Real Estate’s Diversity Problem

While there is the opportunity for anybody to be able to work for their dreams of success in real estate, it cannot be denied that networking and connections reign supreme in real estate. Having those connections will benefit anybody beginning to invest their time and resources into real estate.

Here’s something I have learned in my years of multifamily real estate investing: Although not necessarily intentional or the result of direct discriminatory practices, the social underpinnings of the real estate industry in the United States is a system that revolves around white, upper-middle-class social networks. Left unchecked, this social system self-perpetuates and often leads to the social exclusion of people of color, women, and others not already part of those social networks.

Being successful in real estate requires making connections and going in on deals together with others with similar goals and outlooks, and if you go to a conference and nobody speaking looks like you or has similar goals, then that may be a problem. The first step to fixing any issue is to recognize it as a problem. Here are a few reasons why the lack of diversity in the real estate industry is indeed a significant problem.

Barriers to entry: One of the more commonly cited reasons for the continued lack of diversity in commercial real estate is how people are first able to set foot into the industry. Whether someone is qualified for a job in sales or brokerage may not matter as much, since often the most difficult obstacle is getting your foot in the door and procuring a job to start with. And if you already have the needed social networks in place, you are likely to be the first to find out about potential opportunities ahead of any continued outreach or advertisement.

When looking to recruit new professionals, however, companies will often use outreach programs to colleges or universities where there are already some networking associations established with real estate. Most companies will only recruit from a select few college programs or look to the top regional programs for recruits. They frequently ignore HBCUs (Historically Black Colleges and Universities). This can lead to a lack of diversity in real estate precisely because many top regional programs may be primarily white institutions. While there are a lot of smaller, more diverse institutions, they may not have the same outreach and connections that larger institutions have to the commercial real estate industry.

In addition, some candidates may not be aware of available social networking opportunities that are there to help minority professionals break into and develop careers in real estate.

Development: Developers play a key role in shaping what new buildings look like, influencing how communities grow, and determining whether existing businesses and residents will be considered in new plans for growth. But lack of diversity in developers can turn into a continued lack of diversity in product—often focusing on real estate projects that are aimed at middle and upper-class communities.

For developers, lack of diversity in private equity groups or institutional investors can also be an added hurdle, as developers require equity from a range of sources to close on their deals. It may be even more difficult for Black or minority developers to get the needed equity from banks and investors, especially if you are not tapped into that social network. Even if a minority developer has family and friends willing to help fund their projects, it may not be enough to cover the needs of a real estate project.

Education: Lack of diversity also extends to education in terms of who represents the industry and controls the narrative about how to get into it and how to become successful. If everyone representing the industry comes from the same backgrounds and social networks, then you may not be able to learn effectively from them, because you won’t have the same advantages. New real estate players and investors come from all kinds of backgrounds and aims, and representation in the real estate industry should match the diverse needs in education.

Diversity is an issue that many may ignore, often due to implicit bias, which can be hard to pinpoint if you are not directly affected. However, you might want to look at the real estate spaces in your life and consider whether they are a true meritocracy. Here are some questions to ask yourself:

  • How often do professional deals occur through exclusive activities or spaces, such as a country club or golfing networks?
  • How many parent-child pairs or family relations are present in your company? How common is nepotism in your company?
  • How many sales opportunities go through due to social trivialities such as where they went to school or shared connections?
  • How often do professionals invite their Black or female peers along to happy hours or business lunches with potential clients?

These are all great things that help build connections and help people be successful in real estate, but if only certain members are benefiting from the social networks in place, then it is time to diversify and improve. In our next blog, we’ll talk more about what can be done to improve diversity in real estate.

Real Estate Investing Report