By Cece Derringer of Homewise, Inc.
“Back yard” community investing is as central to American history as the Framers’ creation of our Federalist system, the rights movements that have brought equality to an increasingly diverse country, or the westward expansion that bestowed early riches upon our land.
Since the early 1700’s, when the innovative Moravian community of Wachovia in North Carolina was built to ensure prosperity for all its members, America’s communities have known the value of “back yard” investments. That heritage is fully at work today, helping people buy affordable homes in Santa Fe and surrounding areas of New Mexico through Homewise, an innovative non-profit that offers a proven platform for investing in the local community.
The Moravians labored mightily to invest in their own community, ensuring that all members were housed, had meaningful work, enough food from community gardens, access to health care and education for the town’s young women and men, and that their model would carry on into the future. Sustainability is not a new concept in community development.
For the Moravians, community investment did not simply increase financial resources, but also human capabilities, social equity and sustainability.
Another group of Americans, the industrialists of the 19th century, also left a valuable legacy, though they are often vilified as “robber barons.” They believed in concentrating capital in the community, with private companies building homes and facilities for their workers and investing in the cultural development of the town. Workers were provided health care, education, worship opportunities, planned communities in which to live, and for the most part, fairly safe working environments.
Public service institutions across the land like the libraries of Andrew Carnegie, the Massachusetts Institute of Technology, the public health schools at Harvard and Johns Hopkins, the Albright-Knox Art Gallery in Buffalo, the Museum of Natural History in New York are lasting resources of this past era of community investment.
However, in the post-war 20th century, as the middle class grew and America’s population expanded, the responsibility for housing, healthcare, education – even phone service for the underprivileged – seemed no longer to completely fall upon the working individual, or to be supported by the community philanthropist. It fell instead more on state, federal and local government.
But government cannot do it all, as the recent budget conundrums in Washington and many state capitals have shown. Thus, in the 21st century, we have the opportunity to rediscover the power of investing in our own back yards.
Modern financial investment has been a story of individuals and their money moving farther and farther apart to the point where the average investors don’t know where their money goes or what it does.
However, an emerging trend for investors is to align their money with their values. How and where to invest is beginning to matter. This is called “impact investing,” a blended value of financial and social return. Impact investing can convert capital into a compelling social solutions while it defies two widely held but outdated assumptions:
2) Only government and charity can address social issues.
Impact investing, in a world where government resources and charitable donations are insufficient to address our communities’ social problems, offers a dynamic new alternative for channeling private capital for social benefit – right where you live.
Through impact investing, the community connectivity lost through 20th century investment strategies is being rediscovered. Impact investing empowers individual investors to empower their own communities. This requires competent and financially strong community development organizations. When you invest directly in your community – whether for affordable housing, economic development, health and wellness, education, energy efficiency, small business development, public safety, transit or urban regeneration – you want results.
From its founding in 1986, Homewise has sought to leverage community investment in New Mexico into affordable solutions for home ownership. During its first six years, Homewise was a small nonprofit engaged in home improvement and rehabilitation of the city’s poorer west side. In 1992, Mike Loftin became Executive Director of Homewise. In canvassing the organization’s existing clients, he discovered homeowners were complaining that their grown children could not afford to buy a home in Santa Fe.
Over the next decade, Loftin and his staff grew Homewise into a full-service agency promoting affordable homeownership through financial counseling and educational classes designed to help Santa Fe’s moderate-income residents.
Homewise, as part of its core mission, also developed a conduit for community investment funds to finance the construction, purchase and energy retrofits of homes in northern New Mexico, primarily in Santa Fe.
The only Community Development Financial Institution (CDFI) of its type in northern New Mexico, Homewise launched the Homewise Community Investment Fund to empower local investors and help bring stability and financially successful homeownership to the region.
The Homewise Community Investment Fund is a step beyond charity. It combines the financial benefit of investing with the social impact of donating, yielding an opportunity to receive a guaranteed return while making a positive impact on Santa Fe.
Since 1992, Homewise has assisted in creating 2,439 homeowners; 473 of the energy efficient homes they bought were newly built, which contributed to the Santa Fe area economy through construction jobs and local purchases of building materials. A total of $223.4 million has been loaned by Homewise to finance home purchases.
Additionally, Homewise has assisted 1,771 homeowners to make renovations and add value to their investments with a total of $22.4 million in home improvement loans.
By placing their money and trust in the Homewise Community Investment Fund, local citizens and businesses are giving working families the opportunity to buy homes, while allowing the American dream of home-ownership to thrive in the community.
Homewise is aware that investors want their money to be safe. Vital parts of our loan program include financial classes and coaching for our clients, and careful underwriting of the loans.
Typically, a person who participates in the Homewise program sees a significant increase in his or her credit score (an average of 15+ points), decreased debt and increased savings, which translates into a better risk for a mortgage or home improvement loan. The delinquency rate for Homewise clients is 2.9 percent, below the rate for even prime loans at regular banks, and far less than for loans made under the government’s FHA and VA programs.
For investors, this successful track record of creating financially secure homeowners means Homewise can assure the safety of their money. Additionally, every dollar invested in Homewise through individual investments is 100 percent guaranteed by Los Alamos National Bank, a community bank, shielding the investor from any risk of loss. And every dollar is cycled through the local economy, leveraging businesses and jobs, as well as neighborhood stability, lower crime and financial well-being – the welcome byproducts of homeownership.
“An investment in the Homewise Community Investment Fund is a unique opportunity to support the economic development of Santa Fe now and into the future,” says Owen Lopez, former Executive Director of the McCune Foundation, a strong financial supporter of Homewise.
The Homewise Community Investment Fund is impact investing at its most fundamental. A Santa Fean may invest with the fund and know exactly where his or her money is going, the specific results of the investment, and all with a guarantee and no brokers or fees.
This is a trend that will continue as our nation’s younger generations assume leadership in the future.
According to a recent poll some 77 percent of the “millennials” born since 1980 believe that business decisions based on greed are morally wrong, and more than 80 percent believe the ethics and values that shape our personal lives should apply in business as well.
As Leigh Buchanan writes in Meet the Millennials, “One of the characteristics of millennials … is that they are primed to do well by doing good. Almost 70 percent say that giving back and being civically engaged are their highest priorities.”
Alan Webber, co-founder of Fast Company and a Santa Fe resident, stated in a recent article, “Santa Fe’s problem – as is true for the small towns across the country – is different. It needs a new way to think about and look at an economic strategy. In the end, all economics is local. And that means it’s up to the people at the local level to articulate their own economic strategy, and then create their own economic future.”*
More communities like Santa Fe should consider ‘back yard’ investing, as it combines individual ideals with community needs. It is local, immediate, and a way people can devote their money to a vision of their community now and 25 years from now. Wise investing begins at home. It pays you back with interest – and with better lives for your family, friends and neighbors.
For more info on Homewise or its Community Investment Fund go to- www.homewise.org
Article by By Cece Derringer, Director of Resource Development and Communications, Homewise, Inc.
Article Note:
* “Small Town USA: Economics of Local – All Economics Is Local” by Alan Webber, co-founder of Fast Company, published in good-b 2/17/12.
