Affordable Housing Institute : US

What with my work with Slum Dwellers International, I’ve been spending inordinate time thinking about SDI’s members, which are federations of local savings co-operatives, and hearing descriptions of what they will do with money (as we’re calling it in SDI lingo, a Spend) if they get it from SDI’s in-development International Urban Poor Development Fund.  
 

I’ve got to get out of the mode of thinking digitally

 

SDI’s cooperatives are assemblies of enterprise, in the pure etymological sense – their grasp-between two things, in this case between customer need (their members) and potential supplier (government or private sector capital sources).  While so far the SDI members have never used the term, they are also entrepreneurs, connecting capital to property, supply to demand, programs to money.  They are entrepreneurs on a mission.

 

Yet they don’t think of themselves in those terms.  They speak of their members, they talk of the results they intend to achieve, they focus on recovering their direct costs.  Their pro-formas never have even a reimbursement for overhead or staff time, much less development fee for themselves. 

 

That’s where the profit bit me

 

I’ve seen this orientation before, in US non-profit community development corporations (CDCs) that are likewise culturally allergic to profit.  If their transaction makes money, they call it ‘development fee.’  If by chance they generate cash, they plow it right back into operations, or the next committed venture. 

 

The more we harvest, the more we can grow

 

That’s perfectly fine, if done as a conscious choice by a financially and administratively healthy organization.  A non-profit is bipolar – it’s a business and a charity permanently joined at the hip – and the profits it may generate are consciously repurposed back into expansion of mission.  But the non-profit’s got to make money also:

 

Yet a non-profit is an enterprise too.  By the law of economic gravity, enterprises have to prosper.  This applies at two levels, both the property and the non-profit itself. 

 

Good non-profits expect to make money in their core business area, because profit is the price you pay for competence.  The same is true of non-profits — or, at any rate, of those that last a long time.   Everybody loses money now and then, so you had best make money some of the time, to cover the losses you make some other times.

 

Successful affordable housing achieves dual goals simultaneously: good social outcomes, good economic outcomes.

 

Which end of the bridge is more important?

 

Balance, harmony.  Profitability and contribution, fused together.

 

Successful non-profits have figured out that profits and purpose are not either-or, but both-and.  Each sustains and complements the others. 

 

Not all non-profits are for-profits glued to charities.  But all the successful ones are.

 

That’s what struck me about the SDI membership – for them to succeed in their mission, they have to be successful entrepreneurs.

 

I’ve previously written of the developer as a person with a cell phone and a vision, using Other People’s Money to finance his or her schemes.  Every SDI leader I’ve met is never without his or her cell phone, usually wheeling and dealing.

 

 

All it takes is a cell phone and your honeyed voice

 

Self-motivated and self-taught in the Yogi Berra school of management (”you can observe a lot just by watching“), they’re all entrepreneurs in the grand tradition. 

 

Unfortunately for them – and for cities around the world – bad nomenclature (NGO v CDC v HA) has obscured fundamental similarities, preventing information exchange.  Regardless of what they are called, all these entities are mission entrepreneurial enterprises:

 

• Mission.  They got into the field to make positive change.
• Entrepreneur.  They achieve their results via entrepreneurship, as actors in the space, not government, taking risks, persuading established institutions to do things (approve proposals, provide capital).
• Enterprise.  However little they pay their staff, they must cover their expenses and make cash profits, else they cannot continue pursuing their mission outcomes.

MEE’s always pursue a ‘double bottom line’ – profits and social outcomes. 

 

Profit and outcomes run in parallel

 

They often feel stressed in having to choose one or the other.  

 

 

In the UK, which has essentially no for-profit permanent professional rental sector, the non-profit Housing Associations (HAs) have grown up with the field to themselves.  With that head start, many of them have become large, diversified, and highly professional, to the point where the whole sector is seen as thoroughly market-competitive.  More than any other group, UK Housing Associations see themselves as MEEs. 

 

So professionalized they have their very own regulator

 

Faithful AHI blog readers know that because of my background – thirty-plus years working in affordable housing, but always on the private side, and always in an entrepreneurial environment – I’m predisposed to see their value everywhere.  Still, when I see change being made – in the UK, the US, or increasingly in the global south – the change is coming from the MEEs. 

They’re the ones doing transactions.

They’re the ones turning resources into properties and developments.

They’re the ones organizing slum dwellers into political and economic forces.

They’re the ones whose activity changes the political environment.

 

MEEs are the change agents. 

 

In housing-finance ecosystemic terms, they’re the critters.

 

 

 

Just as ecosystems don’t work without animals, whether acting as the plants’ reproductive system or converting DNA into more DNA (”A hen is only an egg’s device for making another egg” – Samuel Butler), without the critters, the ecosystem doesn’t work.

 

Further, just as parallel evolution gave us the dog and the dingo:

 

 

These two animals are not related

 

You’re kidding, right?  They’re not related?

 

MEEs north and south have plenty in common with each other. 

 

• Similarity of world-view.  MEE’s see themselves as acting to make change on behalf of a customer group (low-income households)
• Mutuality of interest.  MEE’s the world over have mutuality of interest – increasing government and donor funding.   They face the same growing pains, challenges of staff retention, difficulty of competing with or partnering with the private sector.

They just don’t realize it, because they haven’t been brought together. 

 

I need a new perspective, don’t I?

 

MEEs don’t recognize their cousins because their externally-imposed nomenclature keeps them apart.  In the academic literature, they’re referred to as NGOs – Non-Governmental Organizations – a terminology that I positively hate, because it’s wrong on all useful counts:

 

• Non.  Defines by what the thing is not rather than what it is.  Like saying a crow is a not-white bird.
• Governmental.  Defines the incumbent (literally!) and sets up the premise that change flows from government
• Organization.  Aside from being a term without meaning (one might as well call it a ‘bag’, organization isn’t what these groups are strong on!  They’re strong on enterprise, not organization.

“Marge, don’t call them NGOs!”

 

Indeed, to my astonishment, the role of MEEs in making change is largely overlooked in the research and theory of affordable housing and community development in the global south. 

 

AHI is setting out to change that.

 

You have to start seeing things differently

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