Urban Planner Marc Norman on New Community-Wealth-Building Tools and Affordable Housing
By Sheri Hansen | October 7, 2021
Ideas and Action’s Marc Norman.
FEATURE
Marc Norman is an expert in community development and finance with affordable housing experience that spans the country. Founder of the consulting firm Ideas and Action and an associate professor in the Taubman College of Architecture and Urban Planning at the University of Michigan, Norman sat down with ENTER to talk about the ways in which affordable housing can be an engine of economic development.
In his collaborations with municipalities, nonprofits, and philanthropic organizations, Norman often works on interdisciplinary teams with architects, engineers, developers, nonprofits, and government agencies. These sustained engagements harness a variety of tools, giving his clients a window into the forces at play in developing equitable outcomes in communities across the U.S. One of Norman’s big takeaways is that solving the challenges of housing and economic development will require looking beyond housing itself to how Americans build wealth.
He cites research showing that, in large cities, a $15-an-hour minimum wage isn’t enough to keep a full-time worker above the poverty line. Even with truly affordable housing, workers earning low wages typically have little to no cushion to survive emergencies or to save to move beyond “affordable” housing.
“People’s earning potential should always be more than their wages,” says Norman. “What other ways can they generate income? In my mind, there’s a divide between folks who live solely on their paychecks and those who earn money while they sleep. If you have a 401(k), investments, or equity in your home, or an ownership interest in an asset that is not your home, you’re able to grow your wealth, and to build up that cushion for emergencies and moving up the ladder. That’s the real difference maker that can lift people out of poverty and into the next level of the economy.”
Developers Thinking Differently
Norman is on the project team for the Albina Vision Trust (AVT), a 94-acre redevelopment in Portland, Oregon, where the planning and design team are thinking beyond the mix of market-rate and affordable housing, rental and ownership options, to how residents can build an ownership interest in the development, gain financial literacy, or become entrepreneurs embedded in the development or operations supply chains. AVT and its partners are exploring a variety of tools to create a community where families can build intergenerational wealth and expand their capacity to “earn money while they sleep,” including:
Structured real estate investment trust (REIT)–like funds, which offer investment opportunities at small dollar amounts that can return equity and allow low-wealth communities to invest in their neighborhoods
Cooperative ownership structures in which shares create an easier path to ownership and spread the risk of ownership among a larger group, lessening the possibilities for harm
Directing portions of security deposits for renters into investment accounts so that earnings can return to families, even in rental situations
Reconfiguring or creating housing typologies that incorporate spaces that owners can rent out to expand income
Structuring housing developments to have affordable units without federal and state subsidies, which allows targeting of specific groups historically harmed and left behind in redevelopment; alternative financing mechanisms also create a ladder of affordability rather than the AMI (Area Median Income) cliffs created by programs like the Low-Income Housing Tax Credit (LIHTC) and Section 8
“When you start adding up all of the options and leveraging publicly owned land, suddenly a developer may be able to do more to increase equity, opportunity, and access in addition to pathways to home ownership,” Norman explains. “This project can start to create the shared prosperity that will improve our communities over time and build intergenerational wealth.”
“When you start adding up all of the options and leveraging publicly owned land, suddenly a developer may be able to do more to increase equity, opportunity, and access in addition to pathways to home ownership. The project can start to create the shared prosperity that will improve our communities over time and build intergenerational wealth.”
He adds that most homes in the U.S. have appreciated in value over the past decade, and that refinancing homes at today’s low interest rates can create windfalls and reduce mortgage payments for owners. At the same time, those without access to homeownership are paying higher rents. Transitioning more people from renters to owners and providing them with opportunities for investments—Norman notes that the stock market has increased by more than 18 percent this year—will help them take advantage of these opportunities to build wealth.
Neighborhood REITs Create Value
Norman is also working in Cleveland’s Clark-Fulton neighborhood with local architecture firm Seventh Hill and Los Angeles–based neighborhood investment company Nico on a community investment plan that overlays wealth with community development. Nico is notable for being the world’s first neighborhood REIT; the company purchased five naturally affordable apartment buildings in Los Angeles with the help of investors, and now, after SEC approval, renters and others can buy shares at very low cost and become part of the ownership group. The rent-stabilized buildings will remain affordable, reducing the need for subsidies and tax credits in the future.
Nico, Ideas and Action, and Seventh Hill are consulting with the nonprofit Metro West Community Development Organization to determine whether a similar effort could work in parts of Cleveland with lower-valued commercial corridors, older housing stock, and lower housing values. Norman believes the neighborhood-investment model can be applied in Cleveland despite the challenges, because the area is shifting from a manufacturing to a healthcare-driven economy, with new jobs and companies moving in to energize the community.
At the same time, Norman acknowledges that even a small-dollar investment can be a significant challenge for many residents. “When your margin of error is small, even a small investment can feel very big,” he says. “It’s also important to keep in mind that people working their way out of poverty may be suspicious of things that sound too good to be true. So, earning the trust of low-wealth individuals is a key to getting them engaged and opening this door to income generation and wealth building.”
“It’s not without risk,” he adds, “but if people understand the risk as compared to the potential benefits, it can help them get more comfortable with something that’s new to them.”
For Norman, finding creative ways to help a renter become an owner, to help an owner build more equity, and to grow community investment and wealth is critical to solving the housing challenge. “More affordable housing is absolutely necessary right now, because we’re in a crisis,” he says. “But until we can help people move beyond a need for affordable or subsidized housing—until we can help them earn money while they sleep—the cycle of need will persist.”