On-Demand: Inclusion & Innovation--Changing the CRE Landscape
December 01, 2021
By Michael Morris
In Part III of our Diversity, Equity, and Inclusion in Commercial Real Estate webinar series, we explored strategies for improving housing inclusion through innovation, policy, and capital solutions.
Michael Morris: That's great. Thank you so much. Jim?
Jim Farris: Hey Mike. Thank you and welcome everybody. I'm Jim Farris. I'm the CEO of Mosser Capital. Mosser Capital is a minority and women owned business focused on investing and operating in urban workforce housing in California. And we've been doing that since the 1950s in places like San Francisco and being socially responsible has really been at the core of Mosser's values since the beginning. We've always been very connected to the local communities that we've invested in. We've put a lot of time, money and effort into improving all of the neighborhoods that we've been involved in. And we're really excited about how the use of technology can potentially address some of the issues around diversity, equity, inclusion in affordable housing. And we're really excited to be a part of this. We're a small fry compared to Chris' customers or his clients. We're closer to around 4,000 units. We're focused primarily in California and really we're looking forward to participating. We're involved in all levels of this as an operator investor in both the technology side, as well as the housing side and so we're excited to be here. Thank you.
Michael Morris: Jim, you may be small but you are mighty. Alex, let's hear from you, please.
Alex Lofton: All right. Hi everybody. My name is Alex Lofton, co-founder president of Landed and we are a startup that's focusing on helping essential professionals. Think your average teacher, nurse, firefighter, be able to build financial security primarily by helping them buy a home. That's what folks know us for is we have a number of different products that help people along the pathway to purchasing a home. But the one that's most relevant today, I think is our down payment program that's a shared equity down payment program. We're trying to leverage the resources that are in the capital markets to scale once and for all a tool for the folks who don't have the bank of mom and dad to come in and help them buy their home, cover that down payment that is the barrier to so many folks being able to build wealth through home ownership. And doing that as a shared investment strategy that's an alternative strategies to things like single family rental, investments, et cetera, that help actually partner with home buyers and help them stay in the communities in which they serve, as opposed to maybe turning that housing stock into rental and maybe people choosing to live elsewhere as a result of housing stock becoming too expensive to access.
Really excited to be here today. Thanks for inviting us. Happy to share a little bit more about what we're doing today.
Michael Morris: Thanks Alex. That's fantastic. Michelle?
Bella Brickle: Hi, Michelle. I think you might be muted.
Michelle Boyd: Thanks all. I have some technical difficulties on my end so thanks for sticking with me. Hi everyone. I'm Michelle Boyd. I am the director of the Housing Lab. We're the only national accelerator program that's focused on solutions for housing affordability and equity. We work with both nonprofit and for profit innovators across the spectrum of housing solutions. That includes renter, home ownership and homelessness prevention solutions. We were, as I mentioned, spun out of the Turner Center for Housing Innovation at UC Berkeley and still are closely affiliated. We look at over 200 organizations each year for our annual program, ultimately selecting just four to six that we provide seed capital for and then work with them intensively over six months. We mostly work with them on issues that are particularly challenging for innovators in housing, such as partnering with the government and navigating policy and regulatory challenges, capital structuring and then also maintaining their focus on impact and equity outcomes over the long term.
We're wrapping up our second cohort and planning for our third and we're thrilled that the organizations we've worked with, including those we just started working with four months ago, have gone on to raise over 10 times more capital and several have secured really significant partnerships with federal government entities, such as one of our partners who just secured a five year partnership with Freddie Mac. I'm thrilled to be here with the rest of the folks on this panel to have this conversation. Thank you.
Michael Morris: Well, that's a lot, Michelle. That's fantastic. Oh my goodness. I'm just going to right away, we're going to come out and talk about economic and policy solutions and I can't think of a better person to direct as to than you Michelle. I'm going to stay with you right now if you don't mind. Stay unmuted. What are some policies currently under consideration at the federal level to increase housing affordability and inclusion? And how can innovation increase the positive impact of these policies?
Michelle Boyd: Yeah, there is a lot. For the first time in a generation housing is a priority at the federal policy level, which really reflects the housing challenges that we're having right now in the US. In the current Build Back Better Bill that's being reviewed by the Senate. That's been passed by the House, there's a couple really innovative programs. In addition to proposing to fix all of the outdated capital improvements needed in public housing, billions of dollars of investments, there's a new housing investment fund that is an innovative structure based on this program called the Capital Magnet Fund that can be used by grantees in really innovative way and investments in low income communities such as loan loss reserves or guaranteed programs. There's also for the first time ever a first generation home buyer down payment assistance program. Really helps advance and scale a lot of the work that Alex Lofton and really the team is doing to a new level with the government support.
There's also funding for a pilot program that HUD can run, the Housing Urban Development department to help solve the issue around the inability for borrowers to find mortgages for small value properties, which it's a practically impossible in the commercial markets to find a loan for a home that's with less than a $100,000, which for those of us on the coast might not seem like a big issue but it's a huge issue across a lot of the country, particularly for communities of color.
There's also planning grants for zoning reform, which is the first time ever the federal government has tried to influence zoning practices on a local level, the first time since the civil rights movement. And there's also a large number of investments at the intersection of climate change, community resilience and affordable housing, which is beyond what we've seen in scope and a lot that can be used towards more innovative models. Lastly, there's separate from Build Back Better, there's a large national effort around reforming the appraisal process in particular, which recent research had shown is significantly racially biased. And so we're expecting some more news on that in January and February from the administration.
And to your question of how innovators can advance these policies, some of these won't be possible without technology and business partners. Specifically thinking about the question around small dollar mortgages, one of the reasons that it's really difficult to originate mortgages on homes that are worth less than a 100K is because the fixed costs are so high. And so that's an area where technology partners, whether it's people who are already in the origination game or nonprofit or other people who can leverage technology to enter into the small dollar mortgage market, that's an area that technology is really important.
The other areas around this intersection of environmental change and affordable housing, we see that while there's a lot of energy around climate change, resilience and housing, it's often concentrated at higher end properties because that's where the innovators can get the most bang for their buck on where they're investing the resources in R and D. However, while we also have a housing affordability crisis and need to build a lot of low cost housing pretty quickly, we have a tension between prioritizing affordability and sustainability. There's a lot of need for technologies that can solve both of those questions at once and address as we're building new housing to also be building it for the future.
Michael Morris: Well, that's a lot and that's fantastic. Just to compliment what you mentioned on geographies on the coast, should there be some economic policy solutions that differ in different geographic areas within the US?
Michelle Boyd: Absolutely. I think for example, the question around home finance innovations is just a different game in Appalachia, in the Midwest, in the central mountain region, as it is on the coasts. The challenges on the coast around extremely high valuations and escalating home prices versus in the central region are not being able to find a mortgage for a house. And so there are targeted solutions on either. Where down payment assistance may be really important on the coast, some of these efforts to increase just plain financial access to traditional products are most important on the interior markets within the US. Similarly with land use reform, in our really high growth markets, which I know others will talk about here but particularly here in San Francisco, where the populous has really fought housing development, is where these new incentives in order to reduce local zoning restrictions and increase the ease of development are especially important.
Michael Morris: Yeah. The NIMBYs have been a big issue in the Bay area, probably many other areas as well. Alex, to compliment what Michelle just talked about, can you weigh in a little bit? I don't even have a question around this but I know you had mentioned that home ownership piece. Can you weigh in on that just to compliment that conversation?
Alex Lofton: Yeah. One thing I'll saying, the 30,000 foot view I take away from what Michelle is pointing out, which is very true. The amount of activity at the federal level around housing it's an all-time high is that this reiterates the point that to solve this issue or to address this issue, there's no silver bullet. A lot of people like to point out, hey, it seems like there's a lot of little pieces going on all over the place. Isn't there one thing we can do? No, there's not one thing to do. There's a lot of different little things that need to be done at the same time. We always talk about that as needing a toolkit. And there's a lot of different tools in that toolkit. And the other point I like to make here is one of those tools is thinking about where is the place for lower case A affordability instead of uppercase A affordability?
What do I mean by that? Upper case affordability is a lot focused on subsidizing cost of building housing or renting housing, which is very, very, very important. But there's also a role for leveraging the market and capital markets in particular to cover and address missing value for a lot of people and specifically allowing people to access home ownership is a really key part of that and policies that help make it easier for individuals to partner with capital providers, to help them into homes and help them into home ownership is really, really key. And Fannie Mae is doing a lot here leading the way and kind of thinking about this. As a partner of theirs, we think a lot about how do we continue to make it easier for folks or the institutions that have a lot of capital to bring that to the market in a way that partners with people who are trying to buy a home?
How do you allow people to access equity as a co-investment in a home to help them get into it now and then build towards being full homeowner themselves over time? As opposed to some of the strategies that might be popping up where we're buying up housing stock and turning it all into rental and not allowing that to be accessible to the average person because it keeps driving up cost. I think a lot of the talk now at the federal level is really interesting of this point is how do you make sure that capital is comfortable partnering with individual home buyers and helping into homes in a way that we haven't done before?
Michael Morris: Very good. Thank you. All right we're going to shift gears a little bit. We're going to go over to innovative methods and developments. And Chris, this one's for you. How do you as a venture capital investor think about the landscape of innovation impacting housing affordability?
Christopher Yip: Yeah, I think the backdrop here is that we are in a very exciting, maybe generational period of time of innovation within the broader real estate space as technology entrepreneurs, investors focus their attention on solutions impacting the broader space. I think there's a lot of excitement to solve problems, so to speak, across the spectrum. And I think affordability is one of those pain points, so to speak. I think we all know the drivers and what we see in the market. You have home prices and rents having experienced double digit increases over the last year. Now, albeit some off of COVID driven lows but a real decrease in affordability. And I think what we like to see as investors, as venture capitalists of course, is commercial market based solutions rising up to meet the challenge.
And I think that's what we're seeing with entrepreneurs like Alex, on with us today, meeting the challenge, raising capital. I think that's really exciting. I think maybe to dig into the next level of that, I'll give maybe an overview of how we think about some of the different areas where innovation is focused as we see it today. And I'll broadly group, of course, there are many ways to slice it but where we spend a lot of time on the rental front, a lot of solutions, arising around improving access to rental housing. For example, focused on alternative screening and underwriting methods beyond the traditional credit check, background check, which is limiting to many. Alternatives, we'll call it resident finance solutions, such as security deposit alternatives that again, bring down the bar to coming up with that initial rental security deposit, which is onerous for many.
Flexible payment products for rent. If you need to be a week late on your rental payment or rental guarantees, which is an insurance product that can help owners get comfortable with renters that maybe have nontraditional credit. We're seeing products around rewards or earning credit within your rent towards a down payment of a home. We are seeing solutions that most are aware of around co-living and sharing. And I think last but not least around the improving access, reducing friction to some of the existing, the very broad as Michelle has commented on, existing local and national affordable housing programs that today, I think we all recognize could be hopefully made with less friction for all stakeholders with the use of technology. That's on the rental front a couple aspects that we see.
Construction, another large area that we focus on. Construction tech, trying to bring technology solutions and engineering solutions to bringing down the cost of new housing. Lots of different aspects of that. I think most are aware of interesting companies and work being done around modular housing, offsite fabricated housing to reduce labor needs on the job site, improve productivity. We're seeing new construction methods like the use of mass timber, which is now approved in most jurisdictions, and you can build a mid-rise building out of mass timber with no steel frame. It's very exciting. We're seeing innovation around 3D printing. Folks have probably seen in the news videos of big 3D printers printing out houses, which is really, really exciting and innovative. And of course, innovation on a different end of the market around ADUs out here on the West Coast. We've seen recently a company focused on collapsible modular housing to address homelessness. I think there's just a lot of interesting innovation that we haven't seen in the past.
I think last, and certainly not least as a category but I'll actually defer it to Alex as he's on and he's the expert in this space is innovation around home ownership and ways to achieve home ownership which are different than the traditional down payment, mortgage, income based purchase process. This is shared equity, rent to own, co-buying, all things that Alex knows well, so I'll defer that to the expert in the room. But hopefully that gives a little bit of a landscape of how we think about the different types of solutions. It's clearly not exhaustive and I think we're excited when we see a new category pop up that we hadn't thought about but maybe enough to whet the appetite for today.
Michael Morris: I think it's fantastic that a venture capital firm with 40 of the top real estate investment groups in the US is talking about all these innovative solutions. It's fantastic and heartfelt as well, I may add. Jim, let's hear from you, what has Mosser done in the past? And what is it doing to address issues of inclusion and quality affordable housing?
Jim Farris: Yeah. Thank you, Mike. I think I mentioned before Mosser, we've been investing in urban communities now for over 60 years, particularly in San Francisco. We've always had a very hands on approach to the buildings that we manage and the residents that we serve. And what that means for us is we're going the extra amount to provide a higher quality of housing, higher level of housing security, higher level of management service than folks will typically get in the communities that we're investing and operating in. An example, we've always had a mantra, as I mentioned before, of giving back to the communities that helped our company grow over time. An example of that approach and kind of what we do is we have a holistic approach. When we buy a building, we're looking at what can we do to affect positively that block? And then how can we do that on a block by block basis to positively affect that neighborhood?
And so we have a long history of investing in communities such as the Tenderloin in San Francisco that haven't received historically a lot of institutional capital investment. And so what we do in places like that, we've done it in the past and we do it today. 20 or 30 years ago in the 90s, we started a program called Adopt a Block, which was really, it was a nonprofit program that Mosser started as a tenant oriented, tenant focused nonprofit, which was geared towards fighting with or engaging or help solving problems with other owners in that area or that are owners of buildings where residents were in, that were incalcitrant, that were not taking care in any way of their building, not providing any level of security for their residents. And so really to deal with some of the nuisance activity that I'm sure people who have driven through the Tenderloin in the past or recently see in the streets a lot of the time. That was a program that we started in the 90s that made a significant impact on some of the blocks in the Tenderloin.
More recently, we've been working with a local group called Urban Alchemy and Urban Alchemy is a local nonprofit that it's essentially a shared security program with both the city in San Francisco and the owners that can contribute capital to kind of provide a shared security program. And it's security guards walking around with guns and night sticks, it's people that have come from these neighborhoods that can communicate with people down there and that are just talking, kind of creating an uncomfortable situation to have nuisance activity in those places and it's really been impactful. We've looked at a ton of different security options during COVID in particular. It's been difficult to operate buildings period, but it's also been very, very difficult to monitor security.
A lot of inner city properties have gotten broken into, people are stealing mail. DEAs, particularly in San Francisco and I don't want to get political locally, but aren't arresting folks for minor crimes that they would in the past. And so it's been really, really tough. We're looking at new technologies for this topic, such as a company called Deep Sentinel, which offers a remote security program so you can essentially have a real time live security guard at multiple locations at the same time. And so that's an interesting technology we're using. We've been doing that for a long time. Like I said, we don't own two and a half million units or anything like that, we own about 5,000 units in California but we've been really deep into the communities that we've been invested in and those are a few examples of how we've done that in the past.
Michael Morris: Excellent. Thanks, Jim. Michelle, let's swing over to you. How can real estate innovation go wrong as it comes to goals around inclusion? What can be done to ensure innovation benefits everyone?
Michelle Boyd: That's a great question, Michael. There is so much potential and need for technology in real estate. And when you look at the system as it is today, it's incredibly inequitable. Right now the racial home ownership gap is as high as it was in 1960 and the racial segregation is, while marginally better in some places, worse in others. And so when you place technology, particularly in the home buy process or even some of the renter technologies that Christopher mentioned, there is a risk that they actually just make the current system more efficient in inequitably distributing wealth within real estate. Some of the areas that we've seen this pop up are, for example, looking at online buying programs, services that allow you to do an entire house transaction, purchase transaction online. And some of these that are heavily based on predictive valuation algorithms and policies that just further perpetuate the gap in home values across communities of color and white communities or policies that further direct transactions towards those that are easiest to do.
And you can see this in Redfin is currently being sued by a fair housing alliance because some of their policies have discriminated against homeowners of color. Another area you see this is just anything really that's based on an algorithm. It's not a secret that if you put bad data in, garbage in, garbage out. If you put data that's got racial bias into the system, you're going to get racial bias out on the other side. You see this in Quicken Loans, loan data, which is actually has been shown to be more biased than some of the in person lending programs. And also this can get especially complicated when the data and the algorithms become a black box.
Some of these tenant screening programs, for example, that claim to be more equitable. Some of them just offer a simple, yes, no. You should rent to this person or not rent to this person as opposed to describing the reasons how they're coming up with that recommendation. And without that additional detail, it doesn't leave it up to the person renting the unit to be like, oh, well, that's a reason I can overlook. Or that's some reason that doesn't matter to me. They can just blindly take the yes, no recommendation.
I think there are really important questions that any investor, entrepreneur should be asking, particularly around the use of data, extreme efficiency and transparency. The market of investment really does like these black box data systems because that's how you create IP. That's how you create value and build a moat around your business but they can have really negative consequences. And so as investors and founders are making decisions, it's really important that anytime you're facing a big decision around data or algorithms, that you are asking yourself, how is this affecting the bias potential of racial bias within my technology or within my business? How is this reducing or working against the bias that's within the system? And so it's something to be really cautious about.
And I'd say one other area that I touched on briefly is a lot of innovation is driven towards the higher end of the market. It's just the fact of economics but that does leave an opportunity for entrepreneurs who can be even more innovative, more willing to doing the grunt work to find innovations that can reach the lower income end of the market and the lower cost part of the market as well.
Michael Morris: Very good. Thank you so much. Before we move on, does anybody have something they want to add to this dialogue around innovations?
Jim Farris: Yeah, I would just say to the point of a lot of the innovations are focused on the higher ends of the market, I think that's true and that's why it's important to get folks that are doing more of the affordable housing, whether it's on the new development side or on the operating side, like us, engaged in adopting new technologies and utilizing new technology, supporting new entrepreneurs that have these scalable solutions. Because that was a comment I had with a DC investor last night about a company. Oh, well, how does that work for you guys? Isn't that only for kind of class A buildings?
And I think that's part of the issue. And that's what I was talking about before. And what we do is we want to provide a high quality, the highest quality of living standards that people will get in a class A building. We want to be doing that in a building in the Tenderloin, in a renovated apartment, providing that for an essential housing worker like Alex talks about and providing them an affordable price and having those services, whether they're onsite amenities or offsite amenities. This was an offsite amenity technology. And so that's one of kind of the biases as we talk about that, hey, that that isn't applicable in an affordable or a workforce housing strategy and really trying to bring that application and use all the way through the housing spectrum because it can be scalable, can be a low cost and it's a benefit for everybody. Everybody likes to have a dog Walker. I don't have to be rich to have a dog or providing kind of basic amenities that people find attractive, they should be shared. That would be my comment on that. Thank you.
Alex Lofton: And Michael, I think the only thing I'll also add to this is the who behind the organizations and the companies and the innovations that are being developed is really key, that continuing to see a true diversity of people who are being provided capital, providing the opportunity to have their concepts and ideas and companies thrive, it's still a challenge, especially in Silicon Valley and literally Silicon Valley and then all the other innovation markets that have developed similar to Silicon Valley, where you see a lot of the founders, a lot of the investors are the same folks. An, a lot of the times the true innovation and ideas here are going to come from people and communities that have been impacted the most by the market and industries that have been exclusionary more traditionally. I think it would be a loss if we didn't kind of continue you to make that point that the who behind creating these innovations is just as important as what the innovation actually is at the end of the day.
Michael Morris: I think that's an excellent point. And all I kept thinking about is thank goodness for Michelle's group because it sounds like they're deep into it from a very diverse perspective, so very solution oriented. I love that. Let's go over to investor perspectives and we might as well start with the venture capital group. Chris, this one's for you. And I actually was reading this question thinking, yeah, I want to know this question. How are your investors who are institutional real estate owners, the top 40 in the US, and operators approaching affordability and broader ESG initiatives?
Christopher Yip: Yeah, thank you for the prompt. And I'll say first of all, we are an independent venture capital manager. Those owner operators are investors in our fund and they are important strategic partners but I always have to say this, we don't speak for them. I can try to reflect views that we hear from the group and try to discern trends and themes. I'll say, and again to level set, our group of 40 plus includes, I think it last count nine of the NMHC top 20 owners and operators in rental real estate. I think we do have a reasonably representative sample of the large end of institutional owners in North America, which to all the discussion today absolutely is over indexed towards the higher end of rental inventory in North America. It's class A, class B largely, some workforce. And that's the vantage point.
I would say, as most listening to this know, affordability has always been an important consideration for institutional real estate, both driven by practical considerations but a fairly longstanding and I'll say comprehensive framework of local and national policies that drive affordable housing. We know that there is increasing focus on the pros and cons of some of these existing programs. We all know that the current administration's very focused on things like Section 8 housing and the like. And we're also seeing at the local level, many municipalities continue to drive affordable housing allocations, let's say, through the development process, through entitlements and permitting. And so I think that is a framework that institutional real estate is very familiar navigating and will continue to do so. And so I think it's been top of mind for a long time.
I think what's exciting right now is, there's been a real increased focus towards broader ESG initiatives, driven in large part to be fair, by focus on energy efficiency and carbon. I think we're seeing institutional asset allocators so we're now talking about a chain of investors. The investors in, our investors, who are allocating capital to institutional real estate, they are focused on these ESG goals and values and are pushing that down as a mandate to their managers, meaning the institutional real estate developers and owners. I think that is a trend. It's a secular trend. We don't see any sign of that diminishing. We see it accelerating. An increased focus on what is the ESG impact of your real estate portfolio? That's the carbon impact, that's the impact on resident health and wellness, the impact on communities. And so I think that is great for continuing to raise awareness.
I think what's exciting is that in our group, we see in part catalyzed by that, an increased let's say awareness, interest, curiosity about how market forces, technology can impact the S in ESG. The social aspect, the affordable full aspect. I think there's an interest with our group in steering us to try to help find technology solutions to impact some of these challenges. I think that is all hopefully positive tailwinds. I think all lot of work to be done clearly but I think building on a background, I think where this has long been a focus but I think is starting to see some real attention and capital flows in the areas of innovation.
Michael Morris: We have a very large technology practice with a lot of startups, so this is a startup question for you, Chris, if you don't mind, just to kind of compliment what you just talked about. How do you evaluate backing startups who are tackling these challenges? And what's your approach?
Christopher Yip: Yeah, I think this often question comes up when talking about investments that straddle, obviously both a financial and growth motive and a social impact. And I think often there's terms around, are you an impact investor? Do you have a double bottom line? What are your criteria? And I'll say speaking for RET, we don't today have a formal sort of impact criteria. We look at each investment on its own merits. We want it to be successful. To some extent, I think that is a challenge that the broader investment industry is navigating. And again, I think driven by a lot of focus and attention recently on climate change and carbon but developing frameworks where investment mandates can be not just profit seeking but have dual mandates. And I think that that helps.
I think the analogy in the real estate world might be, as I mentioned earlier, a real estate developer may not allocate housing to affordable housing units in the development unless they have a mandate to do so. Otherwise, a purely profit seeking development may not do so. And I think it's the same way as a venture capital manager or private equity manager to say, "Do we have a pool of capital that has a mandate to balance the profit motive with making ESG impact?" And we're thinking a lot about that ourselves and with our group. I think just to preview a little bit, we've been talking to our group about potentially forming a pool of capital with that mandate so that we have flexibility to equally weight some of these considerations and take them into account when making decisions such that it's not purely financially driven. I think all the thinking in the industry's evolving on this, I think it's an exciting time again. And we are ourselves, navigating that. And I'm sort of optimistic about where this all goes over the next few years.
Michael Morris: Excellent. Thank you. Alex, can you weigh in on this as well? You're a technology operator platform, so can you weigh in on you're doing to add to this solution?
Alex Lofton: Yes. I think the key here around technology is that technology allows for scale. Allows for the connection between where there's resource one place and a need another place, especially if that need is distributed, being able to meet that need at market scale. I'll tie a couple points. Michelle talked a little bit ago about the disparity in housing, home ownership across race and just this last point about kind of ESG and the S in the ESG of how does that all fit together?
The way we look at it is, it's no secret last 30 years, household wealth is quadrupled but for the bottom, lower 50th percentile, it's dropped significantly. And as a result of that, if you look at the relationship of wealth change and then home ownership change, they track almost one for one. Where the typical White family right now in the US has about eight times the amount of wealth as a typical Black family, five times amount of wealth a typical Hispanic family. And when you look at home ownership, 73% of non-Hispanic Whites own their home as compared to 47.5% of Hispanic families and 42% of Black families. There's just that disparity matches the kind of wealth difference and home ownership difference are really key.
What does that tell us? That tells us that home ownership is still key to building wealth, that renters are not capturing the value of home ownership, home value appreciation, of forced savings from mortgages. And as a result, the other social benefits that come with home ownership aren't being made available to a wider group of people. When you are owning a home, there's more participation, there's better outcomes for kids educationally, there's just overall residential satisfaction. And the way that we think about that is that means with greater home ownership comes greater financial stability. And as a result of financial stability, you have greater stability across our economy, across our politics and just society generally. Which ultimately equals greater economic outcomes for everybody on this call.
That kind of part is all connected. And so if you're thinking about one of the tools to address stability, it is about home ownership and the largest reason why people can't access home ownership is access to the upfront capital they need to buy a home, the down payment challenge. And that if you look at that, especially we kind of zero in on folks who may already be able to afford rent on a month to month basis but they just aren't able to get over this down payment hurdle, your teacher, your nurse, your firefighters, essential worker, it takes folks 14 to 17 years to save for the down payment they need to be competitive in today's market to buy a home.
And lower down payment options just aren't really readily available to people in expensive markets. They're not competitive when you're trying to buy a home. They're too expensive on a month to month basis because when you add more debt and private mortgage insurance, all these other options for folks, it just becomes untenable on a month to month basis to buy a home. And you see that the way that people get over this hump is I mentioned earlier, the bank of mom and dad. Being able to borrow money from somebody to get money from somebody and inheritance is just vastly different across race groups. 30% for White families compared to 10% for Blacks and 7% for Hispanic families.
Ultimately if you want to try to address this challenge, you got to find a way to match capital out there that's looking to invest in residential real estate and real estate generally and may have some ESG components to what they're looking for. But even if you're not looking at the ESG point, if you're just looking for alternative ways to invest in residential strategy, there are now ways to do that through shared equity, by pairing, by co-investing with home buyers, allowing them to help them stair step in ownership, get into a home that they actually occupy as a homeowner but also provide capital that's helping, that's sharing in appreciation, sharing in the change of value in the home over time. And that's what we do at Landed.
The Harvard Joint Center for Housing said that about 15 million people in the US would be home buyers today if they just had the down payment support of somewhere between 25,000 and a $150,000. That these are folks who have the income, have the credit, et cetera, they just aren't able to access the market. There's a huge market opportunity of consumers that spend over a trillion dollars on housing and financial services generally, that aren't being able to access the market right now. And that disproportionately affects people of color in this country.
We look at this as an opportunity to pair investors who are seeking opportunity to invest in residential real estate and doing so in a way that actually also is helping individuals build wealth. Both parties are building wealth by scaling something like a shared equity down payment investment in a home, which just hasn't been done. It's been done at a very local level. That's what technology is changing for all of us. We can actually do this in a more standardized, scalable way and now is the time to do it. I don't know if that kind of answers the question, but that is the little bit of how we think about the connection between both the challenge that we have but also the opportunity to pair the need and the investment desire in this asset class.
Michael Morris: I think that's an excellent contribution, Alex. Thank you so much for that. We're in the final stretch and last but not least is working together, bringing this all together to work collaboratively and collectively to find a solution. And Jim, I'm going to start with you. What is Mosser committing to do in the future to support innovation and scalable technologies, and I know you're big in technologies, buddy, because I know you personally, that can improve inclusion in quality affordable housing?
Jim Farris: Yeah. Thank you Mike. And just not to go off topic but just to piggyback on what folks have been talking about, Alex and Chris and Michelle, there needs to be these regulatory, whether they're federal, state or local, regulatory incentives and processes that are in place that can allow things like shared home ownership or other types of credit approval processes and ways to develop inclusion. There needs to be some regulatory policy help in that manner because it's very, very difficult. For example, if you look at trying to convert an existing market rate building in California and you say, "Hey, I want to donate this building. I want to make it true affordable housing," even if you continue to own or whatever. It is next to impossible to get through that gauntlet of regulatory approvals and processes to even understand what to do.
We talk with some of the top affordable housing attorneys in the state, they don't even know. They don't know what path he would take to achieve that. And so it's important to have kind of that roadmap developed from a regulatory and policy standpoint to start. Because if you don't have that roadmap, then even if you have a technology, maybe a technology can supersede the current regulatory policy and that may be happening in some level and hopefully that does happen. It's so important to have those roadmaps and then incentives. And then at some point, a local law in 97 in New York, which is essentially a penalty tax on building owners that aren't making certain strides in energy efficiency and that's taking even existing older building stock and having a 40% decrease in your energy usage over a short period of time. And so that's incentivizing all of these owners that have owned buildings for decades in many cases, to really get smart about what they can do to improve the energy usage in their building.
I think that's a really big part of the puzzle. And then, as far as what Mosser's doing, we're recommitting, particularly post-COVID when a lot of folks out there fled urban areas and a lot of the urban areas we're in are highly diverse. They're highly underserved by institutional capital. And a lot of folks fled downtown San Francisco, downtown Oakland, Koreatown in Los Angeles, downtown LA. All these kind of core urban areas in California we're recommitting. And to Chris' point the allocator or the investor to the allocator. Our investors, we would be termed an allocator in that structure. The good news is our investors have a much bigger focus and lens towards ESG. And in particular, like we talked about, the S. E he has been kind of thought through and learned through and there have been metrics designed.
There's GRESB, which is a widely recognized benchmark to measure performance. There's lead certified buildings. There's all these benchmarks that have been created but there are none really in the S. When you talk about diversity, equity, inclusion, how do you measure that? How are you going to measure against your peers? What are the industry benchmarks that need to be achieved to incentivize or to convince investors that what they're investing in actually does have that core S benefit? And so that's a big.
The good news is there's a lot of interest, so there's a lot more focus on it. And we were just on a panel recently talking about, you now have to have a DE and I policy as a real estate manager and operator. It's no longer a nice to have kind of like the use of technology was maybe a nice to have five or 10 years ago. You have to be incorporating the latest technologies into your operations and you have to have DE and I policies and you have to have at least a story around how you're thinking about that if you're going to attract and then how you're going to measure it, if you're going to attract any type of ESG investor.
We're getting involved and going forward we're going to be more involved in helping to shape the benchmarks that folks are going to be using to measure the DE and I, particularly the S in the ESG category. Ferguson Partners work with NAREIM and Priya and NMHC and all the big trade organizations developed the first really institutional quality DE and I survey. And it was in depth. They asked questions that you would be surprised that people would be asking about your organization or your platform but they're asking those hard questions and they're going to be measuring them and that's a start. You have to have some level of performance metrics and measurement to see where you are and then where you need to go and how you're doing along the way. I think those are very, very important. We're involved in that. We're going to continue to get more involved.
And then back to the main topic of this conversation, which is the technology piece, we're continuing to invest directly to support entrepreneurs. We're leveraging our workforce and affordable platform, which is fully vertically integrated. We touch the end investors, like Chris mentioned, and all the way down to the residents that are living in these buildings and these communities. And so we're working and supporting entrepreneurs by providing access to our platform and helping them develop scalable technologies and being very, very passionate about this topic. Me and you, Mike, and I think Alina came up with the idea for this whole series. It's a very kind of a passion project for Mosser and myself and we're going to continue to be committed and be convicted about how we can contribute to accessing and providing more inclusion in affordable housing.
Michael Morris: Thanks, Jim. I'm just going to scrap the rest of my questions because we only have about four minutes left here but just in the sense of working together, Michelle, do you want to weigh in for just a minute or two on working together going forward because you're such a collaborative group. Very impressive.
Michelle Boyd: Thank you, Michael. I think this is a bit working together in more a way that we can all approach our work. I think when we think about investing in innovation and we talk about the gaps that we've discussed on this call, since investing in diverse leadership who can prioritize solutions that serve the communities that they may have grown up in. Solutions that can be brought through the whole end of the housing spectrum into the affordable housing or workforce housing segments and solutions that are at the intersection of affordability and climate change. I would say one thing as an investor to think about is if making these investments may not meet the bottom line or returns profile that you're looking for to really consider how you are evaluating risk and what being risky? Is it that the first time entrepreneur or fund manager or person of color doesn't have as much experience? How can you complement that?
How can you provide advising and partnership in order to think about mitigating that risk? Or is it really a risk? How can you think about, are you underwriting standard vacancy rates? And so you're underwriting because solutions at the far workforce or affordable ends have much lower vacancy rates. I think there's a lot of assumptions underpinning how we think about risk, that aren't real, that can help derive capital and push capital more to innovative and more equitable solutions.
The second area is that we're always looking for partners. We can serve just small portion of the organizations that want to work with us. We, as I mentioned, considered over 200 organizations for just the five slots in our cohort this year. If there's anyone out there who is interested in working with us, providing advising to the organizations we work with or considering ways to further scale what we do, we're always looking for partners.
Michael Morris: Excellent Michelle. Well, your group is certainly an attraction so I think finding partners won't be an issue. Chris, we've got about two and a half minutes here so if you can take a minute and then we'll grab Alex and finish this thing up, we'd appreciate it.
Christopher Yip: Well I'll just say it's a pleasure to be on the panel today and I think this is proof of what we need to do working together, meaning get different stakeholders in different parts of the ecosystem together. I think oftentimes I find as a venture investor, you stay in the technology world with startups and you don't spend enough time with folks who are out like Michelle and like Jim, actually day to day working out in the field, I say. And I think it's only through that, that we can stay grounded in what the challenges are day to day that are trying to be solved. I look forward to more of this.
Alex Lofton: And I'll just add, I think Chris, Michael, Jim, I think coming back to you all, think about this daisy chain of relationships with capital. You have your investors, they have their investors. In all that web there's lots of different places where money is trying to go. And technology is often time about finding the creative ways to get money to the right place at the right time to take advantage of an opportunity, of a need. I think there's a lot of opportunity there. We'll be following up to talk about how to help be one of those allocators. And then Michelle, I'm really excited about continued work to do together as a startup and with other startups to really take all the lessons we're learning about as we do in the field to policymakers in Washington, at the state level, because so much knowledge is out there by doing. And if we aren't talking to each other in real time, then the policy being made isn't being informed by all the lessons we're learning from the market. Looking forward to continuing to partner with you there.
Michelle Boyd: Yeah. A huge shout out to Alex for being a wonderful advisor to a lot of the entrepreneurs in our program and look forward to that continuing collaboration.
Michael Morris: I can't think of a better panel. here I thought, how are we going to fill an hour? And we did it in an hour and it's exactly an hour. Bella, it's over to you and thank you to our wonderful panelists.