Why Gen-Z Is Embracing The Financialization Of Real Estate

addy CEO and co-foudner Mike Stephenson is featured in Forbes magazine

Why Gen-Z Is Embracing The Financialization Of Real Estate

If you want to get people fired up, start talking about real estate. Global investment companies are buying up billions of dollars worth of property. Meanwhile, whole generations are finding themselves locked out of the market.

The culprit? Many people will tell you it’s the financialization of real estate, but I don’t think that’s the real problem. The issue is the exclusivity concerning who gets to invest in real estate.

Real estate investing has been reserved for the elite, disproportionately excluding immigrants, members of the LGBTQ, BIPOC communities and younger generations.

But thanks to technology and younger generations’ vision to make investing fair and equitable, we’re seeing a disruption in real estate investing through crowdfunding — and it couldn’t come at a better time. Here’s how real estate investing is becoming more accessible.

The Taylor Swift effect is letting more stakeholders in.

Last year, Taylor Swift re-recorded her 2008 album, Fearless — a near-identical recording to its predecessor with one major difference — who profits. Swift’s move came as a strike against the music industry where big labels profit at the expense of artists and their fans. After securing ownership of her masters, suddenly, Swifties could show their allegiance by investing in Taylor’s version of Fearless.

Here’s where Gen-Z real estate investors are taking a page out of the pop superstar’s playbook; instead of one property owner holding all the profits, they are leveraging crowdfunding to allow more stakeholders to invest in their communities.

Think of all the people whose lives are touched by one property: the people who live in it, the builders and contractors who work on it and the community that surrounds it.

Through crowdfunding technology, it’s possible to give everyone who’s impacted equity in the project and participation in its societal returns. For example, at a time when retention is challenging, it becomes more attractive to trades workers to not just collect an hourly wage, but be at the owners’ table.

But of course, crowdfunding isn’t the only way to achieve this. Some people are turning to cooperative housing. By co-owning, people can invest in real estate while building community. The benefits are more than just financial — for instance in Winnipeg, Canada, a group of people in one community recently bought a home together to combat loneliness in the pandemic.

Instead of outsiders with no real stake or accountability holding all the shares, there’s a whole ecosystem of people who are actively participating in the economic and social success of a development.

Gen-Z is finding value in the intangible.

There’s a common misconception that the baby boomer’s dream of owning a home with a white picket fence is what Millennials and Gen-Z long for but can’t reach. The reality is not everyone wants their memories to be tied to one physical space, and not everyone’s dreams are tangible.

Young investors understand there is value in the intangible — from making memories through travel or at a concert to investing in NFTs or the metaverse. Just look at the explosive growth of the NFT marketplace OpenSea. The company reported $243 million in sales just two days into 2022. Indeed, younger generations are more likely to invest in decentralized finance offerings and less likely than their predecessors to put all their trust in institutions.

Many don’t aspire to live a traditional lifestyle and that reflects in how they invest. By investing just a fraction of their savings into commercial real estate, for instance, they may still have means to travel and live in different city centers. And buying an investment property in the Metaverse can give them access to a market that’s out of reach in the physical world. With digital land, they’re not tied down, maintaining and living in a single-detached home but are still able to participate in hyper asset growth. 

Gen-Z is demanding tech remove human bias.

Human bias has long been built into the traditional real estate investing system. But through new crowdfunding models, which rely on technology to process applications and pay out funds, we can reduce corruption.

A 2018 analysis found homes in U.S. neighborhoods of mostly Black residents are valued 23% less than those with few Black residents. Generations worth of systematic racism and discrimination have caused a 30% Black homeownership gap.

Of course, technology is still programmed by people and human bias can creep in, but Gen-Z, the most racially and ethnically diverse generation yet, is demanding change. As members of the socially conscious generation look to support businesses that match their values, fintechs are responding with thoughtful product development and marketing. Let’s face it, the existing system was built to reward some while locking others out.

And it’s not only younger generations or BIPOC communities complaining about the financialization of real estate. In fact, the biggest criticism I hear from those folks is that too few people are able to capitalize on property.

While markets remain uncertain, there’s one truth we can count on: No matter the year, no matter the political climate, people need shelter. Real estate will always be a wealth generator and there’s more to gain by making it an accessible investment for anyone who wants to get in.


Invest with addy

addy aims to make real estate accessible for all by lowering the bar of entry, allowing members to invest as little as $1 in previously inaccessible commercial real estate properties. addy doesn’t require a certain amount of investing experience, financial acumen or bank account size to gain entry.

Through crowdfunding, addy members can take part in fractional real estate and enjoy property ownership on their own terms.

This article originally appeared in Forbes on February 24, 2022.

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