International Impact Investing Summit: Impact theme: Housing

I'm attending an International Impact Investing Summit in New York and will be attaching my raw notes from the conference. here are my raw notes from the 11:45 a.m. panel titled "Impact theme: Housing."

Moderator: Terri Ludwig, COO, Enerprise Community Partners

Panelists
Deidre Schmidt, Executive Director, Affordable Housing Institute
Jawad aslam, CEO, Ansaar Management Company
James Magowan, Managing Director, Housing MicroFinance, LLC

James Magowan
I started working in low-income housing in the U.S. with an investment bank. I became interested in issues overseas through an introduction to Hernando De Soto, the Peruvian economist who estimated that the poor own $9 trillion of real estate. We set out to build a structured debt product. That went south in the credit market, but along the way we picked up some clients in that area, advised funds, development banks and others in that space who were interested in investing in housing in emerging markets. We've had clients in Africa and Latin America. Our clients have worked in every country in Latin America except two.

I have another role. I've realized that to bring these opportunities to commercial investors, we need to bring it to an commercial, regulated brokerage. We'll be looking at other impact investments that we've all been discussing today.

Deidre Schmidt
AHI is a small nonprofit organization based in Boston. We focus exclusively outside the U.S. on housing finance and policy to develop housing and finance ecosystems that work better for the poor. The stuff that would be most interesting for this conference…

We're trying to work with self-organized groups of savers and also very strong and proven for-profit companies that want to go downmarket.

The second level is an organizational development mode. If we focus our energy on creating one large development product, it might create 3,000 units. But if we focus on an organization that can create 3,000 or 4,000 units per year, that leverages our ability. That is what we're doing in India and Colombia for the most part.

The third level of our activity is as an advisor to two investment funds. We're deeply involved in a project to create a $500 million investment fund that would focus on the mideast. Not just on production but on building technologies and finance, using some traditional practices and methodologies that are Sharia-compliant in order to address that local nature.

Jawad Aslam
We're based out of a part which this part of the world dubs the most dangerous part of the world, Pakistan.

Pakistan currently has at least a 7 million shortfall in housing. Every year the shortfall increases by 200,000. The average housing product in Pakistan that is available in the market is for people who are earning above $1,500 per month. 60% of the population earns $150/month and does not have a solution for housing, with no foreseeable solution for the near future. My company is a spinoff of an NGO that has been working in Pakistan for 15 years. We've been trying to crack the code of what we need to be doing for affordable housing in the developing world.

What people tend to miss when it comes to low-income housing is, how do you make sure that the people you are trying to target actually end up benefiting from the project? If I start up a project, people snap up the products, invest in it and flip it.

If we successfully get the right income segment to start living in the community, how do we ensure that 5-10-15 year from now we can drive by that community and feel pride that this is a community we developed, and not say, "Well, it's getting dark, so we'd better go another way, because this has turned into a slum"?

Deidre Schmidt
It's important to differentiate between the need and effective demand. A lot of the people who are living in slums have very little ability to afford a home.

The new J.P. Morgan study estimates that 214 billion is in bottom-of-the-pyramic (BofP) markets.

James Magowan
Having the right product is essential, and also to not have the problem that was alluded to of those products just turning into slums, or building the right product and just having nobody there. In El Salvador, there are 200,000 developer-built houses that are just sitting there empty because markets are not happening.

Deidre Schmidt
Most of the housing that is being built to accommodate this incredible influx into our cities is being done by the poor themselves with very little connection to support from formal investors.

Jawad Aslam
Housing, if it's done right, can have major impact. In Pakistan, people are killing each other because of sectarian violence. People are dying of hunger and their neighbors don't give two hoots about it. We're trying to really see some serious impacts on these types of issues.

How are you able to get the Shia and the Sunni community, who as we know in the case of Iraq and Pakistan as well, are in conflict to the point of bloodshed… We decided to establish a non-sectarian mosque in a community. The first major event we had in that mosque ended in violence: bat-swinging. The following day we had a meeting in the mosque. For 90 minutes we sat together. We formed a committee that, because of my unconscious bias as a Sunni, consisted entirely of Sunni. One of the members of the Shia community stood up and said, "I want to help you guys figure out how you can raise funds among yourselves." One of the Sunni guys stood up and said, "You're a member of that community too." We decided that we wanted to have a place for all of the sects that are present there. That was the easy part. We started to have meetings every day for eight months. We spent 90 minutes just deciding who's going to lead the prayer. After eight months, people who were praying separately in the mosques were now praying together. Sectarian issue were sometimes riled up by people in the community, but instead of this leading to violence and anger, they got together and had a meeting in the mosque, and as they were walking out, they were so happy that they had been able to resolve their issues without violence that they said, "Let's go distribute sweets," which is the equivalent in Western terms of saying, "Let's go have a beer together."

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