Podcasts

From Owing to Owning

By Vanessa Quirk and Eric Jaffe

Photograph of two people gardening in front of a low-rise commercial center
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New economic models could help renters, particularly immigrants and new arrivals, become owners — and access multi-generational wealth as a result.

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"City of the Future" is a podcast that explores ideas and innovations that could transform cities, and this season is all about the ideas and innovations that could lead to more equitable development. In this episode, hosts Eric Jaffe and Vanessa Quirk interview associate professor of affordable housing Marc Norman, Esusu's co-founders Abbey Wemimo and Samir Goel, the organizer of Portland's Community Investment Trust John W. Haines, and Yonas Kassie, Hawi Muleta, and Sonya Damtew of the Ethiopian and Eritrean Cultural and Resource Center.

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Marc Norman: I would go to these beautifully rehabbed hotel buildings that we would finish. But there would be people in tents or cardboard boxes living outside of those buildings. So, um, it was very much a juxtaposition that we're building this housing, but the problem is bigger than any one building.

Vanessa Quirk: Marc Norman is one of the foremost leading experts in affordable housing.

Eric Jaffe: Today, Marc is an associate professor at the University of Michigan and runs Ideas and Action, a development consulting firm.

Marc Norman: I help cities think about affordable housing and economic development as part of shared prosperity and wealth building in favor of equitable development.

Vanessa Quirk: He got started on this pathway back as a grad student in Los Angeles when he worked for a nonprofit developer at Skid Row.

Marc Norman: I mean, it was a harsh reality, the kind of which I really wasn't ready for. If you've seen pictures of Skid Row in L.A., it really is open-air misery. So it was a real education, both in sort of design and construction, but mostly in finance. I worked there for four years. Then, when I moved to New York, I ended up moving to organizations that financed affordable housing.

Eric Jaffe: Marc became very familiar with the challenges facing affordable housing development across the country. And he realized what was happening in L.A. was also happening all over, and over the years, it's only gotten worse.

Marc Norman: California, and many other places, is not building enough housing, and housing is getting more expensive. And it's just gotten more expensive with each passing decade. We even have things like inclusionary zoning, where new development in some cities is required to have 20 percent of the units be affordable. The problem is if 20 percent is affordable in a low-income neighborhood, 80 percent is not affordable. I mean, you know, to a large segment of the population. So if you keep multiplying that out, then the 80 percent might overwhelm the 20 percent in terms of neighborhood character, the kind of retail it draws, who businesses are marketing to, where jobs are located, etc.

Vanessa Quirk: And it's not just the lack of supply that's making affordable housing inaccessible. Wages just aren't keeping up with housing prices today. According to the Joint Center for Housing Studies, there's nowhere in the United States that a couple making minimum wage could rent a home without being rent-burdened.

Marc Norman: I don't know how you actually ever catch up. Especially with each year, construction prices are going up faster than inflation. So if incomes are staying the same, and you don't have other ways of making money, you're losing ground, and we are losing ground in terms of building units.

Eric Jaffe: Marc's key point is that, while it's really important to build affordable housing, we need to do even more than that to address the housing crisis.

Vanessa Quirk: Right, because even if we built way more affordable housing units than we do now, wages and income still aren't keeping up with housing costs. So people keep falling behind.

Eric Jaffe: And of course, this isn't to say that there aren't programs and initiatives that help folks afford housing, but, too often, these are temporary fixes --- they are not long-term solutions that really help people generate wealth, wealth that they can pass on to their families and children.

Vanessa Quirk: In other words, as essential as affordable housing is, it isn't enough on its own to close the wealth gap, which in the U.S. is particularly stark between Black and white Americans.

Eric Jaffe: So what do we do?

Marc Norman: We also have to figure out how do we create wealth, build people's incomes, help people make money not just while they're awake but also while they sleep. We have to have some other models.

Vanessa Quirk: We're at the moment in time when new models are emerging.

Eric Jaffe: Models that can help renters become homeowners and help community members become owners and investors in their neighborhoods.

Vanessa Quirk: ---and have the opportunity to generate wealth because of it.


Eric Jaffe: Welcome to City of the Future, a podcast from Sidewalk Labs. Each week we explore the ideas and innovations that can transform cities. We're your hosts. I'm Eric Jaffe.

Vanessa Quirk: And I'm Vanessa Quirk. And in this episode, we're looking at new economic models that could help renters, particularly immigrants and new arrivals, become owners - and get access to what has historically been the means of wealth generation in this country.

Eric Jaffe: To help them go from owing to owning.


Abbey Wemimo: If we go down memory lane and think about the New Deal where the federal housing authority backed the mortgages, of white folks, and non-white folks couldn't have access to the federal housing authority in mortgages. And that created a compounding effect where today the average white family has ten times as much wealth than the average Black family. And the reason why is 76 percent of that wealth is baked in homeownership.

Vanessa Quirk: That's Abbey.

Abbey Wemimo: Abbey Wemimo, one of the co-founders at Esusu.

Eric Jaffe: And this is Samir.

Samir Goel: My name is Samir Goel, and I'm one of the co-founders here at Esusu.

Vanessa Quirk: Esusu is an online platform that enables renters to accumulate credit by paying their rent on time. So, renters pay on time, which makes property managers happy, and Esusu reports the data to the major credit bureaus to get those renters good credit scores, making renters happy.

Eric Jaffe: With Esusu, Abbey and Samir are tackling one piece of the wealth gap puzzle: helping lower-income households, especially newcomers and people of color, generate the credit scores that can open the doors to homeownership.

Vanessa Quirk: That mission is very personal to both Abbey and Samir.

Eric Jaffe: Abbey's life story in fact shows just how important their mission is.

Abbey Wemimo: I was born in the slums of Lagos, Nigeria. I lost my father at the age of two. I was raised by my mother and two feisty sisters. One thing my mother fundamentally believed in, regardless of our social-economic condition, was the power of education.

Vanessa Quirk: Abbey's mother worked hard to pay for him to attend one of the best high schools in Nigeria, where he excelled. He got into one of the best universities in Nigeria.

Eric Jaffe: But when he also got into the University of Minnesota, he knew that's where he wanted to go, to pursue his American dream.

Abbey Wemimo: So I came from 80-degree weather in Lagos to negative 22 degrees in Minnesota, which was a character-building experience.

Vanessa Quirk: Then, the first semester of college, Abbey and his mother, who had come with him to Minnesota, realized they would need to borrow money to get by.

Abbey Wemimo: We walked into one of the largest financial institutions in Minneapolis. We were turned away because we did not have a credit score. I didn't even know what a credit score was.

Eric Jaffe: This lack of a credit score was, economically and emotionally, devastating.

Abbey Wemimo: Our only option outside of borrowing from family members was going to a payday loan lender where we lend money at over 400 percent interest rate. In addition to that, my mother pawned my father's ring and a lot of her jewelry, and that's how we got started in the United States.

Vanessa Quirk: Samir's family also struggled when they immigrated to the U.S. from New Delhi.

Samir Goel: My father was mugged on his first day here. We didn't really have a place to stay for shelter, and the only thing we could really afford was a McDonald's hamburger, which is really tough for a family of vegetarians. And so long story short, most of my childhood was spent watching my parents work miracles with no credit and limited financial resources so that I could have some of the opportunities that I've been afforded. And so, we always say at Esusu is no matter where you come from, the color of your skin, or your financial identity, it shouldn't determine where you end up in life.

Eric Jaffe: Then, in 2017, Abbey and Samir met at a conference - Abbey had just founded a not-for-profit called Clean Water for Everyone, and was getting a master's at NYU. Samir was an NYU business grad who had also founded a non-profit, and his organization provided excess food to communities in need.

Vanessa Quirk: They hit it off and decided to start a for-profit company together in New York City. They knew they wanted their company to have a greater mission: to help new arrivals to the U.S. become financially stable and work towards that elusive American dream of homeownership.

Samir Goel: I mean, I think ownership is so powerful because one, it's literally powerful in terms of the wealth-building and financial capability, but I think it's even more powerful because of what it represents, right? The whole concept of the American dream. You come to this country, or you grew up in this country, whatever, and you work hard, you pay your dues, you do things the right way, and one day you're going to be a homeowner with your picket fence, and you're going to be able to raise a family and care for them, right? That is what America symbolizes to so many people. And that's what I think makes homeownership in general, powerful beyond the literal financial construct, like what it represents, right? It's what people work towards, and it's that thing that someone can call their own.

Eric Jaffe: At first, Abbey and Samir weren't exactly sure how to help people achieve that dream. So they did what any good start-up founders do: they talked to people.

Samir Goel: We would talk to people, and they'd say, "Look, we all know we need to save money, but there are two things that are stopping us. Number one, we're not getting paid enough money, and number two, we have all these financial shocks and emergencies, and there's nowhere where we can get access to cheap capital." As Abbey pointed out, access to debt at a reasonable interest rate is the foundation for Americans, right? And that's what these people were lacking. And so we looked at ourselves and decided, we can't do anything about what people get paid, maybe one day if we're in public office or something like that, but not today, but what we can do something about is this issue of credit and access to cheap debt.

Abbey Wemimo: What Esusu does is work with large property managers and landlords to report rental data to the credit rating agencies to help people establish or build their credit scores.

Eric Jaffe: By helping renters boost their credit score simply by paying their rent on time, Esusu puts them on the path toward a mortgage and eventually homeownership.

Samir Goel: You can't build wealth in this country just because we don't know enough about you. Right? So we also saw this as a problem that data could solve where it's like, all right, we need to debunk this myth that just because someone's low income or just because we don't know enough about you, you're a bad credit risk or that you're not worth betting on because that's just not true.

Vanessa Quirk: When did you realize that "Rent could be the way that we do this for folks?"

Samir Goel: If you look at the number of people who are marginalized in the financial system and the people who are renters, that map is almost like 100 percent overlay. And so basically that made it really easy for us to understand, "Okay, all the people we're trying to serve for the most part are renters. And then the other thing was just how powerful of a data point rent was, right? There's a study that said that there is no single data point that's more predictive of someone's ability to pay their mortgage than whether or not they pay their rent. And everyone listening to this is probably like, "That's obvious." But the thing is, we don't even look at it when we're underwriting mortgages, and mortgages are the single biggest driver of wealth in this country. And so that's why we really focused on this. This is probably the most predictive at scale data point that's available that's not being used today.

Eric Jaffe: But it's not just the renter who benefits from this platform. Landlords and property managers benefit too - indeed, they're the ones who pay for the Esusu platform to be implemented in their buildings.

Samir Goel: I think we've set up this fake construct, right? That landlords are the bad guys, residents are the good guys or vice versa, right? Landlords have this conception that every renter is just trying to pull a fast one on me and I'm just trying to make ends meet, right? We both have that win-lose construct and I think what's so special is everyone benefits from something which is resident financial stability. If renters are stable, that's good for them, and they can pay their rent, they keep a roof over their head. They can provide for their family and for the landlord, it's stable, predictable cash flow. They're not worried about going under. They're not worried about being the bad guy and having to kick someone out because they're trying to make ends meet as landlords themselves. They have a business to run, but if the resident wins, they know that they win too.

Vanessa Quirk: And, to help the residents win, Abbey and Samir have recently rolled out a new service: zero-interest micro-loans, which have helped some residents stay in place during the pandemic.

Eric Jaffe: For Abbey and Samir, these offerings are just different ways to help people along their journey from renting a home to owning one.

Abbey Wemimo: If a resident, take Vanessa for example, lives in an affordable rental unit and has a credit score of 500, Esusu walks in that property. We report two years of historical rent payments. We boost that credit score to 720. Now Vanessa has some issues that she can't necessarily pay rent. We pay up with a micro-loan, so she's not evicted. We keep Vanessa in her home. The third step now is Vanessa gets a credit card, can also get a good job, and now wants to put down a down payment on her home because she has a good credit score, a good-paying job, and now can build wealth. So what we are doing right now, is giving credit where credit is due, number one, and then number two, making sure folks can leverage their financial identity to get access, to this game we've played for close to over 100 years in this country to get access to a home which appreciates in value. That's what the Esusu platform is all about, financial identity, financial stability, and wealth building.

Vanessa Quirk: I love what Esusu is doing - it's such a fantastic model, and I love that it aligns with the incentives of landlords and renters.

Eric Jaffe: And I love the big-picture vision here. I mean, it's a credit score today, but that could mean a new job tomorrow, and it can eventually mean a home of your own time. As Abbey and Samir explained, it's such a crucial component of wealth generation in the U.S.

Vanessa Quirk: Agreed, but we should be clear that homeownership isn't for everyone. There are lots of benefits to renting, and there are plenty of downsides to owning a home. But for those who do want to achieve that dream of homeownership, platforms like Esusu are helping individual households take steps toward it. It's a big deal.

Eric Jaffe: That's right. But, as Abbey and Samir mentioned - unlocking a credit score is just one piece of this puzzle. Many other barriers prevent folks, especially immigrants, from accessing the wealth that comes from individual homeownership. So, if we want to achieve more equitable cities of the future, we need ways of building wealth beyond homeownership and access to entire communities.

Vanessa Quirk: Ah, well, there's a project in Portland, Oregon, that's trying to do just that.


Vanessa Quirk: I flew to Portland, dropped off my bags at a hotel, and got in an Uber, driving east, away from the tall towers of downtown, to see the country's first Community Investment Trust - or CIT.

Vanessa Quirk: Is that John? Hi. Nice to meet you.

Vanessa Quirk: I approached John, who was sitting outside the building, gave him a hello fist bump, and asked him to introduce himself and Plaza 122.

John W. Haines: I'm John W. Haines. And we're at Plaza 122, the first and pilot project of the Community Investment Trust.

Vanessa Quirk: For the last two decades, John has worked for Mercy Corps, an international NGO focused on economic development. Mercy Corps first bought the Plaza back in 2014.

John W. Haines: The place itself, Plaza, is a mid-century 1962 strip mall, 29,000 square feet, has 30 tenants, nonprofit, for-profit, from accounting firms, low-cost funeral preparation, a hair salon, Somali Americans Council of Oregon, really reflecting the dynamics and diversity of this particular neighborhood.

Vanessa Quirk: John explained that the Plaza is located in one of the lowest-income census tracts in Oregon.

John W. Haines: Majority renters. This is really a landing pad for people from around the world, refugees, immigrants.

Vanessa Quirk: I asked John to explain what was unique about this place - and what the heck a Community Investment Trust is - and he suggested we take a walk to one of the offices in the Plaza and learn about the CIT from one of the investors themselves.

John W. Haines: It'd be great to talk with one of our tenants here.

Vanessa Quirk: Yeah, for sure.

Vanessa Quirk: We made our way to the other side of the plaza where a slender man with a big smile was waiting by the door, ready to greet us.

John W. Haines: Yonas. We made it.

Vanessa Quirk: Yonas Kassie is the founder and director of the Ethiopian and Eritrean cultural resource center, or EECRC, a non-profit founded in 2017 to help Ethiopian and Eritrean refugees. Yonas showed us to a small, wood-paneled office. Although, at first, he didn't want to sit at his desk.

Yonas Kassie: I don't want to look boss.

Vanessa Quirk: But you are!

Vanessa Quirk: Once I convinced Yonas it was OK for him to look boss, we sat down and started to talk. He told me that he had first learned of the CIT by going to a neighborhood meeting. There they explained the concept: you invest small dollar amounts, anywhere from $10 to $100 a month, and then you own a share of this building, Plaza 122. As the building grows and thrives, that creates dividends for you on your investments over time. Yonas was floored.

Yonas Kassie: So, you know, especially as immigrants you think of like to be employed, you have to find any job, serve a bad job. So, let alone investing, investing was huge for us. That kind of keeps me, wow. If my community members invest in the community, that's huge. That's yeah. They feel important. They feel connected. So, I was so impressed. And I went to them and asked them, I want to learn about it more.

Vanessa Quirk: He attended an information session. And then, he signed up for the free class, "From Owing to Owning," which is a prerequisite for becoming an investor in the Plaza. And then, he started teaching the class in other languages, so folks in his refugee community could become investors, too. That's when Yonas jumped out of his chair and walked us over to the room next door, to chat with two of his employees who also had taught the class: Sonya Damtew and Hawi Muleta. We absolutely interrupted them right in the middle of their workday, but they graciously agreed to talk to us about their students' experience. Sonya started first.

Sonya Damtew: There were a lot of things they did not know. And there was a lot of myth that they had about investing, money, and credit, so getting that sorted out was really good.

Vanessa Quirk: What were some of the myths that you encountered?

Sonya Damtew: It's better not to get a credit card because you can get in trouble if you use it. They didn't connect that having a healthy credit score is the foundation for getting that you can get to borrow money, and borrow it for less, and those kinds of things.

Eric Jaffe: Aah! This is just like Abbey and Samir's families - understanding how and why to build credit is really so important to create a financial foundation here in the US.

Vanessa Quirk: Completely, I also asked Sonya and Hawi how their students felt about making the leap into investing. Putting money into the Plaza as a means of generating income in the long run.

Vanessa Quirk: The idea of being able to invest in a physical place in your community. It's something that seems really exciting to me. Was it really exciting for people in the class?

Hawi Muleta: Actually, it really was. I feel like a lot of the people really wanted to own something. They want their own property. They want their own, that it's something I own. But they couldn't do that with their own financial situations or anything. So, having something that's like, "Oh, $10 a month, I can commit to this. And now, I can invest in a place and that's partial ownership." So, it was amazing to see that.

Sonya Damtew: It is. They were surprised by how little money it takes to do collective ownership. So, that was a good eye-opener for them. I wish more areas are involved in that, more buildings.

Vanessa Quirk: Thank you! Yeah. Not every day you get a podcast crew barging into your office. So, thank you.

Yonas Kassie: Thank you, guys. Any coffee or anything?

Vanessa Quirk: No, I think we're going to keep walking, but thank you so much.

Vanessa Quirk: As we left Yonas' office, I asked John how the CIT got off the ground. He told me it started with conversations. He and his colleagues went into the neighborhood and asked how they felt about their community. They asked if people invest - no was the answer - and then he threw a thought experiment their way.

John W. Haines: And so, I postulated a couple of buildings, at the time. This wasn't one of them. Said, "What if you could own this?" And they were like, "How? But, yeah. We're interested in real estate." And we wanted to just test out a theory that community ownership of a commercial property was something that could work.

Vanessa Quirk: They wanted to see if by allowing folks to chip in low dollar amounts if they could encourage folks to invest - and not just make money, but become more invested in their neighborhood's growth. And so, later that year, Mercy Corps bought the building at 122 Plaza.

John W. Haines: We bought this out of foreclosure. So, it needed some love. And we needed to get it tenanted up with the kind of tenants that the neighborhood told us they wanted.

Vanessa Quirk: They offered affordable rental spaces to a variety of tenants - non-profit and commercial alike. And then, over three years, John & Mercy Corps figured out how to open up the building to community investment, to make the community members the building's full owners.

John W. Haines: Now, anybody in the neighborhood can invest. The firemen across the street. The teacher, pastor, elected officials. But the majority again are first-time renters, women, people that have never invested before.

Vanessa Quirk: Then, to protect their investors, they did something rather unique. Something that hadn't been done before.

John W. Haines: Our attorneys, some great attorneys have been working pro bono with us. They found this security law exemption, that allows you to offer a corporate offering to unaccredited or lower-income people if you do one of two things. Get a government guarantee, or get a direct-pay letter of credit from a bank. And nobody had used this. But we found a good bank that did the primary mortgage and offered to do the direct pay letter of credit. So, that's -

Vanessa Quirk: That's the thing that prevents people from losing money when they leave?

John W. Haines: Yeah. We don't use it. Our intention is not to use it. But it stands there as protection for the investors. That was the magic. People can get their money out anytime they want with guaranteed no loss.

Vanessa Quirk: So, in other words, community investors can pull out their investment at any time and get their cash back. But, so far, few have done so because the property - and the investor returns - are doing well.

John W. Haines: This building right now is owned by 250 families. And they're very consistent. They reinvest every year. But they're getting dividends annually, 9 percent dividends on average. Their share price has gone up in four years from $10 to $17.10. But one of the big reflections, and I think most heartening things that we found is they're coming over. It activates the space. It activates their citizenry. So, 68 percent of the investors, when we query them at the end of every year, 68 percent are reporting that they're more active in the neighborhood, even during Covid, than they were before. And we ask, "Why is that?" They say, "It's because I'm an owner. I have a bigger say that's beyond my front door."

Vanessa Quirk: If a big developer came and knocked on your door and said, "Hey, we're going to offer to make a new building for you." What would you say? Would you say yes? Would you say yes, but? Or no?

John W. Haines: We would say hell yes. Let's figure it out.

Vanessa Quirk: To John, the upside is clear. Suppose a developer incorporates a CIT into a portion of their project. In that case, they're essentially deciding that they're going to share in the success of the project - and in so doing, increasing the likelihood that the project succeeds.

Eric Jaffe: Right, this is great for everyone. As community members and others patronize the building, tenants line up to lease, other investors add to the resiliency of the grounds or enhance the arts/culture in the spaces, this development will thrive for the long term. The developer benefits from all that activation in improving the chances of a making return on their investment.

Vanessa Quirk: Right, that's the idea anyway. But in the meantime, John's not waiting around. He's spreading the CIT model by working with cities across the U.S.

John W. Haines: Colorado Springs, Atlantic, Kansas City, Omaha, Memphis, Milwaukee, Minneapolis-Saint Paul, Fresno, Albany, New York, Baltimore, and St. Louis. And some more in the queue. So, our goal is to work with a million people in 100 cities in the next five to 10 years. Our intention here is to reduce the racial wealth gap, urban and rural. And if it sounds like an impossibility with too many moving parts, we've done the homework and done the headaches to make it work, to make it simpler for other cities to replicate.


Vanessa Quirk: So, in a few years' time, we could see CIT projects in cities all over the U.S.! It's pretty exciting.

Eric Jaffe: I can imagine Yonases, Sonyas, and Hawis across the country spreading this model and teaching their fellow community members how to become owners and investors in their neighborhoods.

Vanessa Quirk: And that would give even more folks the ability to generate wealth. If enough people catch on, that could help us start to chip away at the wealth gap in this country.

Eric Jaffe: What I also love about the CIT model - about Esusu too - is that they create real win-win scenarios for people on both sides of the equation. Tenants and developers. Only by aligning incentives, we can start to break down some of the systemic inequities baked into our housing and development plans today.

Vanessa Quirk: Exactly. And in fact, there are some community wealth-generating models that seek to take us beyond ownership entirely - models that expand across entire neighborhoods and districts. In fact, we don't even have to go very far to find one.

Eric Jaffe: Where are we going?

Vanessa Quirk: Well, you'll find out in part two.


Eric Jaffe: Thank you for listening to City of the Future, a podcast from Sidewalk Labs. Your hosts are Vanessa Quirk and me, Eric Jaffe. A big thanks to all the guests who made this episode possible: Marc Norman, John W. Haines, Yonas Kassie, Sonya Damtew, and Hawi Muleta.

Vanessa Quirk: Thank you to Alison Novak, Jesse Shapins, and Chrystal Dean from Sidewalk's development team. Thanks to our producer Gugliolmo Mattioli, our advisor Benjamer Walker, and our mixer Andrew Callaway.

Eric Jaffe: Story editing by Rough Cut Collective. Our music is by Adaam James Levin Areddy of Lost Amsterdam. Our social media and transcripts are by JamiLee Hoglind. And our art is by the great Tim Kau. We'll see you in the future.

Vanessa Quirk: See ya.