A new wave of African American businesspeople is helping to create generational change in their local communities through real estate investing.

In inescapable piece of the rich history of African Americans is that many stories accepted as truths are all too often written by those who seek to harm and diminish the culture. Historically, Black neighborhoods are no exception.

From the late 1700s to the early 1900s, more than 1,000 black enclaves were established across the United States, providing their residents with a place to live, learn, worship, and thrive in relative peace and isolation. Unfortunately, these communities represented an easy target for hostility throughout the 20th century, from the abhorrent race-based massacre in Tulsa to the intentional destruction of Black neighborhoods by highway planners and “urban redevelopment” initiatives.

As a result of the structural racism guiding U.S. housing policy over the last few hundred years, people of color have been left at a severe disadvantage. According to data from the Center for American Progress, Black households today are significantly less likely to own their homes than white households, and the typical white household holds 10 times more wealth than the typical Black household.

However, a new wave of African American businesspeople has emerged to help create generational change by creating safe, affordable, and move-in ready homes in their local communities through real estate investing.

The 20th-Century Heritage Heist

African Americans have a long history of using real estate investing to build financial security and self-sufficiency. In 1865, when General William Tecumseh Sherman asked 20 black religious leaders what freed slaves needed most, they said “land.”

After emancipation, freed slaves and their descendants bought up every parcel they could afford, eventually accumulating 16 million acres. Between 1910 and 1997, however, 90% of this land, worth more than $359 billion in today’s dollars, was lost or stolen. At the same time, racist redlining and discriminatory lending practices kept African Americans from participating in the housing booms that followed the Great Depression and World War II. From 1934 to 1962, 98% of Federal Housing Administration (FHA) and Veterans Affairs (VA) home loans went to white applicants.

Although laws like the Fair Housing Act of 1968 attempted to address these practices, the damage had already been done. According to U.S. Department of Treasury figures, homeownership for white households was 75% in the second quarter of 2022, compared with just 45% for Black households.

The Trojan Horse of “Help”

Government entities and institutional investors are increasingly paying lip service to help narrow the racial wealth gap by creating affordable housing in majority Black neighborhoods. Yet many Black leaders remain understandably skeptical.

When large companies, institutional investors, or the government take over and create housing, it often ends up being unattainable for folks within the community. Even if housing developed by the government or an institutional investor succeeds in revitalizing a neighborhood without displacing its residents, rent flowing to a company based in another city or state will not be reinvested into that local community. But when an individual investor acquires, improves, and manages a rental property in their own neighborhood, they hire local contractors, use local services, and spend their income at the grocery stores, restaurants, and local businesses that employ their neighbors.

Empowering African American Investors

Today, more Black businesspeople are investing in real estate, and innovative, technology-enabled lending platforms are creating a new way to circumvent the traditional bank loan system that failed their parents and grandparents. By eliminating many of the barriers created by traditional lenders (e.g., restrictions on eligible income or on borrowers with less than perfect credit) and focusing more on the potential of the investment property than the wherewithal of the borrower, these online lenders can fund prospective investors who might otherwise be unable to access the capital they need to launch and grow their investing businesses.

Kiavi is one such lender using technology to democratize access to real estate investing. Last year, its unique approach to underwriting caught the attention of Corporate Community Connections, Inc. (CCCI). The two organizations have since formed a partnership. CCCI teaches companies and government agencies to engage with underserved communities in a way that’s mutually beneficial.

CCCI promotes revitalization without gentrification and dislocation, helping potential borrowers learn how to invest in their communities. At the heart of the CCCI is the Dfree program, which stresses the importance of abandoning the generational curses of debt, deficit, and delinquency in favor of the hallmarks of generational wealth: deposits, dividends, and deeds. Dfree was developed by Dr. DeForest B. Soaries Jr., CCCI president and CEO.

During the 20th century, the African American community was stripped of property worth more than the market capitalizations of AT&T, Boeing, and Intel combined. That wealth is gone forever, but Black Americans aren’t waiting around for the government or big business to come to the rescue. Instead, they’re taking their future financial well-being into their own hands.

At the same time, local initiatives undertaken by individuals can benefit from bridges and connections, which is why partnerships like the one between Kiavi and CCCI are so crucial to supporting these budding investors in underserved communities.

As Soaries Jr. once said, “We live in a diverse country, but we live in our own pockets. To the extent that we can build bridges between resources in need, we can really make an impact on some of the horrible conditions that have persisted through generations.”

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