The main goal of investment is to turn a profit, but that investment can also bring about a positive change in some situations. Investing in low-income neighborhoods can make a difference to the community as a whole and also to the people who live there.
According to several reports, companies investing in low-income communities can help increase income levels and job retention in those areas by as much as 10%, but often more. A heavy investment paired with comprehensive community development will also improve the overall quality of life and lower the rate of crime in low-income communities.
In the modern world, information and data help people understand the impact of their actions. Much research has proven that investing in low-income neighborhoods decreases income inequalities.
For those interested in comprehensive community development, investing in projects and programs in a low-income community is the best way to effect measurable change that will benefit several generations.
More than just creative partnerships, responsive plans that start at the grassroots level can drive fundamental positive changes that are also long-lasting.
Ways to Invest in Low-Income Communities to Make a Positive Impact
Want to help close the wealth gap? Here’s how.
Promote affordable housing and community development
Promote affordable housing and community development to create stable, thriving communities and support economic growth. The Obama Administration launched a Housing Development Toolkit to help cities and states create affordable housing, promote equitable development, and build strong communities.
The toolkit includes model policies for inclusionary zoning, one of the most effective tools for creating affordable housing near transit. When investing in affordable housing, ensure that you will positively impact your dollars and that it won’t promote overpriced rent. Even if you are simply buying a single investment property, think about ways to still drive positive social impact to the community, such as using local labor for repairs or buying supplies for local business owners.
Invest in education and workforce development programs
Access to quality education and training opportunities is essential for people to develop the skills and knowledge needed to succeed in the workforce. Quality education and training opportunities can help individuals gain qualifications recognized by employers, which could open up new job opportunities.
Quality education also teaches individuals how to think critically and solve problems, which are important skills for success in the workplace. Additionally, quality education and training can give individuals the confidence to take on new challenges and help them network with other professionals in their field.
Access to quality education and training opportunities gives people the tools they need to succeed in the workforce.
Take advantage of the opportunity zones created by the Tax Cuts and Jobs Act of 2017.
Suppose you want to invest in low-income areas but don’t want to deal with all the hassle of verifying your investments locally. In that case, there’s an easier way: take advantage of special tax breaks created by the federal government.
The Tax Cuts and Jobs Act of 2017 created “opportunity zone” designations for certain areas within low-income communities. Investors who invest in these designated areas can defer capital gains taxes if they reinvest in opportunity zones and receive a tax credit.
These opportunity zones aim to spur economic growth in low-income areas. They make investing in local businesses easier, which can help create jobs and revitalize struggling communities. You can use several apps to find Opportunity Zone Investment opportunities.
 | Online real estate investing leader | Fees Average 0.15% | Minimum $10 | ||
 | Great Opportunity Zone options | Fees Lowest 0.50% | Minimum $25,000 | ||
 | Balance of fees and investment options | Fees 1.00% | Minimum $5,000 | ||
 | Low minimum and good investment options | Fees 2.00% | Minimum $500 |
Support entrepreneurship and small business development
Outside of real estate investing, encouraging entrepreneurship and providing access to resources and support can help to create jobs and stimulate economic activity in low-income neighborhoods. By creating an environment conducive to business start-ups, entrepreneurs can take advantage of available opportunities while providing a much-needed boost to the local economy. Access to resources such as capital, training, mentorship, and other forms of support can be invaluable for those looking to start a business.
This can provide new employment opportunities, which can, in turn, help lift people out of poverty. Furthermore, the taxes generated by these businesses can go towards public services that benefit the community at large, further contributing to economic growth. In this way, encouraging entrepreneurship, access to resources, and support promotes economic development in low-income communities.
Work with real estate investment groups, but do your research.
If you’re looking to invest in low-income neighborhoods, it’s important to do your research before jumping into anything. You can’t just pick a real estate investment group out of thin air and hope for the best. If a company doesn’t have experience with these properties or they don’t seem legitimate, walk away. It may seem easy to make money, but risks are involved if you don’t know what you’re doing or who you’re working with. Plus,
You need to ensure that the company will give you solid advice and won’t take advantage of your desire to help underprivileged communities by giving them bad advice or selling them overpriced condos that no one wants to buy. You need to ensure they are building low-income housing that will help the community and are not just looking to make a quick dollar.
It’s also important that their projects are successful and that they benefit the community as much as possible by providing jobs and other opportunities where none previously existed—and even better if those jobs provide pathways into entrepreneurship later on.
Live in the neighborhood or community.
No matter the size of your budget, you can start investing in low-income neighborhoods. You’ll be surprised at how much money you can save by living in a lower-income area instead of an affluent one.
The first step is to live right where you want to invest. If you have enough funds, consider buying a home or renting an apartment there. Get out into your community and get involved—get to know the people who live there and what they need from their government and local businesses.
Find out if the community needs additional services or assistance, then decide how much time and money you want to spend providing these things (or helping others do so).
Become an Airbnb host.
As an Airbnb host, you can share your home with guests worldwide. You can rent out a spare bedroom or even your entire house to travelers looking for a place to stay while they’re away.
This can provide affordable housing or transitional housing assistance to a low-income neighborhood if you offer a room for rent or your entire house as a rental property. It’s a small step that can truly leave a big impact.
Invest in infrastructure and public services
Investing in infrastructure, such as transportation, utilities, and public spaces, can help improve the quality of life in low-income neighborhoods. These investments positively affect economic development by providing jobs and increasing access to services. They also allow people to easily access other job opportunities.
For example, better transportation systems can make it easier for residents to get to work or school and reduce commuting times. Investing in utilities like water and sanitation facilities can reduce health risks associated with poor hygiene conditions.
Finally, public spaces provide areas for people to unite and build community, which is vital for a neighborhood’s well-being. Therefore, infrastructure investment can greatly benefit economic development and the quality of life in low-income neighborhoods.
See Related: Best Investments for Low-Income Earners
Engaging and empowering community members and leaders
Involving community members and leaders in decision-making, providing opportunities for leadership development, and supporting economic development can help build capacity and promote prosperity within low-income communities. This gives local leaders a stronger voice to spur change within local governments, including local housing authorities, tax planning, and community development corporations.
This works because it creates a sense of shared responsibility and ownership. Community members are more likely to support and see them through when they are involved in creating solutions. This also helps build trust among local leaders and government officials, which can help facilitate community development projects.
What Happens When You Invest in Low-Income Neighborhoods
When choosing to invest in low-income neighborhoods, the quality of life a community starts with and when it will end up is always a question. Real change is possible in marginalized communities, depending on the type of investment.
For example, when investment is made into community centers and other centers for youth activities, crime tends to decrease dramatically. Giving youth in these areas options to express their creativity and hone their talent will reduce the time they spend on the streets running into a rougher crowd.
Investing time and money into providing quality shopping centers, healthy food outlets, and other commercial points will bring more commerce and jobs to low-income communities, which will benefit directly from the growth.
Investing in job training and trade programs in low-income areas also gives people in that community a way to improve their circumstances while improving their local area’s look and quality of life.
There is a clear and measurable correlation between investments in improvement programs and community centers and the income levels of these same communities. Investing in healthcare clinics, libraries, and even wellness centers also helps improve improvement rates while reducing preventable diseases.
Low-income communities are highly resilient, and the people living in them often can maintain their ground when faced with various challenges.
Instead of being decimated, investing in such communities results in quality-of-life gains that trickle up in the local community and on a wider scale.
See Related: Anti-Capitalist Investing: Meaning & Can It Work?
How Investing In a Low-Income Community Can Close the Wealth Gap
Investing in a low-income community as a personal investor or as a business is a great way to help others while also increasing your profits. The main goal should never be only profit because there is always a chance that you will never do anything other than break even.
However, investing in a low-income community is certain to help improve the quality of life for those who live there. Often, there will be several years of loss before a profit is made, but the benefits of investment for locals are generally immediate.
You can use an app like Dealcheck to analyze your area’s potential real estate investment. The raw data from the improvements can also encourage other investors to visit the area. It is also useful to convince government policymakers to allocate more resources to a specific low-income community, such as tax credits, urban development, and affordable rent programs.
Many foundations and developers request research and hard data to scale their investments in low-income communities. This can help revive a low-income community locally while encouraging similar investment in community development projects nationwide.
See Related: Best Impact Investing Jobs
Challenges You May Face Investing in Low-Income Neighborhoods
The investment comes with risks and challenges; the same applies to low-income neighborhoods. The main challenge of investing in lower-income communities is slow gains and opposition from some parts of the community.
Investment can be viewed with suspicion by those who are used to hearing promises of advancement only to be taken advantage of by those with more means. Older people are also more suspicious of change; winning them over initially can be hard.
If you want to invest in low-income communities that have a typically higher crime rate, you will face some losses and even threats from criminal factions in the area before things start to balance out.
While these things may seem hard to overcome, it is important to keep moving forward. Investing in low-income neighborhoods decreases income inequalities between the middle class and the very poor, which offers long-term benefits to both classes.
Progress will typically be slow, and the gains you see will often be uneven. This is true for every low-income community, regardless of what type of investment you choose to make. Investing in a healthcare center or community center will give the quickest benefits for the quickest social gains as it helps those in the community who may be overlooked otherwise.
Economic inequality is deepening nationwide, and investing in infrastructure upgrades and job training centers will offer the most dramatic effect for real change. These comprehensive community development programs and investments may be slow to develop, but they produce results that will bridge that gap over the long term.
Investing in retail or business is the riskiest investment in low-income areas, but the returns are much greater if you can endure the rough years. Creating jobs and providing a service the community needs will allow them to spend their earnings locally to improve their community. As local opportunity grows, low-income families will have a better chance to do more than just survive; they can thrive.
See Related: Best Investments for Young Adults
How Companies Are Investing in Low-Income Communities
There are so many options for investment when it comes to low-income communities. Private investors and those looking to flip houses help but can only go so far. Companies who invest in low-income neighborhoods can spur lasting and impactful change that is worth noting.
Companies are in a better position to make more sustainable unconventional investments. For example, suppose there are already community-based programs and businesses in the area. Instead of investing in new competing services, companies can invest in improving those that are already in existence.
This not only supports community growth but also encourages community-based growth. Thinking about the target will also tell you how to invest in low-income communities sustainably. Buying land or opening a store is easy, but investing in something that sustains itself takes more effort. Companies targeting community needs that align with their values can make sustainable improvements.
For example, big pharma could invest in local pharmacies and healthcare programs for low-income people. Not only will this serve a need, but the nature of these services makes them sustainable. Big companies investing in low-income neighborhoods decrease income inequalities and help generate bigger changes.
See Related: ESG Investing Trends
Tips For Real Estate Investing in Low-Income Neighborhoods
Property prices in any neighborhood generally reflect the income level of the residents. Low-income communities tend to reflect low property prices in both residential and commercial areas. While this may seem bad, it is a great opportunity for a savvy investor interested in decreasing income inequalities and closing the wealth gap.
Real estate investing in low-income neighborhoods is not only profitable, but it is also a way to help transform the neighborhood for the better. We have some tips and suggestions that will help you be successful.
See Related: Quanta Services, Inc. ESG Profile (PWR): Is It Sustainable?
Understand the Community First
When considering real estate investing in low-income neighborhoods, it is important to understand the community before purchasing. The chance of profit always exists when dealing with real estate investments, but the margins will differ when the community is low-income.
Place-based investing is an art form that requires proper research and planning to be successful, for those who have little experience investing or are looking for quicker returns, upper-level, low-income communities are ideal targets.
Blighted and to-be-avoided communities are great targets for those with more time or money to invest. Both offer prime opportunities to improve the communities while earning investors a profit.
See Related: Best States for Real Estate Investing
Consider Alternative Methods of Acquiring an Investment Property
Buying property in low-income areas is not very difficult. You can acquire properties from foreclosure sales or actively search for homes for sale from sellers looking to relocate.
Sometimes, you can even purchase property from tenants who can no longer afford a mortgage but would gladly stay in their current home as a renter.
With so many people out of work and those on a limited income generally carrying more debt than they can handle, investing in real estate may be the quickest way to improve a community without changing the demographics of the existing population.
Consider the Risks Based on the Needs of the Community
Buying properties for their rental potential offers a faster way to see profits, but some risks are involved. Purchasing property for rehabbing is more costly, but the returns will also be greater. Or, consider what the community thinks of larger-scale affordable housing projects in the area.
The same is true for purchasing commercial property in a low-income area. You can often find land or even buildings below the market rate. Investing in this land and then developing it to create commercial centers for the community is a great way to earn money and serve the community.
As more jobs open up in an area, more people will move in, which will help the community’s income levels overall. Depending on the amount of money you have to invest or the type of connections you have, it is possible to bring in a group of investors who can more effectively overhaul a low-income area.
For example, investors can buy land big enough for a small mall or retail park. You can then contract retailers and other community growth organizations to engage the community and shop on that land.
The investment will pay off by spurring economic growth and offering locals a way to spend their earnings in their local community instead of traveling elsewhere to spend the same money.
Take the Chance to Understand Your Potential Tenants’
Dealing with tenants in a low-income neighborhood is a delicate matter. In most cases, people who make less can afford only minimal rent. Although they are low-income, most work very hard.
You must have clear rental terms and policies that protect your investment and consider the community’s needs. For lower risk, the best choice is a property located near schools, but those located near retail centers and highways are also great choices. These areas are the easiest to improve and have the biggest ROI potential.
Frequently Asked Questions (FAQs)
Does affordable housing help improve communities?
Yes, affordable housing investment can help improve communities in multiple ways. Affordable housing is available at a cost below the market rate and is therefore accessible to households with low or moderate incomes.
The most prominent way affordable housing can improve communities is by providing access to safe and stable housing for low-income households. Affordable housing can help reduce homelessness and improve housing stability, positively affecting health, education, and overall well-being.
In addition, affordable housing improves communities by promoting economic development and social inclusion, providing opportunities for homeownership and wealth-building, and helping to create more resilient and equitable communities.
Is affordable housing good?
From a societal standpoint, there are many benefits to having affordable housing available for those who need it. It helps to ensure that everyone has access to decent and safe housing, which is essential for overall well-being. Affordable housing also helps to create more inclusive communities and can encourage economic growth by providing opportunities for people of all income levels to participate in the local economy.
What are effective strategies for promoting economic development and increasing wealth in low-income communities?
There are many ways to help stimulate economic growth in low-income communities, including investing in education and workforce development, supporting entrepreneurship and small business development, promoting affordable housing and community development, and investing in infrastructure and public services.
Related Resources
