This Boring Business Model is the Original Form of Social Entrepreneurship

Summary

The article posits that real estate landlords are the original social entrepreneurs, providing housing for the homeless and investing in communities where traditional financial institutions do not.

Abstract

The concept of social entrepreneurship, which combines profit generation with societal improvement, is gaining popularity. The article argues that landlords exemplify this model by offering homes to renters, who are technically homeless as they do not own property. These landlords are predominantly individuals rather than large corporations, taking personal financial risks to accommodate others' housing needs. They often invest in low-income neighborhoods where banks are reluctant to lend, thereby playing a crucial role in community development. The landlord business model, though traditional, is seen as a form of social entrepreneurship that continues to fulfill a fundamental human need for shelter.

Opinions

Landlords are portrayed as essential social entrepreneurs who provide housing for those who cannot afford to buy homes.
The majority of landlords are individuals, not faceless corporations, challenging the negative stereotypes often depicted in the media.
Landlords invest in areas overlooked by banks, demonstrating a contrarian and visionary approach to real estate.
The article suggests that landlords contribute to society by offering housing solutions in areas where traditional financing is scarce.
The landlord business model is described as "boring" and "old school" but remains vital to addressing housing needs.

This Boring Business Model is the Original Form of Social Entrepreneurship

Social entrepreneurship is a buzzword today.

The idea of growing a business that produces profit while improving the lives of customers and the community is attractive. Not only that, businesses that have a social component tend to outperform those that solely focus on financial gain. Businesses deliver more holistic solutions when they focus on that keep both as priorities.

A real estate landlord is the original social enterprise.

Landlords house the homeless

Renters do not have a home by definition. In the truest sense of the word, they are “homeless”. They rely on others to provide housing for them. Of course, some people are renters by choice, but most people recognize the value of having their own property.

Landlords invest their money to provide housing to those that need it.

Landlords are individuals, not institutions

Mainstream media likes to portray landlords are far away megacorps that abuse residents. While there may be some truth to every perception, individuals own the majority of rental housing. According to the 2018 Rental Housing Finance Survey, individuals accounted for 72.5% of 1-unit and 2-to 4-unit owners and were 41% of the owners of all rental units.

These are people who put their own livelihood on the line to house someone else’s family.

Landlords invest when banks do not

Landlords see opportunity in neighborhoods that others leave to fester on their own. Low-income neighborhoods tend to high amounts of rental housing. This means two things.

First, the residents likely are not able to access financing available in other areas. Banks have minimum loan amounts for mortgages in order to stay profitable. It’s a catch-22. If the property values are too low to lend, the only way to buy is with cash. Low-income people rarely have lump sums large enough to purchase the property, even if it is inexpensive.

Second, the people that do buy and invest when banks do not are visionary. A landlord in a low-income neighborhood often puts up cash to buy a property where no one else is buying. This is the ultimate contrarian approach. These property owners are valuable because they offer to house where few others will.

Housing is one of the core requirements we need to survive. The landlord business model is boring, it’s old school…and still incredibly needed. People need housing and landlords are the social entrepreneurs that address the problem every day.