Social Purpose REIT

The United States grapples with a severe housing affordability crisis, often attributed to restrictive zoning laws, speculative private equity investment, and policy deficiencies. Each of these factors contributes to the housing shortage, but addressing any single factor in isolation is insufficient to resolve the underlying issue. A holistic solution requires increasing housing availability across the entire affordability spectrum through both the production of new units and the preservation of existing affordable housing. This article argues the misalignment of interests among key local stakeholders—residents, community organizations, and investors is the fundamental cause of the housing crisis. Realignment requires a transformation of adversarial relationships into cooperative relationships. True cooperation is only possible when all parties share in both the risks and rewards of housing development and preservation. Corporate and private law, with deep experience in structuring complex deals, offers a viable mechanism for achieving this alignment. Using private ordering is different from the consensus approach, which would center public policy as the mechanism for enforcing housing policy. We propose an innovative application of a familiar structure: the Social Purpose Real Estate Investment Trust (SPREIT). Altering the traditional REIT keeps open the possibility of attracting commercially motivated investors to achieve scale and simultaneously providing responsive enforcement of public good such as affordability and broad-based ownership. Through private ordering, this proposal offers an immediately scalable solution to the housing affordability crisis. Over 20 years, the SPREIT model proposed here could create and preserve 69,188 units of housing, 22,866 of which would be affordable, and provide up to $254 million in wealth for residents in a single city.