Real estate has long been a male-dominated industry, particularly in key management and leadership positions, and representation of ethnic minorities is still lacking today in all sectors of the industry as a whole. Progress has begun in the last couple of decades and more efforts have been exerted to develop a more inclusive environment, but there is still a lot to do.
What does real estate look like in terms of ethnic diversity in leadership?
A 2017 study by US-based Bella Research Group and Knight Foundation revealed that more than 75% of senior executive jobs in the US commercial real estate industry were held by white men. Only 1.3% were held by black men. While white women held 14.1% of senior executive or C-suite level jobs, non-white women held less than 1%. The same study revealed that when it came to ownership of the 889 real estate investment management firms, only 0.7% were owned by women, while just 2% were minority owned.
Commercial real estate is notorious for having a diversity problem - with the CREW Network describing the people who buy, sell, and manage CRE in the US as ‘overwhelmingly white and male’. Women make up only a third of the workforce, and only 2% of C-level positions are held by black men.
What about other players in real estate in general? A survey of 650 RE professionals revealed a number of varied responses:
- Almost 1 in 4 non-white respondents said that racial diversity is lacking or severely lacking in the real estate investing community.
- One-third of non-white respondents feel that their race affects their opportunities
- Just over one quarter of non-white respondents feel that it affects their returns.
- 37% said they're happy with the level of diversity in the real estate investing community.
- Most respondents were in favor of more early financial education for under-represented groups. This option was especially popular among Black or African-American respondents - 48.15% thought this was a good strategy for addressing diversity in the community.
- Almost a third said that no action needs to be taken to improve diversity in the real estate investing community. The next-most-popular option was "I don't think we need to do anything to improve the diversity of the community," with almost a third of respondents choosing this option.
- When asked if they think their race affects their real estate investing opportunities and returns, 70% of Black or African-American real estate investors said they feel their race affects their opportunities, while 55.5% feel the same about their real estate investing returns.
The situation gets worse for women of colour. When it comes to women of color in CRE, the pay gap is huge. It’s reported that for every dollar made by a man, Asian women make 86 cents, Black women make 85 cents and Latinx/Hispanic women make 80 cents, demonstrating that pay equality for diverse women in real estate is a huge focus area for the future.
All these varied results (including from other surveys) indicate that real estate players are conflicted and even though the conversation has begun, it’s evident there has been little dialogue in the past regarding diversity and inclusion (D&I) in the industry. Racial and ethnic minorities shared similar sentiments and views regarding their experiences, and almost always agreed that real estate investing isn’t a very diverse community. However, there doesn’t seem to be a consensus on the types of action that should be taken (if any).
That said, other views note that when it comes to online investing, one doesn’t usually know the gender or race of the people one is working with - a valid point, especially considering that more and more of business procedures and paperwork are occurring online.
What are some of the challenges faced by minorities?
Barriers to Entry - One of the most commonly cited factors contributing to CRE’s continued lack of diversity is how people get into the industry in the first place. Companies often recruit through college outreaches, networking associations and pre-existing connections within the sector. However, most of these ‘origin points’ are institutions that lack diversity themselves, while smaller schools that are more diverse unfortunately lack the same outrack and opportunities for exposure.
Lack of awareness - Many minority candidates hoping to get into CRE are unaware and uninformed of the social networking opportunities that exist, according to Project REAP, which helps talented minority professionals with their careers in real estate. The organization also states that while residential real estate is easier to break into, (because certification and licensing can often be completed in less than two months), commercial real estate comes with far more obstacles just to get a foot in the door.
What can be done?
Establishing mentorship programs - Real estate companies and firms can grow diversity by establishing mentorship programs from the school/university level as part of the early recruitment process. Only about 15% of firms have special college recruitment programs for women and minorities, and only 10% have mentorship programs at all. However, the firms that do emphasize these programs have upto 24% increase in minority representation in management, proving that mentorship makes a difference.
Harvard Business Review found that five years after one company implemented a college recruitment program specifically targeting female employees, the percentage of white, black, Hispanic, and Asian-Americn women in its management rose by approximately 10% on average, while a similar program geared towards minority recruitment increased the proportion of black male managers by 8% and black female managers by 9%.
Creating learning opportunities throughout their career - Firms should be dedicated to advancing minority professionals no matter what stage of their career they’re at, supplying ample industry resources and relationship development, including real estate courses, networking events with reps from industry associations, etc.
Change starts from the top - Accountability starts from the C-suite level, who should acknowledge and share a sensitivity to the experiences of minorities under their wing, making sure they’re opening up and holding those difficult conversations.
Why does diversity matter in Real Estate?
It broadens horizons - A study by Cloverpop analyzing 600 business decisions made by 200 teams from different companies found that when diverse teams made a business decision, they out-performed non-diverse or individual decision makers up to 87% of the time.
It improves business - According to a study conducted by Deloitte in 2017, “Organizations with inclusive cultures are twice as likely to meet or exceed financial targets and three times as likely to be high performing. And companies are six times more likely to be innovative and agile and eight times more likely to achieve better business outcomes.”
All real estate agents can learn from diverse working environments - Agents can better impact their communities by establishing their own commitment to cultural competency, always ‘learning on the job’, and improve on networking and collaboration skills from working with different colleagues and communities.