One of the greatest challenges in New Jersey today is a shortage of affordable housing. Too many people are priced out of too many markets. Everyone deserves access to safe homes they can afford, but racist government redlining policies and other discriminatory practices have for generations excluded entire communities of color from this “American dream.”
In Newark, for instance, institutional investors have been buying residential properties wholesale, driving up prices and rent, and driving away longtime residents and vital community organizations. The free market is creating another hurdle for individuals and families who just want to live and thrive in the place they call home.
Organizations in New Jersey can redress these harms by using financial tools to invest in social good, or what we call “impact investing.” This type of investment is an important, but underutilized, way to serve people and places that have been intentionally neglected. The legacy of race-based policies like redlining and racial covenants still exists, and certain communities experience more frequent loan declines because they are perceived as riskier than others. Investing in such income-constrained communities can right these wrongs and usher in sustainable change that creates the foundation for health and wealth.
When considering how and where to invest, more nonprofits and corporations should look toward impact investing, especially as government investment fluctuates because of shifting budgets and political priorities. Doing so would help to address disparities and improve health and economic outcomes in New Jersey, ensuring that funds flow equitably. Investments too often favor more populous cities with relatively stronger community development ecosystems. This starves other communities of capital, making housing unaffordable, infrastructure ineffective and opportunity beyond people’s reach.
Stark wealth gap
In New Jersey, the need is great, but the dollars are scarce. Of New Jersey’s 3.5 million households in 2022, 1 in 10 earned below the Federal Poverty Level (FPL), and about 1 in 4 households earned above the FPL but not enough to afford basic needs such as housing, food, utilities and health care. The state has one of the starkest wealth gaps in the country.
To fix this, organizations must invest for the long term and ensure the money is in the hands of the nonprofit change-makers at the community level. Impact investing like this, however, requires persistence and patience. Centuries of disinvestment will not be undone overnight, and long-lasting change requires not just plugging holes of need but creating foundations of opportunity. It requires investments that return the power back to the community by creating access to long-term, flexible capital. In other words, these places need money and the freedom to spend it where and how they know it will improve lives and create progress that will carry forward for generations. That’s why organizations like the one I work for — the Robert Wood Johnson Foundation — and other nonprofits and corporate partners are putting their dollars to work in New Jersey to drive systemic change.
RWJF’s $5 million investment in the Nonprofit Finance Fund (NFF) is a recent example of how to unleash opportunity. The NFF has a decades-long history of advocating for people and places in New Jersey, and its new initiative helps communities acquire assets such as land, buildings and other facilities to build wealth and power. RWJF’s loan is intended to support community development corporations, community land trusts and other nonprofits seeking property ownership as part of their long-term strategies to create community well-being. Critically, this effort aims to help organizations focused on racial equity acquire, develop, rehabilitate and operate affordable housing and community facilities in communities experiencing historic disinvestment. One such organization is Sierra House, which takes a holistic approach — through housing, education, and community services — to foster independence for families and homeless young adults in Newark.
The power of nonprofits
Nonprofits can’t do important work like this without home bases in their communities. With NFF as a resource, nonprofits are now on a more equal footing with private-sector interests when it comes to bidding for and buying property. New Jersey’s real estate market is particularly challenging today, with rising costs of construction, insurance and property taxes as well as a constrained supply. This financial backing can make or break a community-based organization’s ability to function. Impact investing accelerates the lending process and removes the systemic biases that have prevented loans in the past. Community-based real estate creates a virtuous cycle, stabilizing neighborhoods while ensuring that people have resources and support.
Impact investing and grants play different, but complementary, roles. Whereas grants tend to involve smaller amounts of money spent for a particular purpose — for instance, creating training programs or funding research — impact investing helps to purchase things to provide leverage and scale for organizations. These funds also can be recycled. They are loans, after all, and once paid back, they can find their way back into the community in new ways. Both impact investing and grants can be deployed to advance a cause, serve a need or strengthen an organization’s ability to function.
People shouldn’t have to dream of opportunities. And they shouldn’t be kept from the building blocks to a better life — housing being one of the most critical of those blocks, impacting access to education, healthy foods, well-paying jobs and even green spaces.
It is critical to not only provide the capital, but to change the power dynamics in our communities. New Jersey needs public and private investments that address disparities and improve the health and economic well-being of people across the state. An all-of-the-above approach — grantmaking, policy advocacy and impact investments — is the clearest path forward to transform lives and communities across New Jersey.
The Robert Wood Johnson Foundation is a funder of NJ Spotlight News.
