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An Idea for Inclusionary Developments

Updated: Nov 21, 2022

By Datta Khalsa, Broker

One of the things that has always bugged me about the nature of most real estate improvement and development projects is their impact on the people who currently live at the property, and in many cases the people who live around it.

Whether it’s a single-family renovation, an apartment stabilization, or complete demolition and redevelopment—often with new construction considerably larger than the existing buildings on a property—the common thread is that people’s lives are disrupted for someone else’s gain.

Tenants are uprooted, while neighbors often have to endure the noise, dust and traffic disruptions that a project can create in the short run. And in the case of larger developments, neighbors who don’t necessarily agree with the developer’s vision are forced to live with changes to their sunlight, traffic and parking once the project is complete.

There is an interesting facet of human nature in how people tend to feel differently about the impact of something on their lives when they have a vested interest in whatever that thing is— particularly if that vested interest can directly benefit them.

It would make sense then, if there could be a way of including the tenants and neighbors who are impacted by a project by to some degree giving them a vested interest in its outcome. I believe this vested benefit from the project wouldn’t necessarily have to be that large to at least send a clear message that validates and honors the direct impact that the project has on their lives.

For it to show true intent on the part of the people doing the project, such a gesture could lose its meaningfulness if the inclusionary benefits were mandated. Instead, it would be made as a voluntary contribution to send a clear signal that a conscious choice is being made to honor the relationship between the individuals being displaced or otherwise impacted.

It would need to be figured out how this could be done in a way that was substantial enough yet doesn’t gut the profitability of the project and thereby defeat the core motivation of the investors funding it. But if in some way an impacted tenant or neighbor could be included in the allocation of profits in the outcome, the whole us-and-them nature of things would seem at least a little more balanced. And it might also help build empathy on the part of the inclusionary stakeholders if their shares lose value if the project is unsuccessful in generating a profit.

It will likely take some trial and error to see if such an arrangement could be made both meaningful and economically feasible. One idea might be to match an existing tenant’s security deposit and give them that amount of a financial interest in the project. Or for a neighbor, it might make sense to come up with some formula based on the level of impact on their property and give them a stake that represents a corresponding portion of one year’s property taxes on their home. And in both cases, it could make sense to give inclusionary stakeholders the option to invest more if they happen to have access to additional capital.

Whether this can be achieved in the real world remains to be seen. But the ideal would be to create a way for projects in the future to be more authentically community-based.

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