Cities and innovation are often considered synonymous. But for a variety of reasons, the two fields most responsible for building the cities we live in – urban planning and real estate development – are often late adopters of technological innovation.
So what happens when you apply evolving technology tools to the planning and development of our built environment? Recently several new technology tools have emerged that could potentially answer that question, and potentially have a profound impact on traditional planning and development, decision making, investment, and community engagement practices for new development projects in our cities.
Fundrise: Crowdfunding your project financing = crowdsourced political support.
Crowdfunding has come to the real estate industry and has the potential to provide new sources of financing for development projects and to reduce the barriers to entry for individuals looking to invest in real estate development. For a relatively small servicing fee, crowdfunding platforms like Fundrise, based in Washington D.C., and other similar online portals, allow developers to seek funding from individual accredited investors in increments as small as $5,000 (and in some cases as little as $100). While crowdfunding will not fully eliminate the need for traditional sources of financing for real estate development, it can provide developers with a new source of capital to fund the pre-development and development phases of a project while other sources of financing are being pursued. This might provide critically important gap or mezzanine financing to supplement debt and equity sources. Lastly, this tool could potentially help residents invest in projects located directly in their communities, thereby building their own household wealth while helping revitalize their neighborhood at the same time. For example, how powerful would it be at your next public hearing to say that residents of the community are literally invested in the project and have become actual stakeholders instead of metaphorical ones?
Fundrise recently announced that they will guarantee upfront pre-funding of development projects that meet their due diligence standards. This includes up to 90% LTC for new construction at average annual rates of 12-14% with funding approval in as little as two weeks from submitting an application.
Key Benefit: Providing access to new sources of capital to support traditional sources of project financing and democratizing real estate investment opportunities to include residents of the community where the project is located.
How do you think this tool could impact the future of urban planning and development? We welcome your ideas and questions in the comments section.
(Note: This is the second post in a six-part series that will highlight emerging technology tools with the capacity to impact planning and development practices. The SFHAC will host Tom Lockard, VP of Real Estate Investment at Fundrise, for a discussion at one of our future meetings. Watch for the announcement!)
About the Authors
Will Heywood is a Senior Associate at the San Francisco District Council of the Urban Land Institute. He can be reached at will.heywood@uli.org.
Jeremy Nelson is a SFHAC member and President of REgeneration Strategies, where he advises public and private clients on community revitalization plans and real estate redevelopment projects. He can be reached at jeremy.nelson@presidiomba.org.
Image credit: SB Architects
