Real estate is an industry deeply intertwined with people’s lives; building, maintaining and transacting the places where we live, work and play. Too often throughout history the industry has erected physical and cultural barriers used to discriminate and shut out underrepresented groups from wealth creation. Diversity, equity and inclusion (DE&I) practices are an essential resource to overcome historical challenges preventing equal access to opportunities the sector provides.
Over the past two decades, meaningful progress has been made in recruiting, hiring and promoting diverse talent. But for DE&I policies to truly be effective, it must extend beyond an organization chart into true wealth generation. DE&I policies have worked their way into the board room but capital allocation remains a significant barrier to progress.
“I would start off with the points of entry into the business. Number one is the pipeline; the number of people coming in,” according to Daryl Carter, chief executive of US property management company Avanath. Carter is a 41-year real estate veteran, having built a portfolio of over 15,000 multifamily units across 14 states.
As an African American, Carter watched the world of DE&I take shape. When he started, few were thinking about ways to get more diverse talent into the industry. Early on, most of the diversity in the industry came from the financial world, Carter explains. He has been working to change that with the Real Estate Executive Council, a not-for-profit professional trade association founded in 2003 and composed of Black and Latino professionals. Since then, Carter has seen the organization grow from just three members to over 250.
“I hear my peers; they ask how I do it. Some of my brethren who have companies could be more intentional in seeking diverse talent,” Carter says.
Work in progress
The Global Real Estate DEI Survey 2022, conducted by Ferguson Partners and produced with seven other industry organizations, shows many companies are taking Carter’s advice with more intentional hiring practices. Almost 92 percent of companies surveyed are presenting as a representative workplace, ensuring underrepresented individuals are included in the hiring pool and creating internships to increase the number of underrepresented individuals in candidate pools.
The survey shows there is still progress to be made in broadening the educational and experience requirements for new hires, as well as finding new ways to reach outside the commercial real estate industry to increase the pool of candidates from underrepresented groups. This includes making job advertisements more inclusive and sourcing from different talent pools. Focusing on candidates with transferable skills in other industries helps to overcome those obstacles.
The results are clear. In 2017, just 37 percent of respondents to the survey had DE&I hiring policies in place. The most recent iteration of the survey from 2022 found that 96 percent of respondents had a DE&I program or initiatives to improve DE&I within their organizations, while 71 percent of participants said they had staff dedicated to DE&I.
Hiring more diverse talent is just the first step. Giving diverse talent access to the resources needed to grow and move up through an organizsation leads to lasting impact. Getting diverse talent into decision-making positions at firms is not easy, often requiring a champion within the organization to create lasting change through a top-down approach.
“C-suite members are likely candidates for board seats, but if the C-suite is not diverse that presents issues for diversity on boards,” says Lissa L Broome, professor and director of the Center for Banking and Finance at the University of North Carolina. “Board diversity has increased significantly in recent years as boards have realized that they may need to consider candidates outside the C-suite in their search for the best board talent.”
Camden Living is one of the largest multifamily real estate investment trusts in the US with nearly 60,000 units across the country. Chief executive Ric Campo has made it a point to address the REIT’s corporate responsibility.
“One day, Campo said to me ‘I’m the problem; I have a board with 11 white guys like me’ so he asked two of his long-time board members to resign,” Carter says. Camden promoted an African American and a Latino to replace them. At the time, it was unheard of. “It signaled to the rest of the REIT industry that one of the most successful was taking this initiative. You can see that it moved the needle. The top-down approach starts with things like that – leaders with courage who say this is not right and I am going to change it.”
In five years, minority professionals’ representation at executive management levels rose by 50 percent. Women now represent 30 percent of executives, up from 23 percent over the same period, according to Ferguson Partners’ survey.
Promoting the importance of DE&I and offering programs that provide work-life balance to employees are among the most effective policies, according to the survey, but accountability is the best policy of them all. Programs and initiatives can only do so much if progress is not tracked and reported.
“The use of data and metrics to keep DE&I initiatives accountable is becoming more common in real estate as well as corporate America. That will ultimately benefit all of us because a level playing field is the best incentive that a business can offer,” says David Shin, director of asset management for the Interstate Equities Corporation.
Capital allocation
Goal tracking goes hand-in-hand with goal setting. Reporting shows that 87.5 percent of companies have both qualitative and quantitative goals set around DE&I initiatives. Publicly releasing progress metrics is the next step toward accountability. Tracking the representation of diverse employees in senior-level positions remains the highest priority.
The real estate industry has made great strides in hiring and promoting diverse talent, but that primarily impacts diversity and inclusion. Equity is the hardest part. Cutting diverse talent into ownership that generates wealth requires capital allocation, which remains a major hurdle as minority-owned businesses still do not have access to major lines of institutional capital.
Without money to make moves, Black Americans represent less than 5 percent of residential real estate developers. According to the Breaking the Glass Bottleneck report by the Initiative for a Competitive Inner City and Grove Impact, of the 383 top-tier developers generating over $50 million in annual revenue, only one is Latino-owned and none are Black-owned. Being cut out of development skews the wealth generation within the real estate industry, limiting the gains diverse talent can make.
Equitable capital allocation advocates for the fair distribution of resources to address the historical disadvantages and barriers at the heart of the real estate industry. Decades of being shut out of development have stunted generational wealth in underrepresented communities, limiting their ability to provide their initial capital investment. Community development financial institutions are a potential solution, offering preferential funding options for minority-owned businesses.
“I started out in this business in 1981. Have there been situations where someone has said something offensive? The answer is yes,” Carter says, reflecting on the progress he has seen throughout his career. “But I have been blessed to have some great mentors who have allowed me to grow and realize my potential because they recognize my work ethic and ability. I really believe there could be a great growth of diversity in the industry if there is a little more optimism and a little more patience for everyone.”
The culture of the real estate industry is changing, signaling that years of DE&I policies are having a positive impact, but for true progress, the industry needs to change the bottom line, not just promotional materials.
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