Wharton’s Katherine Klein speaks with Bobby Turner, founder of Turner Impact Capital, about creating more affordable rental housing across the U.S.

Bobby Turner, a Wharton graduate who is founder and CEO of Turner Impact Capital, wants to boost pride in rentership. He believes that building neighborhoods that offer a sense of community pride for renters is an important underpinning for his innovative housing model — an investment approach that increases the stock of affordable rentals, controls the spiraling cost of rent, and generates market returns.

“This is doing good by doing well,” Turner told  Katherine Klein, vice dean for the Wharton Social Impact Initiative, during an episode of the Dollars and Change podcast. (Listen to the podcast at the top of this page; find more episodes here.)

Klein invited Turner to talk about the role of business in helping to solve some of society’s most intractable problems, including affordable housing. The number of renter households in the United States has been growing steadily since the Great Recession, according to government data. In 2017, more than 48% of renter households were “rent burdened,” meaning they were paying more than a third of their income on housing.

The economic strife of the COVID-19 pandemic has squeezed the working class even more, highlighting America’s widening inequality gap and failing social safety nets. Turner said it’s time for business leaders to step up.

“Even before COVID, I think we can all agree that the country had been falling short on its ideals,” he said. The crisis has prompted business leaders “to really think about what our responsibilities are as stewards of capital… and what role [we] can play in helping address some of these most pervasive and pressing challenges in society.”

A Matter of Pride

Problem-solving is pragmatic for Turner. With more than two decades of experience in the financial sector, he understands the difficulty of getting private developers to build new affordable housing. The cost of land, labor, materials, and financing makes it impossible for developers to charge a reasonable rent and make a profit.

“The fact is, in most major metropolitan markets, these parameters yield less than a 2% return on capital,” he said. “The problem is huge, the demand is growing, and there is no new supply.”

Instead of reinventing the wheel, Turner decided to innovate. He launched the Turner Multifamily Impact Funds to purchase existing apartments, renovate them, and create communities through what he calls a holistic approach. Tenants are instilled with a sense of pride through participation. Teachers, for example, get reduced rents in exchange for tutoring and developing other educational programming for children in the neighborhood. Police officers get reduced rents for parking their patrol cars in front of their homes and overseeing neighborhood watches. Health care workers get reduced rents in exchange for setting up health care programs tailored to the neighborhood.

Turner said this kind of participation helps reduce turnover, which is one of the most expensive aspects of managing rental properties. When tenants feel a sense of pride, they are also more likely to report maintenance issues early and band together to increase safety.

The approach is working. In the last six years, he said, the firm has used the investment vehicle to purchase 11,000 units across 30 properties, boosting tenant satisfaction from below 30% to 95%, increasing lease duration by 30%, and driving up net operating income by 8% without raising rents for incumbent tenants.

“Even before COVID, I think we can all agree that the country had been falling short on its ideals.” –Bobby Turner

The Ethics of Doing Business

Turner is emphatic that profit doesn’t have to come at the expense of others; it can be aligned with purpose.

“Business and morality don’t have to be mutually exclusive,” he said, adding that profits are more consistent and predictable when they are connected to purpose. Unlike some other products, investing in affordable housing isn’t speculating on demand. The demand is already there and growing, and so are the opportunities.

“I think we can all agree at this point in the history of America, our reliance upon the government to tackle some of our most pressing challenges like education, housing, and health care has actually handicapped our outcomes and left us in the position that we’re in today,” he noted.

Turner said social responsibility is everyone’s business. These days, consumers are voting with their wallets — a kind of shopping activism — and corporate leaders should take notice or risk being left behind.

“The failure to incorporate or embrace these changing values will lead to a reduced stock price and lower revenue streams,” he said. “Everyone has to be aware of this.”