The Webb Affordable Housing Model

BUILDER BLASTS LACK OF BANK LENDING TO BUILD HOMES IN BLACK COMMUNITIES

James Webb is seeking to ease rule for investing in neighborhoods.

BY TARIQ OSBORNE [TOSBORNE@MIAMITIMESONLINE.COM]

A Miami-based builder who has worked in the real estate industry for more than 24 years, is accusing banks of discriminating against developers who focus on the Black community.

James T Webb, 47, said he is also talking to the Securities and Exchange Commission (SEC) about rules that , he says, restrict investment in Black communities.

“Banks in general have redlined African American communities as it relates to development capital for redevelopment ,” Webb said. He was referring to the practice of limiting financial services to specific neighborhoods, generally based on income levels or race.

Webb, who is starting a new company, said he got a loan commitment of $1 million from a bank within three hours to build an estate home for investment in an upscale neighborhood. The same bank, he said, denied him a $40,000 loan, after two months, to purchase and renovate an affordable home in a Black neighborhood.

Webb’s solution — part of what he calls the Webb Affordable Housing Model — is to bypass traditional lenders and go to others. Those would include pension and hedge funds.  “Alot of your institutional type lenders would be more willing to invest or lend,” he said.

That approach has been met with some success, he said, but an SEC bylaw has proven to be his biggest hurdle. “The rules state that whenever anyone who isnt an active partner gives you a check to perform a renovation, it is deemed at that point in time a security,” he said. Securities are investments such as stocks and bonds.

That would mean that he has to get a Private Placement Memorandum, requiring attorney fess of $20,000 to $50,000 to prepare the paperwork.

That requirement is cost prohibitive to small entrepreneurs and small builders, Webb said.

“So what does a guy do who want to rehabilitate a home in the neighborhood?” said said.

While Webb is seeking to have the SEC revise such rules, he is also hoping, through the company he is setting up, to create a real Estate Investment Trust [REIT] that would reduce or, in some cases, eliminate corporate income tax. REITs allow investors to invest in real estate the way mutual funds allow them to invest in stocks.

Webb said he has sent the SEC a comprehensive package about his plans but declined to go into details.