Enabled by provisions in the JOBS Act of 2012 that allow smaller scale investing, community members are becoming co-owners of local real estate projects.
Originally published in Shelterforce
West Oakland’s 7th Street was historically home to a bustling Black business corridor known as the “Harlem of the West.” During the day, it served customers looking for grocery stores, pharmacies, ice cream parlors, and lunch spots. At night it had a legendary blues music scene that flourished from the 1930s through the 1960s. One of that scene’s anchors was Esther’s Orbit Room, hosting the likes of T-Bone Walker, Ike and Tina Turner, Etta James, and many other well-known acts in its heyday.
In the second half of the 20th century, however, the thriving district suffered waves of economic decline, displacement and fragmentation, with the disappearance of wartime jobs and the construction of new freeways and BART tracks cutting right through the neighborhood, leaving a string of vacant or underused properties. Esther’s, one of the last of the old music establishments left standing, transitioned into a bar and liquor store and then closed for good in 2009.
Now, a local organization is working to breathe life back into the 1.3-mile corridor—and at the same time, place ownership in the hands of the community. The East Bay Permanent Real Estate Cooperative (EB PREC), launched in 2018 and led by people of color, pools money from hundreds of investors of many income levels who can put in $1,000 or more to help EB PREC acquire local real estate for housing and commercial uses. The investors earn a modest return of 1.5 percent and become part owners of the cooperative. EB PREC in turn restores or transforms the purchased buildings into permanently affordable homes and businesses, collectively owned and stewarded by residents, investors, community members, and EB PREC staff.
Executive Director Noni Session, a third-generation West Oakland native, says the model grew from discussions with Janelle Orsi, founder and staff attorney at the Sustainable Economies Law Center, which has provided both incubation and legal support.
“We started playing around with what it would look like, in the face of the rapid racialized displacement we were seeing, to retain Black and brown collective ownership through creating a special vehicle for it—and that’s the permanent real estate cooperative, a term we innovated,” Session says.
So far, EB PREC has raised $5.4 million in investor-owner shares, along with nearly $25 million in grants and low-interest loans, and has paid out $52,248 in dividends to investors, according to Oraya Hunter, EB PREC’s development associate. The cooperative has supplied housing to 50 residents so far and has acquired seven houses and other properties that are in various stages of transformation or continued use. One of those properties, which the group plans to develop into a bar, café, and gallery, with affordable housing upstairs, is the former Esther’s Orbit Room.
A Jump-Start From the JOBS Act of 2012
Small-investor crowdfunding for collective real estate ownership is a growing trend, and other efforts are now operating across the U.S. But until recently, this type of fundraising, especially for large purchases like real estate, was far more difficult.
“Generally speaking, it has been exceedingly difficult and expensive for grassroots investors to put money into any local business, including local real estate projects. But that changed with the national crowdfunding reforms put into law in 2012,” says Michael H. Shuman, a community economics expert who follows community investment models in his “Main Street Journal” newsletter.
The Jumpstart Our Business Startups (JOBS) Act, which passed with bipartisan support in 2012, eased some longstanding federal Securities Exchange Commission (SEC) restrictions, allowing companies to raise seed money through crowdfunding, which had become a popular form of collecting donations on platforms such as Kickstarter and GoFundMe. Now it could be used as a form of investment that paid financial returns. The crowdfunding exemption, which took effect in 2016, may be somewhat complicated in its details, but has made a clear difference on the ground.
Shuman explains that under the first set of JOBS Act rules, any investor—not only those the SEC defines as “accredited,” which requires a high net worth and income—was allowed to put in up to $2,000 per year, and any project could solicit investments up to $1 million.
“$1 million doesn’t get you very far in most real estate projects, so it was mostly small businesses seeking small amounts of money,” Shuman says, but in 2021, the limit was raised to $5 million, “and at that point, a bunch of real estate projects became viable.”
Shuman has co-hosted a series of podcast interviews on community funding efforts. Of the first 40 or so interviewees, he estimates around half are involved in real estate projects.
Chris Miller, chair of the National Coalition for Community Capital (NC3), estimates that the dollar amount of investment crowdfunding is approaching $3 billion nationally. His organization has created a handbook and toolkit on various approaches to building community investment funds.
Crowdfunded Real Estate Efforts in Action
Shelterforce looked into several established and emerging examples of crowdfunding and collective ownership efforts. While details vary, most operate as multi-stakeholder cooperatives, with ownership and decision-making shared by different types of members, including residents, workers, and investors.
EB PREC defines four types of co-owners among its members. Resident owners are people who live in EB PREC’s properties, who pay below-market rents while building limited equity; staff owners are employed by EB PREC and steward the cooperative’s properties in collaboration with resident owners; investor owners have invested $1,000 or more and receive dividends; and community owners are East Bay residents who contribute dues of $10 per year, month, or week, as they choose. A commercial co-ownership category is under development for users of future commercial spaces, Session says. All owners have voting privileges. Voting is on a one-vote-per-owner basis, meaning that even larger investors who purchase multiple shares or people who take on multiple types of ownership still have only one vote.
EB PREC’s mission includes disseminating its expertise and wisdom to others, Session says, and the cooperative has now consulted on more than 70 efforts. She estimates that at least 30 existing organizations, including other cooperatives and at least one quasi-government agency, have followed part or all of the model EB PREC devised on its own.
In Holyoke, Massachusetts, Willow Permanent Real Estate Cooperative is an emerging multi-stakeholder cooperative directly modeled after EB PREC. The organization has a mission to serve people who have been systematically marginalized, especially queer, transgender, Black, Indigenous, and formerly incarcerated people.
Willow launched with some donated money and scattered properties located around central Massachusetts and completed its first official purchase in 2022 of a property containing two dwellings and a “food forest” with over 300 plant species. The team envisions transforming the property into a center for community food access, education, and art.
“We are mobilizing collective resources to purchase collective assets,” says Trenda Loftin, Willow PREC’s founding director and board president. “Through our collective commitment to decommodifying housing, we’re able to remove land from the speculative market, keep it within network and really stabilize prices in a way that will, if not immediately make it more affordable, over a span of years keep it more affordable.”
So far, Willow PREC is set up only to take donations, but will be capable of accepting investments from Massachusetts residents by early 2026.
In Traverse City, Michigan, Commongrounds Cooperative opened in 2023 as a mixed-use community center that includes office space for mission-driven organizations, 18 affordable apartments, and five vacation rental units. The $20 million development got a jump-start with $1.3 million raised by 500 investors in a crowdfunding campaign offering 7 percent returns. For a $50 one-time equity share purchase and annual dues, which operate on a pay-what-you-can sliding scale, anyone can become a member and have voting privileges.
Kate Redman, a co-founder of Commongrounds who led the initial community investment rounds, says that in deciding to offer a 7 percent return—relatively high for a community-serving crowd-funded project—she and other co-founders sought to strike a balance between helping to build some wealth for investors and serving the community by bringing in amenities such as a child care center and a performing arts venue.
“We thought 7 percent was a good middle ground,” she says. Redman also notes that investors could opt to accept a “social impact return” of just 3 percent, and one-third to one-half of them opted into the lower rate. Next year is the earliest investors will be able to withdraw their equity along with accrued returns.
The project has sizeable local support, with 90 percent of initial crowdfunders and 82 percent of $50 contributors living in or having close ties to the Traverse City area, according to Redman.
Commongrounds members elect the cooperative’s board, and the board manages the organization. “It’s not like we’re asking 1,200 people to vote on whether the wash the carpet this week,” Redman says. But for rare and major decisions such as whether to sell a building, she says, the members would need to vote to approve.
In Atlanta, The Guild began in 2015 as a co-living community of artists, entrepreneurs, and community organizers. Six years in, the group purchased a former industrial building and organized as a worker-owned cooperative. In 2023 it broke ground on a project to expand and develop the property, envisioning it as a site of affordable housing, a grocery store, and commercial kitchens. The Guild’s Community Stewardship Trust will allow local residents—in the first iteration, those within a particular ZIP code—to become investors for as little as $10 and receive voting rights for community decisions and financial returns over time.
Most community investment efforts don’t rely solely on grassroots investors, but build a web of funding, including donations, philanthropic grants, and loans. Commongrounds, for instance, tapped many sources, including a nonprofit lender, state and county grants, and a U.S. Department of Agriculture $8 million loan guarantee.
Many also expand their reach and impact through local partnerships. For example, EB PREC is involved with other efforts to steward the 7th Street Corridor, including supporting local small businesses and an annual “Black Earth Day” collective neighborhood cleanup. Willow PREC is connecting with area tenant protection organizations like Springfield No One Leaves and Neighbor to Neighbor to start identifying tenant groups who want to buy buildings from their landlords.
“They’ve been organizing, they understand what their rights are—and we can come in with the fundraising to help the tenants own the building,” says Sawna Caradwyn, Willow PREC’s director of finance and operations.
And despite some of the Trump administration’s swift actions targeting many diversity and equity efforts, Miller, of the National Coalition for Community Capital, sees no reason to fear political opposition to these community investment models.
“Sort of ironically, it was it was a Republican legislature that passed the JOBS Act. It was overwhelmingly bipartisan,” he says. “And in fact, in almost every state where a state-based exemption was passed, it was overwhelmingly bipartisan. The far left likes it and the far right likes it, for different reasons. It’s really viewed as deregulation, but inherently, it’s pretty apolitical.”
Not everyone believes in involving investors at any level of returns in collective real estate efforts. In Washington state’s Kitsap-Puget Sound area, the Kitsap Permanent Real Estate Cooperative rejects investing as too close to a traditional system that’s long been exploitative. KPREC aims to acquire and steward land using grants, loans, donations, member fees, and perhaps entering the marketplace with agricultural products—“everything but investors,” says co-founder Sean Makarin—to serve groups historically left out of land ownership, particularly descendants of Native and enslaved peoples. His vision is to start local and eventually spawn a nationwide network of collectively run villages offering housing, food production, health care, and other community needs.
Successes, Challenges, and Tips
The rules for crowdfunding are still complex, and the federal securities exemption application process can be daunting. EB PREC opted for a simpler starting point, a state-level exemption, even though it limited early investing to state residents.
“Getting into selling securities is a heavy lift for most organizations,” Session says. “That’s why we started with the California securities exemption. We wanted to model that there is an entry point where the lift is lower. Once you have some strength, you can move into the federal level.” EB PREC has worked to make any shared materials, from its federal securities application to its cartoon-illustrated bylaws, use “really down-to-earth language,” she says, so as to be easily usable by others.
Accredited investors across the U.S. can now purchase any number of EB PREC shares at $1,000. Non-accredited investors who live in California are allowed to buy a single $1,000 share. In both cases, the cooperative offers a 1.5 percent target return rate.
EB PREC is a maturing organization with a staff of 15 and a budget that’s grown from $36,000 to $2.2 million. It’s soon to launch its third and largest capital campaign, this time hoping to raise $10 million to buy two more 7th Street Corridor properties. That means finding new ways to reach additional investors nationally and moving beyond being able to “shake every hand” while still making sure the investment feels meaningful to each investor.
“Also, as you grow, as you build more, how do you retain the true ethic of the cooperative? We are going through growing pains even with 15 people,” Session says. She and her team will be looking to other longstanding member-run community investment organizations, including the Boston Ujima Project—which is making its own entry into real estate investing this year—for guidance.
Other challenges include assuming the role of landlord, which could mean possibly having to evict nonpaying tenants, even as the organization’s goal is to break free of traditional landlord-tenant power dynamics.
“Legally, we are the landlord. We have had to make landlord-style choices. That is our fiduciary responsibility,” Session says. “But in practice, we try to offset the landlord paradigm where ‘We own something and you do what we say or leave.’ We are an anti-displacement organization.” The cooperative is working on policies to ensure that a few nonpayers don’t endanger the whole collective’s survival, while also working with tenants to avoid eviction, she says. “We do have a theoretical cutoff point [where people have to leave], but we’re always playing with the lever of where that cutoff will be.”
She sums up the challenges wryly: “Me and my co-founder Ojan [Mobedshahi] have a joke now, that ‘We don’t do this because it’s easy—we do this because we thought it was going to be easy.’”
Another hurdle is finding specialists who understand the cooperative ownership model and how it works in real estate acquisition.
“It’s challenging, even some of the simple stuff like finding attorneys and accountants who are willing to work with a model that has not been in existence before,” says Willow PREC’s Caradwyn. “It took us a while to find just the basic supports, the people who knew how to handle the money or were willing to put in the time to learn about the model and see how things fit together.”
Redman, of Commongrounds, echoes this: “Some banks were like, ‘This looks very complicated. You have way too many owners.’” But it can go both ways, she adds. “For the bank we ultimately went with, it was helpful, because they thought that [the number of investors] really demonstrated community buy-in and really showed that the community supported our project.”
Redman also notes that with hindsight, it’s clear that keeping the cooperative and its businesses afloat would be easier with lower-cost financing.
“Our financing is all pretty reasonably priced, but we didn’t have any philanthropy in the project,” she says. “We did the crowdfunding and thought, ‘Well, that’s the way the community’s contributing, we don’t need to also ask people to donate.’ But understanding now the cost of real estate and having all these nonprofit community-benefiting businesses, it would have been easier if we’d had more philanthropy upfront, and/or had more social impact or other truly low-cost financing.”
Still, Commongrounds Cooperative is up and running, and Redman ticks off multiple successes.
“The building exists, it’s open, and we built exactly what we told the community we were going to build. It’s the same floor plans, the performing arts space, the teaching kitchen, the child care, the local food business, the co-working space. And I think that is really a testimony to the power of community investment,” she says. “Another success is our affordable housing. Like so many communities right now, having affordable workforce housing is pretty much the most important need, and we are offering that.”
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