The Top 5 Practices for Ethical Investing in Real Estate

In an era where the call for social responsibility echoes louder than ever, ethical investing in real estate has transitioned from a niche pursuit to a mainstream demand. Investors are increasingly seeking opportunities that not only promise financial returns but also contribute positively to society. This shift towards ethical investing reflects a deeper understanding of the profound impact that real estate investments can have on communities, the environment, and the economy at large. Here, we explore the top five practices for ethical investing in real estate:

1. Prioritizing Affordable Housing

Affordable housing stands as a pillar of ethical real estate investment, addressing the critical need for homes that are accessible to all segments of society. A shining example of this practice is the work of the Community Preservation Corporation (CPC) in New York. By leveraging private capital, CPC has financed over 196,000 affordable housing units since its inception. This not only provides homes to those in need but also stimulates economic growth and revitalizes neighborhoods. Investors in affordable housing projects can find success and fulfillment, knowing their capital is directly impacting lives, with the National Low Income Housing Coalition reporting a direct correlation between affordable housing investments and decreases in homelessness in communities.

2. Supporting Community Development

Investing in projects that support community development—such as mixed-use developments that include public spaces, local businesses, and services—is another hallmark of ethical real estate investing. The Atlanta BeltLine, a redevelopment project transforming a historic 22-mile railroad corridor around downtown Atlanta into a multi-use trail, serves as a powerful example. It has not only enhanced urban connectivity but also spurred economic development in adjacent neighborhoods, with over $1 billion in private investment. This project highlights the potential for real estate investments to contribute to vibrant, connected, and economically dynamic communities.

3. Emphasizing Sustainability and Green Building Practices

Sustainable development and green building practices are critical to ethical real estate investing. These practices reduce the environmental impact of buildings and offer long-term savings and health benefits. The Bullitt Center in Seattle is a testament to the power of green building, operating as the world’s greenest commercial building. It is fully energy self-sufficient and has significantly reduced water consumption through innovative technologies. Investments in such green projects can yield an impressive ROI, with the US Green Building Council indicating that green buildings can see a 7% increase in asset value over traditional buildings.

4. Engaging in Impact Investing

Impact investing focuses on generating positive, measurable social and environmental impact alongside a financial return. A standout example is the work of Enterprise Community Partners, which has invested over $43.6 billion in community and affordable housing projects across the US, creating or preserving 585,000 homes since 1982. These investments not only meet the pressing need for housing but also promote social equity and economic diversity, proving that financial returns do not have to be at odds with social impact.

5. Ensuring Diversity and Inclusion

Finally, ethical real estate investing means ensuring diversity and inclusion in investment practices. This includes investing in minority-led projects and businesses and fostering diversity within real estate development teams. The Diversity Fund, for example, is a platform that allows individuals to invest in commercial real estate projects led by diverse teams. Such initiatives not only support underrepresented groups in the industry but also bring a variety of perspectives that can enhance creativity and drive innovation in projects.