors to support causes they believe in while generating a return on investment.

Social Impact Real Estate differs from traditional real estate investing in that the focus is not solely on the financial return but also on the social and environmental impact of the investment. The goal is to create a positive change in the world while generating a financial return for the investor.

There are many benefits to investing in Social Impact Real Estate, including the potential for higher returns, the opportunity to make a positive impact, and the satisfaction of investing in a cause you believe in.

Improved Social Returns Through Data-Driven Approach

Social impact real estate can benefit greatly from impact measurement and management. This involves tracking and evaluating the positive effects that a property or development is having on the community and the environment. By measuring and managing the impact, it is possible to optimize the positive outcomes and increase the overall effectiveness of the investment.

Here are some specific ways that social impact real estate can benefit from impact measurement and management:

  • Increased transparency: Measuring and managing a social impact real estate investment provides a clear and detailed picture of its positive effects on the community and the environment. This increased transparency can be valuable for investors, stakeholders, and the wider community, as it helps demonstrate the investment's impact and increase accountability.
  • Improved decision-making: By tracking and measuring the impact of a social impact real estate investment, it is possible to identify areas where improvements can be made. This information can be used to make more informed decisions about how to optimize the investment and maximize the positive impact it has.
  • Increased return on investment: By optimizing the positive impact of a social impact real estate investment, it is possible to increase the return on investment. This is because the investment has a more significant positive impact on the community and the environment, which can lead to increased demand for the property and higher rental income.
  • Better alignment with values: Impact measurement and management help ensure that social impact real estate investments are aligned with the investor's values. This is because the impact is being measured and evaluated regularly, and any areas where the investment is not having the desired impact can be addressed.

Overall, impact measurement and management are essential for maximizing the benefits of social impact real estate investments. By tracking and evaluating the impact, it is possible to ensure that the investment has the desired positive effect on the community and the environment and make informed decisions about optimizing the investment.

In this article, we’ll discuss affordable housing initiatives' challenges and how IMM can drive transformative impact.

  • What is affordable housing?
  • Affordable housing policy
  • Impact Measurement and Affordable Housing Policy
  • IMM data and bipartisanship

What is affordable housing?

The notion of housing affordability is highly subjective. In the United States, affordable housing is defined as housing where the occupant spends 30% or less of their gross income on housing costs and utilities. In the UK, there is no standard definition of affordable housing. 

Most people have heard of housing projects in New York City or council estates in the UK. Generally speaking, the two most common characteristics of affordable housing are:

  • Controlled, sub-market prices
  • Regulated access for people who meet certain qualifications (usually economic)
Social Impact of Affordable Housing
social impact of affordable housing

Affordable housing efforts focus on specific groups such as low-income, seniors, people with disabilities, families with children, unhoused people, certain ethnic groups, and more.

Barriers to affordable housing

Significant obstacles to affordable housing include poor housing quality, limited land access, insufficient affordable or social housing supply, too much of people’s income going toward rent, and increased income inequality.

The “housing crisis” in California highlights some of these barriers. There is an estimated shortage of nearly 1 million affordable homes in California. 42% of all state renters and homeowners are cost-burdened or pay more than 30% of their gross income towards rent and utilities.

Affordable housing policy

Affordable housing policy seeks to reduce these barriers to residents. Governments and other agencies have various tools to do this:

  • Subsidized mortgages
  • Tax relief for homeowners/renters 
  • Financial support to housing developers
  • Social rental housing
  • Regulations for quality dwellings
  • Rent control

Impact Measurement and Affordable Housing Policy

To advocate for good policy, it’s a show me the data situation. The first step of policymaking is clearly defining the problem. Researched data helps to delineate the issues precisely. With high competition for limited resources, governments, and funders look to data to make the most bang-for-your-buck impact.

The traditional indicators in housing policy include:

  • price-to-income ratios
  • housing expenditure-to-income ratio
  • number of social housing units 

While these are important, the true value of affordable housing goes further. What do people get from a quality, affordable place to live? How does that strengthen communities? Now we are talking about social impact

 IMM data and Partisanship

Data-as-usual doesn’t capture the profound social impact of affordable housing. The right approach to impact measurement and management provides big data to break through partisan housing politics and see progress by working smarter, not merely spending more resources.

Stakeholder-centric approach. At the core of IMM are the people we are trying to serve. It is critical that impact measurement not only includes stakeholder voices but also centers on their feedback. Through the stakeholders, we can understand the positive - or negative - effects of housing policy in the community. As decision-makers and implementers, we cannot assume the needs of the community nor the benefits they are perceiving. 

Focus on impact. IMM goes beyond program outputs as affordable houses are built, funds are distributed, or increased income. Through a holistic approach, IMM tackles tough measurements like reduced poverty, increased well-being, and reduced inequality in the community.

Strategic and foundational. IMM isn’t another department of your organization. It is foundational to your organization’s growth model. IMM is grounded in a logic model like the Theory of Change and provides a strategic path to achieving impact goals. It’s not a one-and-done, either. It’s a regular, iterative process that keeps your organization dynamic, lean, and learning.

Real-time. With the right technology, your impact data is comprehensive and compiled from multiple sources. Convenient dashboards offer impact data in real time. There’s no laborious end-of-year reporting. Your data is ready when the policy window opens and funding is available. The efficiency that IMM provides is attractive to funders across the political spectrum.

A deeper understanding of affordable housing
We all understand that a home is made of more than four walls. IMM is the key to understanding the stakeholder benefits of affordable housing initiatives. The complexity of the challenges around affordable housing demands strong data that goes beyond traditional indicators to demonstrate transformative social change. 

Measuring Social Impact of Real Estate Initiative

Learn More: Impact Measurement 

AI for Social Impact

Current state of AI for Social Impact Measurement
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