Real estate investment hasn’t always had the best reputation. House flipping, gentrification anxiety, and opaque LLCs have characterized a popular perspective on the industry. But Pittsburgh-based Small Change is a young company seeking to democratize the field and shift who participates in real estate investment—and how. Founded and led by architect-developer Eve Picker, Small Change has become a platform for minority and female developers, among others, seeking crowd-sourced funding to get smaller-scale projects that have positive impacts on their communities off the ground.

Crowdfunding’s heyday was born from ArtistShare, Kickstarter, Indiegogo, and their ilk operating under the premise that anyone should be able to invest in a good idea. But Small Change and other crowdfunded real estate platforms were facilitated by former President Barack Obama’s 2012 Jumpstart Our Business Startup (JOBS) Act and subsequent changes to Securities Exchange Commission (SEC) regulations, which allowed non-accredited investors (whose net worth and income are relatively low) to invest relatively small amounts of money into businesses. For real estate, this meant that anyone, with any income or net worth, could invest in eligible commercial or housing projects and receive returns on the project’s success; developers can raise up to $5 million from crowdfunded sources. While some projects featured on Small Change are for accredited investors only, many are open to everyone.

Dwell spoke with Picker about why Small Change is focusing on underserved markets and emerging developers, and how crowdfunding can launch new, equitable developments in areas that require more housing—but may be less attractive to big capital.

When you founded Small Change, what was happening in the real estate market and the conditions around development?

I started doing small-scale real estate development in Pittsburgh and was fascinated by the city that had died and was being reborn. There's some pretty amazing architecture here, and I thought there were opportunities in places that people were ignoring. My primary partner was the Urban Redevelopment Authority which, at the time, had relationships with small community banks. In the late 2000s, there was like a tsunami of events: The banking market melted down, and it rapidly became much more difficult to do these projects because banks required much more equity, which was very hard for a small developer.

At the same time, the Urban Redevelopment Authority had lost its funding stream because of Bush administration cutbacks. So that was my major equity partner gone. Simultaneously, banks were consolidating rapidly—it felt like community banking died. I had built a portfolio of about 10 small projects at that point that really required all of these partnerships to work and it just became impossible. So I started packing up my business. And then in 2015, I met with a builder who had some securities background, and told me about the 2012 JOBS Act.

When the JOBS Act passed, how did it change the way you thought about real estate development?

The JOBS Act was the Obama administration’s first attempt to democratize investment, and I was fascinated, because I thought that my story would have ended differently if my neighbors and the people who followed me in Pittsburgh could have invested in my projects. That’s what sparked Small Change: I knew of other developers doing this type of work, who were having the same issues, at least in these small neighborhood-centric projects. And I thought, Look, here’s a really interesting way to think about financing the equity piece of projects like this for developers who perhaps don’t have a huge wealth network, and are doing really important, interesting work.

After the JOBS Act passed, we got to list fundraisers for developers to raise money from anyone over 18. And developers get to decide what the minimum amount will be. We have one offering online right now with a minimum amount of $100. They’re building a project in a very poor neighborhood, and they’re committed to making sure the neighborhood is engaged. So that’s pretty radical. But this rule was really written with small businesses in mind, not real estate. It happens to work well for real estate.

You talk on your website about fundraising for impact investments. What does that look like?

When we started down this road, we were looking for a way to describe what impact and change meant. Essentially, we wanted to create a minimum impact bar for investors to list on our sites. We didn’t want to help raise money for projects that could have easy access to funds in other ways. For example, a Dunkin’ Donuts in a suburban mall would just not be a fit. We’re looking for projects that either impact the environment or have a team that is emerging and has never had this sort of opportunity before and also for investors who've never had this opportunity before. Today, 63 percent of the developers on our platform are minority- and woman-led—and if you’ve ever been to a real estate event, you know that’s just unheard of. We don’t advertise to developers, they’re coming to us through word of mouth.

We have one project on our site right now, a ground-up life sciences building that will have a LEED platinum rating. It impacts the street level, but also 50 percent of every vendor in the building is a minority- or woman-owned business. So impact comes in many forms, like the Pajama Factory in Williamsport, Pennsylvania, that a husband and wife team is working on. They purchased what was a vacant, 300,000-square-foot warehouse, and they’ve been gradually turning it into a creative hub and housing in a small town that had no activity like this before. These are very different projects, and they have very different impacts.

Looking through the residential projects on your site, it’s interesting that there are projects in cities like Detroit and Alexandria, Virginia, and also in more expensive cities, like San Francisco.

In Michigan, there is a woman-owned company focusing on new market tax credit projects, and they raised money just to help their operations begin. They needed money for pre-development costs for six different projects. In Detroit, there’s a corner store project with one residential unit above—this one really broke my heart: The developer is a woman who is very experienced and had such a hard time getting a small loan for this project. I really do think it’s because she’s a Black woman. In San Francisco—this was a really heavy lift—a nonprofit came to us. They have been purchasing buildings in a neighborhood that’s been rapidly gentrifying and converting them to cooperative housing. And this specific building was 40 units, I believe, and they purchased it and expected it to take maybe three to five years to convert it into a cooperative. Shortly afterward they got a $25 million gift from Mackenzie Carpenter. And in Los Angeles, there’s a project that is really interesting: A woman is developing kits to convert garages into affordable workforce housing—half the cost of building an ADU.

What I think is exciting about this is that $100,000 maybe doesn’t go as far in San Francisco as it might in Detroit. So people are covering these costs in different ways or using fundraising to cover different costs.

Right. But we’re also seeing larger and larger developers. I think because of the Black Lives Matter movement and Covid, things radically changed, and many developers are starting to think about community engagement in a more meaningful way. It used to be you had to have a meeting with the community, and then you go away and you build a project. But they are seriously considering how they can open up an investment opportunity for people who live in a neighborhood, especially when they know that they're improving the neighborhood. And they want to give some of that to the people and the residents. Sometimes it’s not a very large amount, it might be a very poor neighborhood where they don't expect to raise very much. Sometimes the project doesn’t need the equity, but they're doing it for that reason. So one of the things I love is that there are so many different reasons for people to want to raise money this way. It’s just a tool, this SEC regulation, that, as long as you follow the rules, could be used in a variety of ways.

The conversations around the affordable housing crisis are ongoing. How are you thinking about this particular tool as a possible way to help address issues of housing scarcity?

A few months ago, I wrote a tongue-in-cheek LinkedIn post where I did a back-of-a-napkin calculation of how much money would be needed to make affordable housing possible. The math doesn’t work. Construction costs have gone up enormously during Covid. You have to pay X to get something built that is a reasonable quality, and you want to rent it or sell it at Y to keep it affordable. And there’s a huge gap. I know the government made funds available for projects to fill that gap but unless we have access to funds, we won’t have affordable housing.

We would love to serve more housing projects. I had an investor ask me a question once: “Why isn’t the return higher on this housing project? I would invest if the return was higher.” If you have investors who want more money, that just drives up the cost of housing for the people who are going to occupy it. And that’s what makes it especially hard because you are competing with other projects that can offer a higher return. We have repeat investors who come and invest in the same type of project. We also have investors who have built a portfolio of 15 projects on our site. Mostly investors come with the developer, they’re already engaged. They live in the city in the neighborhood, they know the developer. It’s sort of a really interesting mix of how people think about it.

I imagine that local investors are not as concerned about the immediate return as they are in getting a project off the ground. Local investors might care for a property in a different way, and patronize it more often.

It’s really hard for some of these investors. I got a phone call from a gentleman who said, I have a young woman who cares for my wife, and she cannot afford, I think it was, a $500 investment. She doesn’t have the money, but she’s so excited about owning a stake in this. Can we arrange that we pay for her investment? That was a lovely moment, but I think that’s really what it meant to her. She lives there. She’s going to it and saying, I’m an owner. It’s very meaningful.

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Top image: The King Henry development in Alexandria, Virginia, crowdfunded via Small Change, Courtesy Small Change