Abandoned, boarded-up houses have a notorious dampening effect on neighborhoods, driving down real estate prices and scaring away investors and potential tenants. Turning such places around requires more than a paint-job here and there; it takes profound revitalization.
Luckily for the south side of St Petersburg, Florida, there’s man named Frank Wells who has a plan. Over the next year, his Venture House project plans to buy 100 homes in the area, do them up, and then offer them on to entrepreneurs and artists at moderate prices.
“You can’t make a dent in the problem thinking about it as one house at a time,” he says, talking of the $5 million plan. “We have to think about it as 100 houses and a whole portfolio. That’s the kind of scale to make a dent.”
Wells plans to develop rows of houses, then rent them out to entrepreneurs and artists. His goal isn’t to make big money; rents will be reasonable and there will be restrictions on ownership. If the residents choose to buy, they won’t be able to take out more than 3% equity each year. And if they resell, it will have to be to another member of the program.
Financing is coming from three sources: banks (which will offer low interest rates on the promise of future business from the startups), local government (small seed grants), and private individuals. The city likes the job-creating angle. “They say: ‘Hey, we really like your idea of tying neighborhood revitalization to economic development. It’s not just about fixing up houses, it’s about putting entrepreneurs in those houses,'” Wells says.
The private “impact” investors have to accept modest returns; their reward is otherwise. “We’ll say you can probably make more money on other investments but this is an investment secured on a real estate portfolio and it’s investing in the community,” Wells says.
Wells isn’t a natural real estate guy. His day job sees him putting together renewable energy investments. He was sort of bounced into Venture House after speculatively pitching the idea at a Florida Next event. Soon, people started asking when the apartments would be available and Wells found himself discussing the idea with city officials, community leaders and his contacts in finance.
He hopes to keep costs down by rehabbing houses in batches, so crews are lined up to do one after the other. “Our strategy is to do these in clusters of five, 10, 15 houses in just a few blocks. Then you can get that network effect,” he says.
Venture House plans to offer rents at a third to a half less than downtown prices (which is within walking distance). If a two-bedroom there is $1,500, the single family homes in the Venture House area might be $800.
Long term, Wells’s idea offers a potential model for hybrid social impact investing to regenerate an area, and perhaps a way of smoothing out the extremes of gentrification. “What we want to do is create a store of affordable housing that, even if the prices increase dramatically, we’ll still a have stock that lets us keep our neighborhoods for entrepreneurs and artists in perpetuity,” he says.