Enterprise Community Partners has announced a new program to give renters the wealth-building opportunities traditionally limited to homeowners while preserving up to $1 billion in affordable and workforce housing.
Backed by Enterprise’s national affordable housing platform and fund management experience, the Renter Wealth Creation Fund has a goal of raising $250 million from investors. The fund will offer a return for investors while creating upward mobility for renters, who earn immediate cash back for on-time payments and the opportunity to share in the appreciation of the property over the long term. Enterprise expects the fund to preserve 7,000 homes.
“The Renter Wealth Creation Fund is a direct response to what renters have told us they want: more cash in hand today and the opportunity to achieve upward mobility over the long term,” said Lori Chatman, president of Enterprise’s Capital division. “With their feedback, we created a financial innovation that offers returns to investors, loyalty and stability to property owners, and—for the first time—real wealth-building potential for renters.”
Chatman will become interim co-CEO of Enterprise in November.
According to the national nonprofit housing organization, the fund, which has been launched by its affiliate Enterprise Community Investment, benefits residents of affordable rental housing developments in which it invests in multiple ways:
1. Cash Back: Every month, residents who make on-time rent payments receive cash back through Stake, a mobile app that allows the transfer and use of these reimbursements;
2. Resident Services: Each property will offer services tailored to the needs of the residents; and
3. Shared Appreciation: Like homeowners cashing out from a sale, long-term residents—current and former—can receive a share of the profits if the property is refinanced or sold for a profit. When this occurs, investors receive a targeted financial return of 4%, and residents who lived in the building for at least four years are expected to receive 80% of the financial upside thereafter as an additional cash-back reward.
“The Renter Wealth Creation Fund recognizes that there is more than one way to build wealth, and more than one way to define it,” said Chris Herrmann, chief investment officer and fund manager of Enterprise's real estate equity business. “Through focus groups and surveys, residents made it clear that wealth is not just a long-term return. Wealth is also having enough money to know next month’s rent bill will not break the bank, to order dinner in instead of cooking after a long day at work, or to treat the family to an afternoon at the movies. The Renter Wealth Creation Fund was designed to reflect that reality.”
