Although they are underrepresented, Black and Hispanic developers are often at least as successful as their white counterparts in our data. Yet despite many strong performance indicators, we also find that the revenue gap for medium-sized Black developers and revenue cliffs for large Black and Hispanic developers are limiting Black and Hispanic developers. Taken together, our data suggest that there is untapped potential for Black and Hispanic developers, especially in the middle of the market.

Finally, we show that removing the constraints on Black and Hispanic developers—fixing the representation crisis, closing the revenue gap for medium-sized Black developers, and leveling the revenue cliffs for Black and Hispanic developers—is an opportunity to grow the economy by tens of thousands of businesses. These new developers could generate more than $100 billion in revenue each year and create more than one million new jobs. Growing the numbers of Black and Hispanic developers could also help solve the country’s profound and growing housing shortage.

Our findings are evidence of a current lack of diversity and a stark wake-up call about the opportunities and wealth we are leaving on the table. While we cannot predict how average performance might change as more Black and Hispanic developers enter the industry, the strong performances of both the smallest and largest Black and Hispanic developers are promising signs that real estate development could be an important tool in closing the racial wealth gap. Real estate development has a long way to go before it is a diverse and inclusive industry, but the opportunities are enormous.

The road to making real estate development more diverse and equitable doesn’t end with our research. New research, new public policies, new initiatives, and new efforts by existing developers are needed to help drive change in the industry. These new initiatives and efforts will, of course, need to prioritize addressing some constraints ahead of others. For example, new initiatives may aim to address the $17 million revenue cliff before the $50 million cliff because building a pipeline of developers with revenue between $17 million and $49.9 million is probably necessary as a first step toward increasing the numbers of Black and Hispanic developers at or above $50 million in annual revenue.

Recommendations

• Research. Future research could engage individual real estate developers to better understand their experiences and challenges in starting and growing their businesses. Do these developers have more difficulty accessing capital after a certain stage? Is it more difficult for medium and large Black and Hispanic developers to access the markets and projects that are common for medium and large developers? How do the barriers vary across groups and stages of growth?
• Public policy. Congress or regulatory agencies could update the Community Reinvestment Act (CRA) and mandate that banks report aggregate information about business lending and applications for loans, including the applicants’ and borrowers’ race and ethnicity. This would help policymakers, journalists, and researchers better understand how banks lend to Black and Hispanic business owners.
• New public, private, and philanthropic initiatives. Initiatives to increase diversity and inclusion in the real estate development industry should not only aim to support new developers and encourage more developers to enter the industry, as some philanthropic initiatives have done in the past; they should also help existing medium-sized and large developers grow. New programs aimed at existing developers could play important roles in both growing the industry and helping to increase the numbers of Black and Hispanic developers at the top of the industry, where they are especially scarce. These initiatives could be philanthropic or implemented by investors looking to create societal benefits while also generating a financial return.
• Expand networks. Current developers, real estate investors, and other capital providers should expand their networks to include more developers from groups that have been historically excluded from the real estate development industry. We have started a publicly available map and directory of Black and Hispanic developers to assist those who want to connect and do business with these developers. Although we aimed to be comprehensive, our list of Black- and Hispanic-owned real estate development companies is not exhaustive. As we explain in our methodology section, our list is based on a sample of companies and we intentionally limited it to those companies for which we could find public statements about the owners’ identity. We invite Black and Hispanic development companies across the country to contribute to this growing database.
• New efforts by existing developers. Current developers (including Black and Hispanic developers) can help build a pipeline that leads to more Black- and Hispanic-owned development firms. Current developers should examine their employee recruitment, hiring, retention, and promotion practices to ensure that they are reaching and including Black and Hispanic candidates. By increasing the numbers of Black and Hispanic real estate professionals, current developers can help build the skillsets of future Black and Hispanic developers.