What Does The HUD’s Social Experiment Mean For Investors?
The results of a decade long social experiment by the HUD have recently gone public. So what do the findings, and new initiatives mean for real estate investors today? Moving to Opportunity The U.S. Department of Housing and Urban Development (HUD) conducted a quiet 10 year social experiment called Moving to Opportunity (MTO). The findings of the report and a research paper on the findings by two Harvard University professors were released this year. The program was designed to measure the impact on families and individuals from moving from poverty stricken areas, to more affluent areas. During the process, some families were given housing vouchers to move into areas with less poverty. Others received with vouchers that weren’t restricted by location. The control group wasn’t provided with any housing vouchers to enable them to move. The effects of moving to more affluent neighborhoods on adult women reportedly included; reduced anxiety, depression, diabetes, and obesity. The results were split for children. Girls saw improvements in mental health. Boys actually saw negative behavioral and mental benefits. While no significant improvements in school performance were reported. Once these children moved into adulthood themselves, they reported significantly higher incomes and percentages of having attended college. What’s Next? Via its own website, a May 2015 HUD release says the department will use this data to continue pressing forward to help with housing. In particular, HUD will use this data to empower ‘economic mobility’ and to focus on in-place revitalization of poverty stricken urban areas. We can also assume that this will also mean more affordable housing projects and vouchers in more expensive areas. The department also plans to seek more operational funding and private capital. What it means for Real Estate Investors This study gives some clues to profitable real estate opportunities ahead. It reminds us that investors can help provide affordable housing and help families while getting paid by the government, no matter where they are. Section 8 has long been a great profit center for real estate investors. It has its quirks, but has been leveraged very well by some very sizable investment firms. HUD’s comments also hint at increased investment in urban revitalization. That’s a great thing for poverty hit communities. There is no reason that private investors can’t work to revitalize the same areas by rehabbing houses and providing rental homes. The resulting economic, and property value increases will help everyone. The Impact Investors Can Have When you are serving enough others in a valuable way, the money comes. This applies to all ends of the real estate market. It is true when serving high-end luxury buyers, vacation home buyers, other investors, and families needing affordable houses. Focus on serving enough other people, and doing it the best. The returns will come. However, those that focus on poverty hit areas and affordable housing can have a far bigger, longer, and broader impact. You aren’t just providing desperately needed housing, but helping boost the health and education of generations. It doesn’t just have to stop with providing bare bones housing that barely makes the grade to qualify for Section 8 housing vouchers. Better housing and elevated communities can reduce crime, and helps keep people safer. When remodeling homes, green and sustainable features can make housing even healthier. While helping the environment, and building more sustainability into ongoing living. Why stop there? Nicer housing and affordable housing is a good starting point. But let’ be honest. This alone won’t revitalize, save, or turn around entire neighborhoods or cities. It can help. And it is vital. But when you look at the depth and breadth of distress in places like Detroit, MI or Jacksonville, FL it is clear that more than shelter is needed. Income earning opportunities and education are needed too. At least for a turn around to be sustained. Individual real estate investors and small investment firms can play a huge role in this. There is plenty of work to be done to grow real estate investment businesses. Even when investors don’t want to expand their own operations that large they can pass on their education to others. While HUD has talked about seeking private capital to pursue more revitalization and housing solutions, many might see the reserve to be a better option. In general, the government has proven to be extremely inefficient in orchestrating positive change in these areas. That is true of most governments. Their intentions may be great, but their size, infrastructure, and process are just too slow, and inefficient. Investors can leverage grants, tax breaks, and other help from local government, and other agencies to make the process better. There are a lot of money and opportunities out there for investors that think big, and are willing to invest the effort.