Rethink Real Estate. For Good.

Affordable housing

3D printed houses.

3D printing is the construction of a three-dimensional object from a digital model, and it’s now being used in a multitude of applications — from aircraft components to running shoes, cars to orthopaedic implants and prosthetic limbs. And one of the latest to come to market is houses. You can now live in a home printed out by a computer.

There are some big advantages to 3D printed houses. These include:

  • Environmental benefits. When you print a house there is very little material waste. Prefabrication also reduces building site waste as well as transportation needs. This will lessen the heavy carbon footprint that the construction industry.
  • Faster construction. According to McKinsey, the construction industry has struggled to improve productivity over the past 20 years and has grown at a third of the rate of the world economy. 3D printing is fast and could double the speed of production.
  • Cost savings. Automation can bring huge cost savings by reducing labor needs on a building site and speeding up production. The construction industry has been slower to digitize than most other trades and is also facing shortages of skilled labor.

3D printed houses are popping up all over the world – in Malawi, Mexico, The Netherlands, Canada, Germany, Dubai, Saudi Arabia, India to name a few. And NASA is exploring 3D printing for use on the moon and Mars.

In California, Mighty Buildings, co-founded by Sam Ruben, is collaborating with Palari Homes to build a solar-powered community of 3D printed houses. Components such as walls, ceilings and eaves are printed from a composite paste, then cured and hardened with ultraviolet light. The pieces are then put together on a prepared foundation using simple tools. Each home can be erected in less than 24 hours and may cost 40 percent less than conventional homes. Mighty Buildings offers printed studio units from as little as $115,000 and a 65-square-meter home for $187,250. Listen in to my conversation with Sam Ruben to hear about the progress Mighty Buildings is making.

3D printed houses are just getting started. It will be interesting to see if this idea takes hold and delivers some of the desired outcomes.

Images courtesy of Mighty Buildings

Permanently affordable.

Kimberly Driggins is executive director of the newly created Washington Housing Conservancy. The nonprofit’s mission is aimed at ensuring that moderate to low-income residents are not priced out of their homes. DC is a city where rents are running rampant and this only promises to get worse once Amazon’s HQ2 opens. The Housing Conservancy plans to acquire and own 3,000 units of affordable housing helping to stabilize rents, prevent displacement, create communities and promote opportunity and wealth building.

For Kimberly, this is a challenge worth taking on. She has had a remarkable career in urban planning and public policy, working on and in the cities she loves. And now she is turning her passion and energy to the challenging crisis that is touching so many people – housing. While she has only just begun to craft a fresh approach to this overwhelming problem, it’s clear that she plans to be spectacularly successful. Just two years into the job and Kimberly is making strong progress with her sights on some big milestones.

Kimberly was a Loeb Fellow at the Harvard GSD, a White House Fellow, and a recipient of Woodrow Wilson National Fellowship in Public Policy and International Affairs. Her early career as an analyst played out at Enterprise Community Partners, International Economic Development Council, and Ernst and Young. This was followed by roles in city government and as associate director in DC’s office of planning. She also worked for D.C. Public Schools facilitating public-private funding partnerships. Before joining the Housing Conservancy Kimberly worked for the City of Detroit as their director of strategic planning for arts and culture, while also serving as chair of the Gehl Institute’s board of directors (based in NYC).

Insights and Inspirations

  • The Housing Conservancy is working to purchase 3,000 units in high-impact neighborhoods, which are relatively affordable today but in the path of redevelopment.
  • Their goal is $150 million of flexible private capital to preserve apartments with affordable rents. With investor returns capped at 7%.
  • The Housing Conservancy is not just about affordable housing. It’s about community building as well.
  • Kimberly got into being a DJ, Kool Like Dat, in Detroit. She has impressed people with her seamless performances and her ability to read the room.
Read the podcast transcript here

Eve Picker: [00:00:12] Hi there. Thanks for joining me on Re-Think Real Estate for good. I’m Eve Picker and I’m on a mission to make real estate work for everyone I love real estate. Real estate makes places good or bad. Rich or poor. Beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website Rethinkrealestateforgood.Co or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.

Eve: [00:01:05] Today, I’m talking with Kimberly Driggins. She’s Executive Director of the newly created Washington Housing Conservancy, tackling the affordable housing crisis with a fresh model. This one is aimed at ensuring that middle income teachers and firefighters are not priced out of their homes. D.C. is a city where rents are running rampant, and this only promises to get worse once Amazon’s HQ2 opens. For Kimberly, this is a challenge worth taking on. And just two years into the job and she’s making strong progress, she has her sights set on some big milestones. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to rethinkrealestateforgood.co, where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:02:13] Hello, Kimberly. I’m really honored to have you with me today and excited to hear about your work.

Kimberly Driggins: [00:02:20] Thank you for having me, Eve. It’s a pleasure to be here today.

Eve: [00:02:24] So you head up a fairly new organization in Washington D.C., the Washington Housing Conservancy. Can you tell us a little bit about it? Why was it formed and how does it work?

Kimberly: [00:02:39] Sure, yes. The Washington Housing Conservancy, we are relatively new, not for profit organization 501c3. And we were created in 2018. And we were created because we saw a gap in the market really refocus on the market rate affordable, also known as NOAH, Naturally Occurring Affordable Housing. We’re focused on preventing residential displacement, stabilizing rents and promoting opportunity for moderate to low-income Washington area residents. Really, the focus of our work, we really work to mitigate displacement and to promote economic mobility. That’s really what we do. And we really felt that in our hot real estate market like D.C., where affordable housing is becoming a scarce resource, thinking about how we can preserve what we already have. This housing stock is the housing stock that is being lost to the market, no matter where you are in the country at the greatest rate. And for, you know, and it’s not the easiest to preserve, but it’s always easier to preserve existing housing as opposed to creating new housing. You need both. We certainly think that you need everything at your disposal, but we’re really focused on this, this product, multifamily housing.

Eve: [00:04:21] Yeah, I think you have, there’s an organization in San Francisco that does something a little bit similar if I’m remembering correctly.

Kimberly: [00:04:30] It’s quite possible, I mean, in hot markets like San Francisco, New York, Boston, I mean, we’ve been fighting this for several years, decades, I would say. I think a lot of listeners that are outside of the DMV don’t really understand how expensive D.C. has gotten over the last 20 – 25 years. And we really are. When you look outside of New York and California and possibly Boston, we’re really in the top five, maybe top three in terms of most expensive markets to live in, especially in the rental market. We’re very much akin to Manhattan, parts of Brooklyn and Brooklyn, New York and the Bay Area in terms of our housing costs. We’re not as high, but we’re trying to really solve a problem before it becomes out of control. With respect to mixed income communities. In those areas that I just named you in Manhattan, you really have a situation where you have unless you’re in a subsidized unit, it’s really the very wealthy, very affluent or low to no income. Because you have the housing subsidy or government subsidized housing, you don’t have a lot of this market rate affordable. I think probably none in the Bay Area, San Francisco specifically. So that’s what we are focused on, and we’re really focused on workforce housing, which is a term that I don’t love. It’s an industry term, but it’s really, it’s people who are, you know, working such as your first responders, your teachers, your lab technicians, hospitality workers, folks that make a “decent living.” You can be making 60 – 75,000. Yet you are extremely rent burdened. That’s not enough to be not rent burdened here in the D.C. area.

Eve: [00:06:42] Just talking about rent burden, so the typical calculation that you do with a tenant is one third of your income should go to rent and utilities, right? So, if you earn $60,000, then you shouldn’t really spend more than $20,000 on rent and utilities. How is that playing out in Washington? Where can someone find rent at $20,000 for a year? At the moment?

Kimberly: [00:07:08] It’s increasingly hard to do, Eve. I mean, that’s the reality. You know, on average and I’m trying to find some statistics, but you know, this is a region where you know, people are severely rent burdened. A cost for, you know, a two-bedroom apartment is well north of 2,000 maybe 2,500 dollars. And I think about 35 percent or so of folks are rent burdened. And you know, I can get you the specifics.

Eve: [00:07:43] I read some really high numbers. Something like 40 percent are paying half their income in rent, some really large number like that.

Kimberly: [00:07:51] It’s actually, yeah, I’m pulling up some of the stats. It’s 50 percent of households are spending more than 30 percent of their earnings on housing in the D.C. region.

Eve: [00:08:00] Wow!

Kimberly: [00:08:02] That’s a lot, that’s half the population.

Eve: [00:08:05] So these are everyday people who really can’t afford to live in the places they’re living in. What happens when Amazon’s HQ2 headquarters opens? Does that get worse?

Kimberly: [00:08:17] Well, you know, I do. I think that it’s known when you have tech companies and organizations like Amazon, when they move into town, the impact. It can be great for the economy, but it definitely creates housing pressure. And you know, to Amazon’s credit, I think that they have looked at what happened in Seattle. Looking at what’s happened in California with Google and Apple and all the others, and really try to do things differently here in the DMV and Nashville. I think that was a main motivation for their housing equity fund, which we were one of their first marquee investments. So, I think overall, the tech sector has actually responded in a way that I wish other corporations and employers would. I think that they’re recognizing their impact on place. Mainly because of what has happened in California and what has happened in Seattle. And so they all have initiatives around housing, affordable housing, housing affordability. You don’t see that. D.C., you know, there’s a lot of other employers and hospitals and universities are your largest employers in D.C. You also have a lot of defense contractors that are based in D.C. So, we don’t actually, tech doesn’t drive industry here. But I hope that the other sectors are listening and thinking and looking at what Amazon and Microsoft and others are doing because we really need the corporate sector to do their part around thinking about solving for the challenges of housing affordability. Because I think it’s everyone’s issue and I think it becomes a workforce issue for many of these companies. If we don’t do something collectively. It can’t just be government. Can’t just be the not-for-profit sector. We all have to be rowing in the same direction. And I haven’t seen that, and I’m hoping that Amazon and Google and others can inspire other corporations to do similar type of investments.

Eve: [00:10:33] So then that brings me to the Washington Housing Initiative. How does that tie into what you’re doing? Why was it formed? What does it do?

Kimberly: [00:10:44] Washington Housing Conservancy, we sit in a larger, broader initiative called the Washington Housing Initiative. Think of it as a three-legged stool. So, the Washington Housing Initiative has three main components. The Washington Housing Conservancy, or WHC, which is what I run. I’m the Executive Director and we are the not-for-profit owner and operator of the real estate that we acquire. In addition to WHC, we have an impact pool. That impact pool provides mezzanine or second debt financing. It’s a social impact investing arm and that’s managed by JBG Smith. And then we have a stakeholder council that we’re establishing this year and that really is looking at policy and advocacy in this NOAH space. There are very few tools in the toolkit to preserve this type of housing stock, and we are really hoping to change the system and really create more mechanisms to allow this to occur. We are disrupting the real estate market. We’re trying to do something that doesn’t want to happen. And we’ve realized that. We compete with the for-profit sector with these properties. In the NOAH space, by and large, the majority of these properties go to value-add investors or developers that are looking to make double digit returns on their investment, as well as add to displacement. They often acquire these properties. There’s a lot of up-side. The rents are low, but the growth trajectory is high, and they often know that, and they will either make substantial improvements that raise rents or just raise rents gradually because there are no affordability covenants on these properties. And so that’s what we’re doing that’s so different is that we’re buying the property. We’re putting affordability covenants, sometimes up to 99 years. Our first project with the Amazon money, it’s a 99-year deal. But more realistic of our typical profile is 20 – 25 years. Sometimes it’s 30 or beyond. It really depends on where we are in the financing terms, but we’re putting affordability covenants on properties that currently don’t have it and maintaining the asset for the long term. We’re not interested in reselling. We refinanced the property. That’s how our investors get paid in the impact pool, not through sell.

Eve: [00:13:28] Mm hmm.

Kimberly: [00:13:29] So did I answer your question there, Eve?

Eve: [00:13:31] Yeah, yeah. So, I think, you know, probably most of us are thinking, you know, to keep something affordable is very difficult with the way finances are structured these days. The capital stack and you’re a nonprofit, which makes it possible for you. But how about that impact pool that you talked about? How does that work? I mean, where does the money come from and what sort of return and how big is that going to grow?

Kimberly: [00:13:58] Sure. So, the impact pool, again, that’s it provides mezzanine financing. I’ll talk about who invests in that in a second, but to give you an example of our capital stack. So, our typical capital stack, it’s a first mortgage from a GSE like a Fannie Freddie. That’s 70 percent. On average, these are averages. The impact pool comes in to provide the mezz debt, and that’s up to 20 percent. And then the conservancy, WHC, what I run, the organization that I run. We provide up to 10 percent equity, so we have real skin in the game. We put money into our deals that’s separate and apart from the mezz debt, from the impact pool. And I think that that’s something that most people don’t really know or fully understand. But what makes us competitive is that mezz debt, because it is below market rate debt. That debt is so the investors, we have, it’s 115 million for the first round for the pool. The fund has closed. We raised that money over the last two years. We started deploying that money early or late last year. And that impact pool, the investors are primarily banks. And banks know, this is impact investing. So, it’s a single digit return to investors. It’s a total of nine percent. It’s seven percent to the investors. There’s a two percent fee that goes to the administrators of the pool. In this case, it’s JBG Smith, so it’s nine percent money.

Eve: [00:15:40] Not bad. It’s not bad.

Kimberly: [00:15:42] It’s not bad. You know, when we structured the fund several years ago, that was what it needed to be. I think if we do a second round, it could be lower in terms of the return. It’s not bad. I know in the social impact world you’re looking typically around five six percent return, so it’s above average for social impact investing and we recognize that. And so again, banks are primarily the investor in that fund, and they have many reasons to invest. Mainly, it fulfills their CRA credits, and it advances the mission around affordable housing. All of them have affordable housing, social impact, economic mobility goals. And you know, the biggies are all in. Bank of America, Wells Fargo, you know, you name it, Trust, which used to be SunTrust, BB&T. So, they are national banks, local banks. We have high net worth individuals that are also in the fund now, you know, as opposed to our money WHC, you know, ours are philanthropic dollars. So, you know, that’s the difference. Banks are rarely donating to us. If they are, it’s really a very small amount, typically. But our biggest donors, we have donors, we have some foundations locally, Marriott, Shatner Foundation, others that are based here. We’re looking to grow. We have a $30 million fundraising goal, the Conservancy does. And we’ve raised over half of what we need to date. We have raised 18.5. So, we’re looking to close that gap in the next 12 to 18 months to be… We feel like that is the number it’ll take to get us to scale and to get us towards self-sufficiency. That’s another key aspect of our model, Eve, is that we are designed to be self-sustaining. We will not always be in a fundraising mode once we get critical mass in terms of the number of units, which is 3,000 for us. You know, our properties do generate some revenue that goes back to the Conservancy to help with our operations. Not a lot, but some because we have market rate units in the portfolio. I mean, that’s part of our criteria selection.

Eve: [00:18:18] Interesting. So you, to sort of break even, 8,000 units…

Kimberly: [00:18:23] 3,000 units

Eve: [00:18:25] 3,000. Okay. That’s a lot.

Kimberly: [00:18:28] Yes, it is.

Eve: [00:18:29] What is scale mean to you then? What sort of the big, hairy, audacious goal?

Kimberly: [00:18:37] I mean. For me, you know, that’s a great question, I don’t think I’ve ever been asked that. You know, we want to go as far as we can. I mean, you know, we’re proving the model. We’ve had a breakthrough year this year. I mean, you know, I’ve been on the job two years and this year we’ve acquired our first properties. We have two more that we’re closing on and we have a strong pipeline. And I think that we’ve moved from this is a nice idea and it sounds cool to knowing that it can work. So, we’re past proof of concept, but we’re pre scale. And for me, you know, 3,000 is a starting place. It’s not the endgame. I mean, I definitely think we want to do more. I don’t know what that means, but I do know that we want to keep going. And I also think that as we prove the model, if we can do more in the low-income space, I get this question all the time. You guys are focused on workforce. What about low income? There’s pressure there and it’s the hardest housing to create because of the amount of subsidy that it requires. That’s really true. I mean, I would hope that, you know, if we’re successful beyond my wildest imagination, that we are able to do more at the 30 percent or less AMI. I mean, that’s where the challenges, I mean, are really, really great.

Eve: [00:20:03] Yeah.

Kimberly: [00:20:03] But there’s also a lot of government resources that work to produce housing at that level. Of course, it’s never enough. But you know, we, as I said earlier, all need to all sectors need to step up to solve this crisis, and we are one solution. We’re not the only solution. And I think that if we can make a dent and workforce, we chose this because no one is really, not as many people are paying attention to this demographic. And there’s actually no resources for folks. I mean, and this is personal. I mean, this was me, you know, I chose to live in Washington because it was affordable over 20 years ago. If I was just starting out in my career, I’m not sure if I could afford Washington. I went in, I started my career in the not-for-profit space. I wasn’t making a lot of money and I didn’t have a lot of debt from college and graduate school. So, I was able to follow and work on what I’m passionate about and live in a city that was affordable, and I want more people to be able to do what I was able to do. And you know, right now, it’s really tough in D.C. to be able to do that. You have two and three roommates, or you have two or three jobs to be able to come out of school.

Eve: [00:21:33] Right, right. So where do you find your tenants then? Are they typically the buildings are full, and you keep tenants in place?

Kimberly: [00:21:41] Yes, absolutely. I mean, you know, the great thing about our model is when we buy a building, it’s about keeping residents there. We want residents to stay. We don’t need people to move. The mix is what we need for our model to work. The one exception is the Amazon project and Crystal House. Crystal House is a market rate luxury building, right? It wasn’t mixed income, you know, typically, our building profile is Class B Class C buildings that are in very good shape. They don’t require substantial rehab, but they’ve got great bones. They’ve been well cared for. There’s not a lot of deferred maintenance, but it’s just not the, you know, the buildings. And you know, that’s most of the NOAH housing stock is what I’m describing. And so that’s typically our building profile with the Crystal House. That’s market rate luxury. We’re transitioning that building to 75 percent affordable over the next five years. So it’s 20 percent a year and we’re doing that through natural attrition. We don’t need to displace current residents. We want residents to stay. Many of the residents that live in Crystal House qualify for the workforce program, so when their leases are up, we’re asking them if they want to participate. Now, participation in the workforce program, having your rent reduced, you have to we have to income certify. So, this deal was written to LIHTC standards and so we income certify at all of our properties to make sure that you’re qualifying for the workforce units. There’s about 20 percent of those units are 50 percent or less of AMI, but it’s 75 percent. So let me do the math. 825 units, that’s 619 units that will be made affordable for moderate to low-income workers and residents at Crystal House over the next five years. And we were keeping that affordable for 99 years. There’s a 99-year affordability covenant. It’s quite possibly one of the largest NOAH projects in the country, so we’ve been told by some of our national advisors.

Eve: [00:24:05] So, you know, when I listen to this, you know, I also interviewed an architect, who I think is amazing in Australia, who’s tackling this in a completely different way, but exactly the same demographic. The firefighters and teachers who could no longer afford to live in the city. And he found a piece of land next to a railway station with a bike trail that goes all the way into the central business district and built this building, just chipping away at all the cost to make it affordable for that group of people without any marketing. He has a waiting list of 8,000 people.

Kimberly: [00:24:42] Wow.

Eve: [00:24:42] So there’s a part of me that thinks like, this is a global problem, and we’re just like scratching at the surface of it. What is it really going to take to correct this housing crisis that we’re in? Are we ever going to be able to correct it?

Kimberly: [00:25:00] Yeah, that’s the million-dollar question, Eve. I do think it’s a global phenomenon. I have some experience in Europe and Denmark. Copenhagen specifically, I sat on a board there. Europe tends to have social housing, which, you know, they have a larger sort of definition that I think includes sort of this workforce. But I’ve gotten some interest outside of the country. I know that Canada, Toronto. You know, again, another hot market real estate market. And you know, the project that you discussed in Australia. Jennifer Keesmaat, the former Planning Director, she’s now head of a company called Markee Developments. They’re doing exactly the same thing, but they’re doing new construction. And, you know, we talk often. I recommend her. If she hasn’t been on your podcast, she probably has.

Eve: [00:25:54] I love that. I would love that. No.

Kimberly: [00:25:56] I think that what we’re doing is so similar. But her scale is actually larger than mine because it is new construction that they’re doing. But the goal around creating and or preserving workforce housing is is exactly the same and also the ambition around. We have a dual mission. It’s preserving rents and service of promoting economic mobility, and we haven’t even scratched the surface on what that looks like. So we are a mission driven, not for profit. We focus on, you know, how can we promote economic mobility for our residents? And we have a full strategy that we developed last year that we are implementing with all the properties that we acquire. And it’s really exciting. I think that that piece is part of the solution to the question that you raised. Because it’s it’s not just about rents, but it’s also how do you ensure that people have enough income? How do you raise people’s incomes? That’s really the equalizer. And, you know, you know, minimum wage, I mean, it’s going up to 15 hours and I mean, $15 an hour. It was stagnant for I don’t know how many years in the U.S.

Eve: [00:27:19] Yeah.

Kimberly: [00:27:19] So you know, there’s definitely like an income stagnation issue in the U.S. and how do you promote economic mobility, whether that’s, you know, for our residents thinking about what are the resources that our residents need to help them build wealth? Is it, you know, financial literacy? Is it thinking about how do you mitigate the second highest expense, which is daycare in the DMV? Is it thinking about how do we promote entrepreneurship if that’s something that you’re interested in? Is it thinking about workforce development? So, we really have a focus on human capacity and wealth building, and we’re partnering with best-in-class service providers for that. We were very clear about what we do and what we don’t do, but we are very collaborative. We will make the partnerships that we need to, to advance our mission.

Eve: [00:28:20] So you’ve had a really big background, including pretty significant honors like the Loeb Fellowship at Harvard and White House Fellow. And I wonder how you ended up here. You’re clearly very passionate about this. What led you, kind of down this path to equitable housing for everyone?

Kimberly: [00:28:42] You know, it’s something I’ve thought a lot about. You know, I’ve had an amazing career and, you know, I’ve been in urban planning and development my entire career. I started out working at Enterprise. Enterprise Community Partners now, but it was Enterprise Foundation in the mid 90s. And so, this is a bit of a full circle moment for me. I’ve always been someone who was interested in cities. I grew up in the suburbs, so it was very much, you know, I was attracted to cities. But I grew up in the 80s and I saw, you know, cities weren’t the hot places to be that they are now. And there’s a lot of homelessness. There’s a lot of violence, gang violence. There was a lot of drugs. I saw a lot of that when I would go into to New York. When I go into to Philadelphia, when I go down to D.C. And I always wondered why, and I saw it disproportionately impact people of color, African Americans in particular. And I was living a very different life. You know, my parents were first generation. They moved from the city to the suburbs to give my sisters and I a better life. You know, this is really, you know, zip code matters. Where you grow up is a strong determinant of your life outcomes. This is Raj Chetty. But even before he came along, this was the case and my parents understood this and they moved us out. You know, my mom grew up in the toughest part of Baltimore. My dad grew up in Chester, Pennsylvania, in the poorest area. And so, you know, they were, you know, they defied expectations and, you know, they instilled in us, you know, the will to give back. Like, you know, do whatever you are passionate about. But make sure that whether it’s in your career or in your personal life, around service, around this world is bigger than you. And too much is given, much is required. And that ethos has driven me and my entire life. My love of cities. I love everything about cities. I love the density. I love the diversity. I love the messiness actually of cities. Cities are complicated and it’s something as an adult, I’ve always chosen to live in a city. I went to graduate school in Chicago, and I’ve made my career in Washington, and I worked in Detroit for three years. So, I like big, messy challenges and problems. But I also look at the entire ecosystem. So, I would say that I’m an urbanist and I’m a city builder. Right now, I’m focused on the challenge of housing and creating equitable housing. But, you know, throughout my career, I’ve gone deep. I’ve thought about how arts and culture, you know, it can be a catalyst for neighborhood change that informs my view on placemaking and making sure residents feel a deep sense of belonging. So, you know, the route, you know, it’s not a dotted line per say, but there is a through line in my career and this it all comes together in this job. And there’s a sense of urgency. I mean, I love working on issues that are of the moment, and there’s nothing more urgent right now in the DMV than really trying to figure this out. And I like innovation. You know, I worked for government for 15 years. I loved local government. I served with honor and duty with local government. But they’re not out of the box.

Eve: [00:32:34] No, no.

Kimberly: [00:32:35] We did some. We did some innovative things. You know, I tried my best. But that’s also what draws me to this job and this role is that we’re not quite sure that it works. We are proving out the model and I think that we are going to be successful. But there is a level of risk and I think that innovation requires risk taking. You really do have to push the envelope. You have to be uncomfortable. You have to move out of your comfort zone. And these are things that I live my life by. I certainly, my career has been defined by taking some level of risk because I think that that’s when you really learn, and I think that you have to fail. I think, you know, innovation part of innovation is failing, but you want to make sure that you course correct, that you’re constantly willing to look at what you’re doing to evaluate, is this working and be able to innovate and move as you go?

Eve: [00:33:47] I love every word you said. So, you have a start-up, it’s pretty, that’s pretty fabulous. That’s a pretty great way to live your life.

Kimberly: [00:33:59] You know, for me, you know, it is, you know, I, you know, I get really excited, I love being the first person to do something. Even when I was in government. Many of the jobs that I had I was the first person to have it. I like startup culture. I like building something from the ground up. You know, it’s deeply rewarding. And I also think I have the personality to think about the next steps. What’s needed, the unknown. You know, this is not work that if you need to know what you’re doing every day, and you need a roadmap, this is not for you. You know, I’m interviewing now to bring on staff and you know, I’m looking for personality traits as well as skills. But this entrepreneurial, out-of-the-box thinker, you know, that’s where I live, and I try to surround myself around people who have that as well, because you need that in startup culture.

Eve: [00:35:06] Yes, you do. Well, thank you so much. I’ve really enjoyed this, and I hope I get to talk more to you some other time because there’s a lot of energy there, and that’s pretty wonderful.

Kimberly: [00:35:18] Well, thank you, Eve. I really appreciate you inviting me on to your podcast, and I would love to come back because I feel like I didn’t do justice talking about the social impact work that we’re doing. And I think that your viewers, as well as you would be really interested to kind of get into the details of that work. And I would love to share it with you. You know, at an appropriate time.

Eve: [00:35:43] Awesome. Thank you. That was Kimberly Driggins. Kimberly is a woman of great passion and generosity. She’s had a remarkable career in urban planning and public policy, working on and in the cities she loves. And now she’s turning her passion and energy to the challenging crisis that is touching so many people. Housing. While Kimberly has only just begun to craft a fresh approach to this overwhelming problem, it’s clear that she plans to be spectacularly successful and we’re sure she will be.

Eve: [00:36:44] You can find out more about this episode or others you might have missed on the show notes page at our website, Rethinkrealestateforgood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music, and thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Kimberly Driggins and Washington Housing Conservancy

The Housing Lab.

Michelle Boyd runs the Housing Lab at the Terner Center for Housing Innovation.

The Terner Center itself was created in 2015, with a mission “to formulate bold strategies to house families from all walks of life in vibrant, sustainable, and affordable homes and communities.” The Housing Lab program was developed in response to the void of knowledge accessible to entrepreneurs who were trying to solve core problems in the housing market, primarily policy and funding. The hope was that investigating (read: accelerating) new housing ideas could help to advance innovative practices.

Today, the Housing Lab is an independent nonprofit organization, a sister organization of the Terner Center, that identifies and accelerates early-stage ventures which might help to make housing more affordable and fair. The lab has a team of experienced ‘coaches’ that work with entrepreneurs such as Dweller and PadSplit. They also work with Graduate Student Fellows from across UC Berkeley, including students from the Masters of Business Administration, Masters of City and Regional Planning, Masters of Real Estate Development + Design, and Masters of Public Policy (MPP) programs.

Michelle brings nearly a decade of experience in community and startup finance, organizational design, and urban policy research to the Housing Lab. Previously, she worked as a strategy consultant for the Bridgespan Group on issues of community development, housing, and education. Michelle has also worked at a Chicago-based CDFI, as a Kivi Fellow in India and even, back in the day, as a Senate page in Washington, D.C. She also serves as a Chamberlin Fellow with the Urban Land Institute.

Insights and Inspirations

  • The Housing Lab at the Terner Center is a startup accelerator with a heart. Cohort businesses are chosen because they are developing a solution that will hopefully help the housing crisis.
  • The Lab’s startups are diverse and tackling how to build, how to appraise, and how to engage community in their businesses.
  • The Lab is funded by the Chan Zuckerberg Initiative amongst others.
  • Michelle thinks of the Lab as a startup too, in growth mode.
Read the podcast transcript here

Eve Picker: [00:00:10] Hi there. Thanks for joining me on Re-Think Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co or you can find them at your favorite podcast station. You’ll find lot’s worth listening to, I’m sure.

Eve: [00:00:56] Today, I’m talking to Michelle Boyd, who runs the Housing Lab at the Terner Center for Housing Innovation. The Terner Center’s mission is to formulate bold strategies to house families from all walks of life in vibrant, sustainable and affordable homes and communities. And in turn, the Housing Lab program was developed to support entrepreneurs trying to solve core problems in the housing market. The result is a business accelerator which hosts a widely varied group of developing businesses. These are early stage ventures with a powerful mission to help solve some segment of the housing crisis. Michelle’s background brought her full circle back to housing after a decade in community and start up finance, organizational design and urban policy research, I’m going to learn a lot from Michelle and so will you. So listen in. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast or go to patron.com/rethinkrealrstate to learn about special opportunities for my friends and followers and subscribe if you can.

Eve: [00:02:31] Hi, Michelle, I’m really delighted to have this opportunity to talk to you.

Michelle Boyd: [00:02:36] Thank you, Eve. I’m really excited to be here. I’ve enjoyed listening to your podcast and I’m honored to be able to participate.

Eve: [00:02:43] So you’ve been working on perhaps one of the most difficult challenges of our time, affordable and accessible housing for everyone. I wanted to start by just talking about how our real estate industry has failed everyday people. Why is there such a huge gap between housing availability and the need?

Michelle: [00:03:06] Yeah. I mean, it’s a big question, we talk about it in our work at the Terner Center as a myriad of factors that’s contributing to it. There’s no single bullet there. I’d say if we think about the real estate industry as the mortgage industry that is financing home ownership and financing the construction of housing, the construction industry that is building housing and the broader investment markets that influence warehousing is built, as well as the policy elements at the local, state and federal level that regulate real estate. Each of those sectors has contributed to the great inequality that we see in our housing market.

Eve: [00:03:53] Yeah, and zoning is a big part of that. And then

Michelle: [00:03:57] Absolutely,

Eve: [00:03:58] Along with that is NIMBYism, right? Once people get used to having a half acre lot, they don’t want to give up on it. So.

Michelle: [00:04:07] And we have this fundamental assumption in the United States, particularly in California, where we do a large share of our work, that someone has the right to dictate what gets built a few houses a few blocks down from them or even across the city for them. And I think the way that power is allocated in the U.S. really favors homeowners.

Eve: [00:04:31] And I that’s right.

Michelle: [00:04:33] Yeah, and takes, doesn’t allow for power for decisions really to be made at a regional level, for example, as we think about how housing markets are regional because our job markets are regional. There are very few, if any, ways for policy leaders, government leaders to make regionally minded housing decisions. And so instead, they’re left up to small municipalities and neighbor by neighbor. Just saying that we don’t want the housing here. We want it elsewhere.

Eve: [00:05:02] That’s right? That’s probably the most insidious part of this. So, you know, that really struck me. As you can hear, I’m not an American, I’m Australian. Well, I’m a U.S. citizen now, but this is my accent. And that was one of, probably the only culture shock I really had. In Australia, local municipalities really do have much more control. So if you know, if there’s a beautiful tree in your yard, you, you need to get permission to hack a branch off it. Or, you know, if you’re going to build an addition to your house, you have to show some diagrams to make sure that you’re not casting a shadow on your neighbor’s house. I mean, there’s things in place there that just would never fly here.

Michelle: [00:05:50] Yeah, I think we have both a norm that you, as someone who lives in a certain neighborhood, has the right to dictate how and where housing gets built. But however, that power is inequitably distributed.

Eve: [00:06:12] Yes.

Michelle: [00:06:12] It’s most likely, it’s most often allocated to the people who have the time to show up to planning meetings.

Eve: [00:06:19] Yes.

Michelle: [00:06:19] Who have trust in the political system to think that they will be listened to. And that means it to predominantly older white homeowners who really want to keep things the status quo. I mean, I spent, there is this misconception that we can continue to have…

Eve: [00:06:41] Keep things the same.

Michelle: [00:06:41] Yeah, keep things the same and have cities that aren’t dense and still address our housing equity and environmental goals. Like those things are intention to each other and we and requires a compromise.

Eve: [00:06:53] Yes. Someone else I interviewed said that the most difficult thing for people is understanding and envisioning change. And, even if keeping things the same may not be better for them, you know, changing things may actually work out very well for them. But it’s very hard for people to visualize that, I think.

Michelle: [00:07:14] Right. There was a study I saw recently about how that upzoning in the city of Los Angeles, so allowing for more density, more dense housing, actually raise the property values of the single-family home parcels that didn’t were upzoned because they were seen as more valuable now that they were proximate to higher density housing. That runs in contrast to how people perceive the influence of apartments in the neighborhood. They think that they’ll destroy their home value or destroy their quote unquote.

Eve: [00:07:43] Yeah, interesting. So how do we begin? I mean, how do you think we begin to tackle these issues as so many of them?

Michelle: [00:07:51] Yeah, yeah. Well, I think it you know, it’s in part disentangling where the zoning decisions should lie and where the incentive structure should lie. Like, are there certain types of programs and agencies that can be put in place at a regional level in order to make more regionally focused housing decisions? And then also, I think there are creative solutions about how we can. Right now, it’s really, really difficult to add in what is often called the missing middle housing. So, this is housing, that’s three stories or four stories that can accommodate between two and 20 families. It’s really, it’s economically infeasible to build that type of housing in many areas, and that type of housing would be more amenable to some of the people who don’t want to see their neighborhoods change so fast. And so then we kind of get into this other complex problem, which is the extremely quickly escalate, extreme escalation of housing construction costs and everything that’s contributing to that. And it starts to kind of, you know, you continue to peel layers of the onion to understand where that’s the status quo. I think some of the things that we see as opportunity are both thinking about policy change and then also thinking about how to support more creative proposals and creative thinkers within the housing industry. And this is a large part of my work. There, as we think about the housing industry as a whole, it’s been one of the slowest to innovate in the United States. It’s one of the most inefficient industries compared to other industries and its ability to reduce the cost over time or increase the efficiency of labor, for example. And so I think there and that has to do with a lot of reasons, but one of them is the way the real estate industry is financed and the way it is regulated that make it really hard to support more creative approaches to doing things differently.

Eve: [00:10:05] Absolutely. I think you and I see eye on that. So, you run a non-profit called the Housing Lab, which is a closely affiliated with the Terner Housing Lab, right? And I want to know what is the Housing Lab’s role in changing the game?

Michelle: [00:10:22] Yeah, so just to take a step back and contextualize the Housing Lab that, so we have a close affiliation with the Terner Center for Housing Innovation at UC Berkeley, where our sister organization, we were incubated by the Terner Center and we now live in a sister non-profit that’s called Terner Labs, which is a we’re using as a platform to grow the Housing Lab, the program I run, and then other creative initiatives that use technology and business innovation to address housing inequity and housing affordability. And so the Housing Lab specifically is a program that supports entrepreneurs with creative approaches to reducing housing costs and increasing housing equity in the United States. And so, the way we see it is that entrepreneurs that are trying to, as you mentioned, have creative ideas and housing or face a number of barriers specific to innovating in the real estate environment. So, one of them is the complex regulatory environment that is regulated at the local, at the state, at the federal level. And it’s regulated for really strictly, for good reason. Once you build a house, it’s always there. It’s important that the house is safe. It’s important that house is built to a certain standard. We have, after the global financial crisis, we saw a great need to more highly regulate our mortgage market. So, there’s a reason these regulations exist, but they also stymie innovation. So we support entrepreneurs and figuring out how to best develop their company strategy and their relationships with government in order to effectively navigate that environment. The second main area is thinking about capital. Raising capital and structuring their company. There is not a lot of money to invest in innovative and risky projects in real estate.

Eve: [00:12:07] That’s for sure.

Michelle: [00:12:08] Yeah, that’s right. And for a number of reasons.

Eve: [00:12:12] Yeah, because banks are really made to keep, you know, they want to invest in the same.

Michelle: [00:12:18] They want to invest in the same. The way that real estate is underwritten is evaluated is by looking at a financial model of a prior investment. And if you don’t have a prior investment, an example of what you’ve done, it’s almost impossible to get money from a bank.

Eve: [00:12:31] Yes.

Michelle: [00:12:32] And in order to do real estate innovation, it’s not like you can take $20,000 and code something in your basement and come up with the next great solution to real estate. You often need to buy an asset or buy land or buy a home and use that as a testing ground for your product, and that costs a lot of money. And it’s really hard to raise that capital. And so, when you work with entrepreneurs about both connecting them to creative and innovative capital providers and helping them think through how they can structure their companies to attract certain types of investors who will help them accomplish both their impact goals and understand the level of risk that they’re taking. And so, and that’s, I think, something that it’s not completely unique to housing, but the environment of innovating in housing requires a different approach. The third, the third main area that we support them with is thinking about all the entrepreneurs we work with have a strong social mission to increase racial equity and or housing affordability and thinking about that intention and how they actually design their business to follow through on that intention in the long term. There is a real risk, particularly with technology and the financial services environment, for example, to unintentionally cause more harm than good. Like placing an innovation that, on top of a really inequitable and messed up system, can sometimes not accomplish those impact goals that the individual entrepreneurs are seeking. And so, we help them think about how to build their business model for long term accountability to keep them towards the impact goals that they have set out.

Eve: [00:14:17] So you host a cohort, you have a program every year, I don’t know how many years have you been doing this?

Michelle: [00:14:24] Yeah, so we’re in our second cohort now. We launched our first cohort in. So we run a cohort program, it’s a six months of intensive advising for a small group of entrepreneurs. We work with four to six organizations each year. We’re in our second cohort now. Our first one was, ran from 2019 to 2020. We graduated our first entrepreneurs on April 7, 2020, which is not the environment we were anticipating graduating to.

Eve: [00:14:52] Yeah, it sounds like you took a break pretty purposefully.

Michelle: [00:14:56] Well, we took a break purposefully to redirect our program. I also had a baby, and it took a bit of time off in between the two cohorts. So we’re now deep into our second cohort.

Eve: [00:15:06] Congratulations! Yes. And how does it work? You know, you select four to six entrepreneurs in one cohort and what is the selection process look like? How many people apply? What do they have to go through?

Michelle: [00:15:21] Yes, we look at about 150 applications each year. We have close to 160 this year and it’s a four-month application and diligence process. So how that works is we have a pretty what we intend to be an accessible application for the entrepreneurs. It’s ten short, intermediate or medium answer questions. And if we’re interested, we do an internal review, a little bit of looking around the website, looking at materials that sent us. And then if we’re interested, we invite them to a second application, or they provide more information on their financials and under upcoming plans for growth. At that point, if we choose to advance them, then we go through multiple rounds of interviews. So, we have we work with a team of graduate students from across the graduate programs at UC Berkeley who help interview the entrepreneurs. We also have an external selection committee that has a range of investors from impact investors, philanthropy, venture capital investors, traditional real estate investors who and experts in construction innovation. And so we work our selection committee to work with the entrepreneurs do these series of interviews. Once we get down to maybe our final 10 to 15, we start working with the companies to look at what type of work we may do together, since our program is, involves a significant investment of one on one advising, and we want to make sure there’s a good match between the needs of the organization and the advising we can provide.

Eve: [00:16:58] Um hmm.

Michelle: [00:16:58] So we spend the last month of our diligence process working with the companies on this. Throughout the whole process we are using a specific set of selection criteria that we’re evaluating the organizations against, that primarily looks at the quality of the idea they’re working on. Like, how creative is it and how likely is it to accomplish the equity and affordability goals that the organization has? We look at the strength of their business model as a product market fit and are they well suited to the capital environment that they’ve targeted themselves towards? Because we look at non-profits for profits, we don’t care we’re agnostic as to what type of company structure it is that we just care that it’s well suited to the capital environment, that it’s in the business structure, that it’s chosen. We can also just kind of look at the standard stuff at any early stage investor would look at around the team skills that they have in the leadership as well. And then the last part is really, well, how they fit with our program.

Eve: [00:18:02] So pretty rigorous. You must also be thinking about the cohort blend, or aren’t you? I mean,

Michelle: [00:18:09] Yeah, absolutely. I’d say we’re looking for entrepreneurs that will be one, like good participants in our program. Like active members of our cohort that will strengthen the community of entrepreneurs, and then we are looking for a certain amount of diversity of the types of problems that they’re working on. So, our 2021 cohort that we’re working with now, each of them is trying to address a pretty different gnarly challenge within the housing market. We think there’s some overlap and we’ve already seen this as opportunities the entrepreneurs need to work with each other. But we are intentionally selecting to pursue types of solutions that are different than one another and can build off one another.

Eve: [00:18:59] Tell me about the 2021 cohort. Actually, I know a couple of have interviewed a couple of the earlier cohort, but I’d love to hear about the new cohort and who they are and what they’re trying to accomplish.

Michelle: [00:19:13] Yeah, I am thrilled to talk about what they are doing and I’m excited. They’re really cool. So, we have two that are in the homeownership space. And so the first one is an organization called Black Star Stability. What they’re doing is to help restructure homes, restructure the financing on homes that right now are encumbered by predatory financing. And so they have built a business structure where they purchase homes that currently have land contracts on them or predatory lease to own agreements. So these are agreements where a family is paying a certain payment each month like a mortgage, but they don’t actually own title to the house, as you would on a traditional mortgage. And they’re often have been paying for 20 years, but have barely paid down any of their ownership stake. There’s really predatory fees and other things that hold them back. And so Black Star purchases these homes, usually in pools of these homes and then restructures them into traditional 30, 10, 15 or 30-year mortgages that end up saving the families. Both give title of the house to the families and save them hundreds, if not more than a thousand dollars a month. And so, the other home finance company that we’re working with is a group called True Footage. They have a new strategy for how to manage the home appraisal process that involves technology and addressing the labor structure of the home appraisal industry.

Eve: [00:20:49] That’s interesting.

Michelle: [00:20:50] Their primary goal is to increase the speed of appraisals and to reduce racial bias.

Eve: [00:20:55] That’s really interesting. We’ll see if it works.

Michelle: [00:21:01] Yeah, we’ll see if it works, I mean, we there’s a lot of things that are contributing to the racial bias we’re currently seeing in the home appraisal industry and a lot of that is baked into the history of racial segregation and ongoing racial bias. But we do see an opportunity for technology to support at least reducing the bias on the margin that is caused by the current appraisal industry, which is incredibly subjective. And I’m going to get these numbers wrong. But I think the current appraisal industry is over 85 percent white men right now…

Eve: [00:21:38] I would say that’s exactly what I imagined. It’s crazy.

Michelle: [00:21:42] And they are over 65 and no shade to throw to the white sixty-five-year-old men, including my father and my father in law, but that is not representative of the sample of the people who are currently seeking home appraisals.

Eve: [00:21:57] Right? Interesting. And then you have a couple more.

Michelle: [00:22:02] Yeah, we’ve got two models that are working with creative like shared housing type solutions. And so, one of those is called the Homecoming Project. It’s a project of an organization called Impact Justice in Oakland, California, and they are placing people coming out of long prison sentences. So, 10 plus years into homes, into renting rooms of homes in the communities that they would like to come back to after they’re released from prison. And it’s a, they’ve worked with 50 individuals so far and have incredible outcomes in helping the people through their program, secure long term housing and get a good start on the ground. So, we’re helping them think through their scaling strategy and seeing if they can access some federal resources into the program. And then the second organization in that category is a group called L.A. Room and Board, and they are using underutilized housing that’s adjacent to college campuses to house community college students that are struggling with homelessness and housing insecurity. And both those models combine the provision of stable housing with also a provision of services and wraparound services to support the individuals while they’re there.

Eve: [00:23:24] So these are these five companies, entrepreneurs, some of them, you know, there’s really only one really high tech one, right? True Footage.

Michelle: [00:23:33] Yeah, True Footage is the only high tech one. And also, there’s one more that I haven’t mentioned, which is a group called Trust Me that is building a new AI financial product and governance structure for community-based organizations to purchase and manage mixed income neighborhood trusts. And so these are trusts of rental property in neighborhoods, and they particularly are trying to serve community based organizations in neighborhoods at risk of gentrification to really purchase a large share of rental property in their neighborhood and maintain stabilized rental prices in that neighborhood. While that neighborhood may see increased rates of rental, increased rents and gentrification. But to your other question about technology? Yeah, True Footage is the only organization working with us this year that is pure tech model that’s seeking traditional venture capital. That’s flexibility has a technology angle to what they’re doing as well around how to communicate to the homeowners that they’re working with and streamline communications and streamline their mortgage processes. And there is everyone in the organizations working with some portion of technology in what they’re doing.

Eve: [00:24:56] That’s a requirement these days, right? It’s not the core of what they’re doing, which is really interesting because I think most people think of entrepreneurs and incubators as places that are all about high tech solutions. So that’s not what you’re doing here.

Michelle: [00:25:16] I will say it’s something that we we knew that going into this, we wouldn’t work exclusively with technology entrepreneurs. Because, as we often say, on our team, you don’t live in a virtual house. Like there’s a real physical nature to housing and to this year’s cohort, in particular, has less of a technology bent. But that really came from our focus this year on trying to find entrepreneurs who are solving racial equity concerns coming out of COVID 19. Like the areas of inequity that were exacerbated by the COVID 19 pandemic. And just the organizations we’ve ultimately chosen are working on really gnarly problems. We think the innovation that they’re working on is scalable despite not having a pure software platform, and it has a significant opportunity to impact individuals on a deep level. I think as we’ve seen, a lot of the technology and innovations tend to be more on the surface and the impacts that they’re able to have.

Eve: [00:26:22] It’s really interesting. So, tell me about like some success stories from the first cohort.

Michelle: [00:26:30] Yeah, happily. So, a couple of the organizations we’ve worked with, so and one of them that had a more pure technology angle and where I think technology is really suited to the problem they were trying to solve as an organization called Esusu. And so, they provide data and analytics to tenants and property owners that improve tenant credit and financial well-being. And their hallmark platform product is a rent reporting platform that has overall allows tenants to record past and current rental payments to the credit bureaus, in order to positively influence their credit scores. And overall, across all of the individuals on their platform they have increased credit scores on an average of 50 points over the past year, with many of the individuals on their platform having credit score increases that far exceed that. And they have grown exceptionally over the past couple of years, and they now have at least 30 percent of the largest landlords that are on the National Multifamily Housing Council list. 30 percent of those landlords are now using Esusu’s rent reporting platform. And so, they’ve been able to scale pretty quickly and actually just raised a large round of financing that’s going to help them grow to the next phase.

Eve: [00:27:54] Wow.

Michelle: [00:27:56] So we’re, yeah, they’ve been really successful and we think it’s an all star team that’s working on that. And we looked at a lot of rent reporting platforms and when we were doing diligence for our last cohort and found that Esusu had, for us, the perfect combination of scalability and strong impact focus in what they were trying to do. And strong racial equity angle to the work.

Eve: [00:28:18] So who’s who’s on your team and how do they help move these ideas? Or, you know, early start ups to a functional business model like this that might scale?

Michelle: [00:28:31] Yeah. So we, I, we do work with organizations that already have a core business model in place because the advising that we help them with is really an accelerant. Like we’ll help them with their business model around the edges. And then with their policy strategy, their capital fundraising, what supports it and that and their long-term accountability, and then also open up our network to them. And so in order to really open up our network to them, they have to be at a stage where they’re ready for those conversations and partnerships. And so, our internal program team is small. It’s really me and Carol Galante, the faculty advisor at the Terner Center and the founder of the Turner Center. And then we have a wide network of coaches who some of them we pay, some of them have donated their time pro-bono, who are leaders in the real estate innovation industry, and they spend time with their companies as much as two hours a week, helping them identify and sort through their priorities during the program and really help them get in front of key people in government that can help them secure certain partnerships. Get them in front of industry experts that other industry experts that can just take them to the next stage in their organizations analysis about how they fit into the regulatory environment. For example, how to structure a partnership with a large bank. So, it’s really through this kind of intensive work where we sit down with the entrepreneur and get a full list of all their biggest challenges and what they want to do. We pick out like three or four of them and really help them with and we get on the phone weekly and talk through them with that mix of like advising, structure that helps with their decision making if they want that and really, really network connections. And so, an example of a couple of our coaches. One of them is, they kind of range in experience. So, we have a woman named Molly Turner, who helps start the policy team at Airbnb and now works on faculty at the Haas School of Business and advises start-ups, both on scale strategy and how to work with city governments. We also have a coach, Brad Blackwell, who used to run homeownership growth and policy at Wells Fargo and is now retired, and he supports our companies that are working in the mortgage environment. And so that’s just two examples of some of our other coaches work professionally as real estate investors and for a mix of non-profit, affordable housing and traditional real estate and are helping organizations on that type of work. And then we have in addition to those coaches that get on the phone for a couple of hours a week. We also have a wide network of other advisors that we can connect our companies to for specific projects or goals. And those often have a strong real estate expertise, but not always. Some of them bring their expertise and non-profit scaling strategies specifically, which is important to some of the organizations, and they just know how to apply that to specific companies.

Eve: [00:31:57] Ok, so, you know, it’s not always smooth going when you build something like this, you must have also had some failures. What have you learned that you might do better?

Michelle: [00:32:08] Oh so much, Eve. We’re constantly innovating ourselves. I mean, we’re you know, well, we’re a program that was established at an established university. We tend to view ourselves as a little start-up ourselves in constantly getting information and feedback from our companies and from our advisors and innovating as we go. I think some of the biggest changes we’ve had over the past were just in our first two years. Our first year, we had a heavy in-person component. And before COVID hit, we had already realized that we needed to reduce the in-person requirements and in-person time for our companies. Our founders are all over the country. They are already working.

Eve: [00:32:54] Yeah, that’s really hard.

Michelle: [00:32:54] Some of them are parents. And so, we were already transitioning our model to be more virtual, especially for the advising and kind of like monthly cadence check ins and then just kind of more targeted in-person community building. More retreat type space for our founders when that was needed. So that’s one big thing that we learned over the past year. Another was that we switched that part that I mentioned that the last month of our diligence process is about figuring out how we work together. That’s in addition to our diligence processes this year. We found that allows both to make sure that our partnership with the company, that we’re coming in with really clear expectations on how we’re going to work with each other. And it also lends itself to our intensive one on one advising model. We’ve invested more resources in that one on one advising this year. So, it’s just really important to us that the coaches we’re working with are getting to know the companies and really feel like there’s a mutual match there. And so, as we’ve transitioned from these kind of bigger in-person events to more of this kind of an intensive one, that’s the biggest change. We also have revised our selection process and criteria as we continue to learn about the information that we need. I think we’ve, we’re really happy with the selection process this year and imagine keeping that mostly intact in the next couple of years.

Eve: [00:34:25] And then, I have to ask this question. You’re a non-profit, someone has to pay for this. So who funds you and why?

Michelle: [00:34:35] Yeah, so our largest funders to date are foundation funded. So, our major founding partner was the Chan Zuckerberg Initiative. And we’ve also brought in money from the we also partner with the James Irvine Foundation here in California and a couple other West Coast foundations that we have a tech angle to their work or come from families like family offices that have that do real estate work. And the main reason that most of our funders have at some point worked or received pitches from some of these start-up innovative housing ideas, and they see the same need we see to one, provide specific type of coaching to these entities to navigate the regulatory and finance environment. They see the same challenges we see that these companies face, and so they see the need for advising and two is they honestly want help and understanding which organizations they should support and work with. They see value in the diligence process that we do in order to select the companies that we work with.

Eve: [00:35:47] Interesting. Yes.

Michelle: [00:35:47] The kind of the housing expertise that we bring to that diligence process is of value to them.

Eve: [00:35:54] It sounds like you have good partners.

Michelle: [00:35:57] We do have good partners and they’ve also been great partners in helping us improve both our program and our selection process as we’ve grown.

Eve: [00:36:05] And then I just want to switch to you. How did you find your way to this role? What’s your background and how did you land here?

Michelle: [00:36:14] Well, I’ll say it. It’ll maybe sound like it makes sense perfectly, but you think everybody knows it? That’s not always, always how it feels. So I’m originally from the Detroit region, I grew up in the suburbs of Detroit, and both sides of my family have been from Detroit for almost a hundred years. And I really, I grew up, my father worked in real estate, and I grew up understanding the physical nature of the divide in Detroit, primarily racial divide. My suburb was overwhelmingly white upper middle class. And you would drive six miles down and cross that Detroit line. And the change in the quality of housing stock was incredible across that boundary, from a well strewn sidewalk to one that was completely broken. And so I started my career educational path studying urban policy to try and understand the forces that shaped the inequity that I saw that was so clear to me when I was growing up. And my first few jobs were in economic development. So I worked in the non-profit sector for Workforce Development Organization for an organization that invested in small businesses that were operating in low income communities. I then had the opportunity to spend several years with the Bridgespan Group, which is a non-profit philanthropy advisory firm. And while I was there, I really got to take a step back and think about the myriad of factors affecting urban development in the U.S. and somehow just kept finding my way back to housing. I had the opportunity to work with a couple of housing focused clients and just kept finding that housing was this nexus of social equity around issues of race and financial markets and in place that just became more and more interesting to me. And I frankly became frustrated at the limited tools available to philanthropy and even non-profits that wanted to make a real change in housing. I was working in San Francisco, and at that point it was almost already about half a million dollars to build one new apartment subsidized apartment in San Francisco, and that number is continuing to rise. And I had a full philanthropic client who are trying to advise to work in housing and say that they felt like investing in housing was a big black hole that was going to suck up all of their money. And part of them wasn’t wrong.

Eve: [00:38:47] Yeah.

Michelle: [00:38:47] And so I took that point and I went back and got an MBA at UC Berkeley and really wanted to understand the real estate financial markets. Like what was governing the investment markets within housing and what were some creative solutions that could help push us forward in this egregious policy. And I was at UC Berkeley while the Terner Center was thinking about expanding. I had just had this initial partnership with Chan Zuckerberg Initiative and thinking about expanding its innovation work. And so I got to help build out the housing program and then step in to lead it when I graduated. So, at this point, I feel like I get to draw on both my experience and philanthropy investing in non-profit advising, but also draw on my strong interest in working on solutions that are interacting with the traditional capital markets in ways that can influence at a more significant scale.

Eve: [00:39:44] It sounds like a perfect landing place for you. So tell me one more question, and that is how do you plan to grow the Housing Lab? You have small cohorts. This is the second one. What do you think it’s going to look like in five or 10 years?

Michelle: [00:40:00] Yeah, well, we’ve clearly seen through our application process the past few years that there are way more highly qualified companies that want the services that we offer, then we have the capacity to serve. And so we are thinking over the next few years about both how we can grow our program to serve a larger cohort and then also how we can think about serving the broader ecosystem of innovators out there. Like, what type of network can we build light or touch advising to serve a broader group? So, I can imagine us growing to have kind of a second tier to the work that we do that can serve a broader number of innovators. And I, we also are in conversations with several partner organizations to explore establishing more financial vehicles that can fund innovation. Specifically, there is a gap for many of the organizations that we see, and I’m sure you’ve seen this too. Through the innovative financing that you do is that sometimes companies can find that money for that first pilot, but then they may need five or 10 million dollars for the next version of their pilot. They can’t get that from the traditional bank.

Eve: [00:41:20] Yeah, yeah.

Michelle: [00:41:21] But then they can’t go back to their philanthropic investors because that’s too much money concentrated in one project. And so, yeah, we’re working with several of our partners to explore what our different creative ways we can have to fund some of these more innovative models. And so, whether that’s something that we build into our Housing Lab growth or something we do in partnership that’s housed at one of our partner organizations, but I definitely see that something that we want to make progress on in the next couple years.

Eve: [00:41:47] Well, I can’t wait to see where this takes you. I think the ten companies so far are pretty fabulous. So, I’m really excited to see what happens the year after and the year after and count me in if you build something bigger. I think that networks around creativity in the housing market don’t seem to exist and they’re critical.

Michelle: [00:42:13] Yeah, I mean, you’re coming back to one of the main reasons we started this program is we were just hearing from entrepreneurs that they didn’t feel like they had peers. And so, building a peer support network where people can bounce ideas off each other and get feedback and input and share each other’s networks are really important.

Eve: [00:42:32] Yes, it’s pretty fabulous. Thanks so much. Thanks so much, Michelle. I really enjoyed talking to you. Can’t wait to see what happens next.

Michelle: [00:42:40] Thank you, Eve. Thank you for your time.

Eve: [00:42:47] That was Michelle Boyd, who runs the Housing Lab at the Terner Center for Housing Innovation. Just like the businesses she serves, Michelle is growing a business too. The Housing Lab is a mere start-up, having hosted two cohorts, a total of 11 companies to date. To make a significant difference, Michelle knows that she must expand the Lab’s offerings. I can’t wait to see where that takes her. You can find out more about this episode, or others you might have missed, on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Michelle Boyd and the Housing Lab

Greater mass.

Mass timber is a catch-all name for a range of engineered wood products. Smaller, non-structural pieces of wood are glued together and engineered in such a way that together they become much larger and structural elements. Mass timber has many attributes. Speed of construction is a major benefit. Panels are pre-manufactured and pre-cut before delivery. These panels can be fitted and screwed into place by a small crew. An entire floor of a large building might be made up of only five or six panels. And an 8-storey building might be constructed in as little as two weeks.

A familiar mass timber product is Glued Laminated Timber (glulam), made of layers of dimensional lumber (lumber that is cut to standardized width and depth) bonded together with durable, moisture-resistant glue. These days the most frequently used mass timber product in construction is cross-laminated timber (CLT). This product, which looks like a giant butcher block, is made using dimensional lumber, cross thatched with glue on a giant press and placed under extreme pressure. CLT panels can be as large as 12 x 40’ and 12 inches thick. They are structurally stronger and lighter than both steel and concrete and have been widely adopted in Europe, East Asia and Japan. Other variations include Dowel Laminated Timber (DLT) which uses wooden dowels to connect boards together, and Nail Laminated Timber (NLT) where the boards are nailed together.

The biggest drawback of these technologies is that they use a lot of wood, making them susceptible to market fluctuations. Just recently, prices soared by almost 200%.

New mass timber products are in development and Scott Ehlert’s cassette system is one of them. Scott, co-founder of Fabric Workshop, is designing a proprietary hollow core mass timber plate column and wall system that uses 50 percent less wood fibre and will cost 10 – 35 percent less overall than a CLT structure. The box-like panels consist of two outer layers with a hollow core and an internal membrane to retain structural integrity. The advantage of the cavity is that what would normally be exposed in a CLT building – mechanical, electrical, and plumbing systems – can be integrated right into the panels. Insulation, acoustic, seismic and fire safety materials can also be added.

Fabric Workshop is based in California and while it hopes its product will help address the state’s housing affordability challenges, the company also sees an opportunity to impact California’s wildfire crisis. In 2020 the state’s fire season was 75 days longer than just 20 years before. Removing excess unnatural growth out of forests would help to reduce the severity of those fires. Right now, those small and medium diameter trees have no value but Fabric Workshop wants to create a market demand by using them in advanced cassette-based plate systems. Instead of dimensional lumber, they are focusing on another sub-product of mass timber known as laminated veneer lumber, or mass plywood, which is made from peeled timber sheets glued together.

Scott hopes that forestry industries, which have reduced by 70 percent in the last 45 years, will return to California with a much greater technological, environmental, and ecological focus. Timber is an environmentally friendly building product which offsets the carbon and environmental impacts of concrete and steel. Sourcing it locally and preventing wildfires are the icing on the cake.

Image from PxHere

Jamison loves real estate crowdfunding.

Jamison Manwaring is the co-founder and CEO of Neighborhood Ventures, a remarkable Arizona-based real estate crowdfunding company, focused on value-add multi-family properties.

It’s a real estate company, for sure – they buy, hold and sell property. But the capital plan is innovative, with a growing pool of state residents who are permitted to invest through Arizona intrastate securities law. Nine successful projects later, Jamison is now taking his plan to the national stage with their latest project, a short-stay hotel he wants to repurpose into affordable housing. And he’s raising funds on my crowdfunding platform, SmallChange.co.

Jamison attended business school at the University of Utah where he graduated with a BS in Finance. He was always interested in finance. He loved it enough to become president of the finance club. Even at a young age Jamison’s determination shone through. He wanted to work in New York, at a top finance firm. But those companies have their pick of Ivy league school graduates, which he was not. So every Thursday night he flew the red eye to New York to network. You’ll have to listen in to hear the rest of the story.

Insights and Inspirations

  • Jamison’s determination and stick-to-itness has taken him to Wall Street, and on to con-founding his own successful real estate company.
  • His mission? To let everyone invest in real estate opportunities.
  • Value add real estate projects, with less construction time than ground up, generally mean distributions to investors can start more quickly.
Read the podcast transcript here

Eve Picker: [00:00:05] Hi there. Thanks for joining me on Re-Think Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo in order to build better for everyone. If you haven’t already, check out all of my podcasts on our website at rethinkrealestateforgood.co or you can find them at your favorite podcast station. You’ll find lots worth listening to.

Eve: [00:00:56] Today, I’m talking with Jamison Manwaring. Jamison is enjoying success as the Co-founder and CEO of Neighborhood Ventures, an Arizona based real estate crowdfunding company focused on value-add multi-family properties. Always interested in finance, Jamison went to business school and studied finance. He loved it enough to become President of the Finance Club. Even at a young age, Jamison’s determination shone through. He wanted to work in New York at a top finance firm, but those companies have their pick of Ivy League school graduates, which he was not. So, every Thursday night, he flew the Red Eye to New York to network. But wait, if I tell you what happened next, I’d be a spoiler, so you’ll have to listen in to hear the rest of the story. If you’d like to join me in my quest to rethink real estate, there are two simple things you can do. Share this podcast and go to rethinkrealestateforgood.co., where you can subscribe to be the first to hear about my podcasts, blog posts and other goodies.

Eve: [00:02:14] Hi, Jamison, thanks so much for joining me today.

Jamison Manwaring: [00:02:17] Hey, thanks for having me, I’m happy to be on your podcast straight out of Pittsburgh. I’m here in Phoenix, still in the nineties here and…

Eve: [00:02:27] Oh wow.

Jamison: [00:02:29] Happy we have the technology we can be talking and doing this remotely.

Eve: [00:02:32] Well, I’m in the snow belt, at the moment. It’s in the low 60s here, so that’s a pretty big differential. So, your background is solidly in finance, all the way back to college when you majored in finance. And I want to know what led you to, you know, your early career was with Goldman Sachs and places like that. And I want to know what led you to launch Neighborhood Ventures and your focus on real estate.

Jamison: [00:03:02] Yeah, yeah. Great. Well, you know, I was always an entrepreneur type of person as a kid and did, I had several businesses. My most successful one was either dog walking or picking up, hauling off people’s Christmas trees into the field where the city wanted them to go for for a couple of bucks. That was a big business. And I ended up doing a bunch of telemarketing when I was in high school because you don’t have to have any experience there if you can produce results quickly. So, I started doing telemarketing and by my senior year I had 10 of my friends from school working for me and we were calling doing lead generation for mortgage company, insurance company and and I was just always pulled into business in general and in specifically real estate. My brother was in the mortgage business. My dad’s a real estate broker and has been for a long time. I always loved real estate, especially seeing a project go from what it was right now, but having a vision around what it could be and then seeing that vision come to fruition is really gratifying. And I started a real estate business right out of when I was in my early 20s before I went to college, and it was a for sale by owner business service. People want to sell their homes on their own. And we would help them with that and then charge them a flat fee. And that worked OK for a little while. But I also realized I was I had a lot of limitations when it came to my understanding of business, and even though I thought I knew everything, I clearly didn’t. And when the financial crisis happened and I was living in Phoenix at the time, you know, it really slowed things way down here. And when with real estate and with building and with the real estate market in general. And I hadn’t gone to college university and at that point decided, boy, right now is probably a good time to go to school because there’s not a lot happening economically. So I started in 2008 and I did a year at Arizona State, and then I transferred and finished at University of Utah in Salt Lake City. And when I was there, I realized finance is kind of what what helps you understand what is going on with the business. If you understand the financials, you understand the lifeblood, you’re kind of like the doctor of a company. You can really look at it, see where the problems are, see where the the great things are. See where areas that need focus. And if you can really understand how to give how to analyze a business or a real estate project financially, then then you have a really key skill set. And so that’s why I decided to study finance.

Eve: [00:06:19] Yeah. So you’ve had a kind of a you always had a background in real estate, but still it’s a pretty big leap to go from that to launching a crowdfunding platform. And tell me about that and what made you take that leap?

Jamison: [00:06:34] When I was studying at the University of Utah, I had a lot of friends who had done, a few friends who had done some internships with some investment banks. And as I talked to them, I realized and came to conclude that that would be a great option for me to try to get the experience of working in an investment bank. Most of them are were either going to be in San Francisco for us because we’re more. I was in Utah and then some people even made it all the way to New York. That was a little bit further than than most of us get to and um, I decided to go for that, not just to work on Wall Street, for the the brand or, you know, the status. I was more wanting to really go because I heard how how much they learned about companies, public companies and the markets. And so my junior year of school at University of Utah, I started going out to New York on a redeye flight, JetBlue flight on a Thursday night. I would leave at 11:30 p.m. and I’d arrive in New York at about 5:30 a.m. And then I would go out to the investment banks and try to network with with folks. And because the investment banks, they recruited their core schools, which tend to be the Ivy League schools, they are not recruiting at University of Utah, so we have to go to them. And I did that.

Eve: [00:08:06] That’s pretty intense.

Jamison: [00:08:10] Yeah, it’s, you know, I’d get on that flight and get there at six a.m., grab a little breakfast and then just try to have the most productive Friday that I could. And that usually meant meeting two or three folks face to face. And I would just, I got some some email addresses from some professors who have friends working on Wall Street, former students. Uh, from University of Utah, who maybe later went on and got an MBA at Wharton or Chicago or one of the the schools where a lot of them end up on Wall Street. And I ended up meeting probably half a dozen people, maybe 15 people who would have a 15 20 minute meeting with me. And I just said, Hey, I just want to learn about your business. I’d ask them a few questions about what they do. And it gave an opportunity for for them to get to know me and ask me questions, too. And I was hoping that something would happen, but I didn’t know exactly what would happen, and I made probably half a dozen or eight trips there. I’d stay in a hostel with eight other people snoring. You know that Friday night it was it was miserable. But I was in New York and it was fun. I had never I had never experienced New York, so I would stay there until usually Sunday night and fly back Sunday night and really grew a love for, for all things, New York. And luckily, one of the people who I met he was at Barclays, which bought Lehman Brothers after the financial crash. Barclays is a UK based bank. They came in kind of bailed out Lehman and they were one of the biggest investment banks in the world, and he was there and he helped me get an internship. And he actually he helped me get an interview, and they flew me out from Utah for the interview, for a super day and ended up getting an internship, full time summer internship, the junior year to my senior year. And that’s really what kind of got me into finance in Wall Street.

Eve: [00:10:22] It also certainly shows your determination, which you really need for a startup business.

Jamison: [00:10:28] Yes. Yeah, there’s there’s no giving up. It’s just it hasn’t happened yet. I’ve just got to keep going. As you know.

Eve: [00:10:37] I know that feeling really well. Not giving up.

Jamison: [00:10:42] Yeah. One of the things I found is a lot of times right when you’re at your worst and you’re about ready to give up that a lot of times means you’re almost there. So it’s kind of like…

Eve: [00:10:55] Oh, that’s awful.

Jamison: [00:10:56] I feel that so many times. And I was paying for this out of pocket. And luckily, JetBlue had a special, I think it was $129 round trip on that flight. And so I spent about $1,000 in the travel and stayed as cheap as I could. But, you know, had a great experience. And I ended up at Goldman Sachs after college.

Eve: [00:11:19] That’s a testament to your stick-to-itness.

Jamison: [00:11:23] You know, some folks, they might go to Ivy League and go right into a company like that, and those companies are out recruiting them, trying to get them to work there. For me, it was a little different. I had to come in the side door, not the front door, but I was in the door. And then once you’re in there, you know, you’re all equal. It’s it’s a meritocracy. It’s about what can you do? What ideas do you have? And I love that. I love the, you know, it’s kind of a low drama atmosphere. It’s just about what do you do and what can you produce. At that point, once you get the job, it’s not who you know. And I love the fact that I could be from Idaho, you know, going to school in Utah and I’m here on a level playing field and it really motivated me and I was I felt like I was with some of the smartest people I’d ever been around, for sure.

Eve: [00:12:15] That’s a great story.

Jamison: [00:12:18] Yeah, thank you. One of the companies that went public that I worked on their IPO was LifeLock in 2012, and they were based in Arizona. And I had some family in Arizona and I had lived in Arizona for a little while. And when they went public, I was always a little drawn to them because they were one of the few companies in Arizona that’s kind of like a tech company. And long story short, in 2015, they offered me a job to run their investor relations. I had been working with their investors as a Goldman Sachs equity analyst for several years, three years.

Eve: [00:12:58] Oh, okay.

Jamison: [00:12:58] And then they brought me basically from Goldman Sachs into their own into internally. And a year and a half after joining, LifeLock got bought out for three times our share price. From the time I joined. When I joined, it was about eight dollars a share and we ended up getting bought out for twenty-four dollars a share. So that was a good outcome for everybody. And at that point, I had an opportunity to do something new and different, and that kind of leads us to where we are here now with with Neighborhood Ventures and the current company. I had bought a few buildings when I was in New York, including a 10-unit building, renovated it. The buildings weren’t in New York. They were in Idaho where I was from. And I really was drawn back to real estate. Kind of came full circle back to some of my roots and where my family had spent so much time. And so I went from wanting to go to Wall Street, getting to Wall Street, seeing everything that was there and saying, you know, I kind of want to go back to the. tangible assets in real estate.

Eve: [00:14:10] But with a pocket full of different experience, right, that you could apply.

Jamison: [00:14:14] Yes, and realizing that, you know, a lot of people don’t have the opportunity to put money in real estate. They invest it in the market because you can do it from home and you don’t have to manage anything, you don’t have to be a landlord. And a lot of people think, Well, if I’m going to invest in real estate, that means I’m going to have to become a landlord and I’m going to have to get that phone call on a Saturday afternoon that the toilet’s broke. And I don’t want anything to do with that. And that’s kind of when this idea came together, about how can we make real estate more attainable as an asset class for people to own, because I saw an opportunity where it’s very easy to invest in the market, but the market has a lot of downsides. It’s a roller coaster. There’s a lot of risk there. And as I was drawn to real estate, I think a lot of people, other people are too. If we could find ways for them to invest in real estate without them having to become a landlord.

Eve: [00:15:18] Yeah, it’s definitely a more stable investment if you invest in it correctly.

Jamison: [00:15:23] Yes. And there’s REITs and there’s some of these big instruments you can invest with in real estate, but they’re also very Wall Street in many ways because they don’t really, they don’t disclose much about what they’re doing.

Eve: [00:15:37] Yes, that’s right and you don’t have a choice. You don’t have a choice about what you invest in. You’re investing in a big bucket, almost a blind pool of funds that could be invested into something you really hate, quite frankly. So…

Jamison: [00:15:52] Yeah.

Eve: [00:15:52] Yeah.

Jamison: [00:15:52] It’s more of a financial decision where they’re just saying, I want to invest in real estate, let me invest in a REIT. But there’s not that, you know, the thing that’s fun with real estate, just like piggybacking on what you’re saying is, you know where it is, and you see the, you can drive by it and you can touch it and you can… There’s a pride of ownership there that you don’t get when you just own a bond, you know, or something that…

Eve: [00:16:16] Right, especially if it’s in your own city, right? If it’s somewhere where you care about, yeah.

Jamison: [00:16:21] You can drive by it. We have investors now that drive by the assets that they own every month, and they just drive by it. And I think they do it just because it feels good. And you can’t do that with a financial instrument that’s traded on Wall Street. So…

Eve: [00:16:36] Do they send you comments about what you have to fix?

Jamison: [00:16:39] Yeah. And you know what? We think it’s an advantage because we have a couple of hundred owners keeping their eye on it.

Eve: [00:16:48] That’s right.

Jamison: [00:16:51] Our property managers do a great job, so we don’t get that feedback very often. But we’ve gotten it before. And when we say thank you, we’ll get it fixed and happy to have more sets of eyes on things.

Eve: [00:17:01] So just tell me about Neighborhood Ventures. Like, how does it work and why did you develop that? Like after this wanting to get into real estate, looking for something new? Why Neighborhood Ventures and how does it work?

Jamison: [00:17:15] Yeah. So, after I came out of the sale of LifeLock, I wanted to figure out a way to get more people to be able to invest in real estate projects. And I actually wanted to just create a platform similar to what you’ve done at Small Change. And as I dug into it, I realized that is going to be a ton of work. And thankfully. for people like me, there’s people like you that you went out and did that work. And around that same time, I met my now Co-founder John Kobierowski, and he basically convinced me instead of creating a platform, why don’t we just create a company, and I can lead all of the financial aspects of that fundraising. And he would be the real estate expert. He’s been in commercial real estate in Phoenix for 30 years. He’s been an apartment broker, very, very great reputation, and knows this market extremely well. And so, we decided to launch Neighborhood Ventures as a crowdfunding company. So, we raised funds via the Arizona intrastate laws on our first nine projects. $1,000 minimum investment. And I don’t know if I can say that or not. Maybe you can edit that out, but we raised money.

Eve: [00:18:42] No, you can say that. You can say whatever you like about Arizona intrastate.

Jamison: [00:18:46] Yes, we raised funds through the Arizona intrastate crowdfunding laws, $1,000 minimum investment. And in each of our first several projects, we had 100 or 150 investors. The first project we did…

Eve: [00:19:02] Hey, let me just stop for a second for the benefit of our listeners. So, there’s this rule called regulation crowdfunding that lets everyone 18 and over invest, but it took the SEC four and a half years to write it. So, in that four-and-a-half-year period, many states just didn’t want to wait any longer, and Arizona was one of those, and they created their own crowdfunding rules, which are called intrastate, which really only permit Arizona residents to invest. And they sort of bypassed the Federal SEC. It’s kind of like marijuana laws in individual states. Yeah, everyone, sort of, just looked away and said, okay, this has to happen because it’s happening so slowly at the Federal level. Is that a good explanation of it?

Jamison: [00:19:52] Yeah that’s, you hit the nail right on the head. Because it took so long for the SEC to implement The Jobs Act that was passed in 2012. A lot of the states like Arizona, I think we passed our intrastate law in 2015 and it’s nice in some ways, because we our regulator is the corporation commission in Arizona. And then there’s also very various and obvious limitations that we can only raise money in Arizona. So, for us, it gave us a good opportunity to start our business, but we knew at some point that we would need to grow nationally with our investors. But for our first nine projects, they were all in Arizona and all Arizona investors.

Eve: [00:20:41] So what sort of real estate projects do you focus on?

Jamison: [00:20:45] So John’s experience had been in multi-family and specifically in value-add multi-family, in walkable core areas. So, in Phoenix, what has happened in the last 15, 20 years is there had been a mass exodus of the downtown area in the eighties and nineties and moved to the suburbs, and the downtown area was kind of like the place nobody wanted to go. And then in the late nineties, the Arizona Diamondbacks built their stadium right downtown and there was became this energy around downtown. And then millennials and pre-millennial, but the younger folks decided downtown is kind of cool, and I don’t want to live way out in the suburbs where it’s a 45-minute drive in traffic anywhere. And in the 2000s and in the 2010s, we started seeing this urban migration back to these core areas, and we’re still seeing that. And what we do is we find buildings in those core areas that haven’t been renovated for a long time. A lot of them have been owned by the same owners for decades, and they’re just basically cash flowing them, and we’ll go in and fix these, kind of, cool, unique buildings. A lot of them kind of mid-century architecture that has been covered up over the years and not brought out, and we’ll go make them cool again. And people really love to move into a newly renovated building that’s in these core areas. So that’s really been our focus.

Eve: [00:22:22] And what are the limitations for you, like how are you feeling? Well, you know, financing altogether or just the Arizona rules like…

Jamison: [00:22:31] Well, our first project was a small building in Tempe, which is where Arizona State is. So, it’s a great area because there’s a lot of activity there, not only the college, but just in general. And we thought we might raise that. We’re only looking to raise half a million dollars. And we thought we might raise that in the first couple of weeks, and we launched the project on our website. We had done a little bit of PR and marketing before that. And I think the first day we got five or six investors who invested a few thousand dollars, and it became really clear about two or three weeks into it that I think we had hit maybe 100,000, but we had a long ways to go.

Eve: [00:23:15] Yes, it takes a while. Yeah, yeah.

Jamison: [00:23:18] It was our first project. So even though I had a finance background, John had a commercial real estate background, it was our first project and one of the things we committed to do, he and I, was that we wouldn’t call our friends that have deep pockets and have them invest. We want to really build a real business here with organic new investor base. Not just, kind of, call the rich folks and have them write quarter-million-dollar checks. And there’s a lot of people out there that can do that and do do that in real estate. But we wanted to open it up to a broader group of people with a 1,000-dollar minimum investment, and that’s going to take time to build. We knew that, but we didn’t anticipate how long it would take. Long story short, we ended up barely being able to close on time, it took six months to close. We had a friendly seller who gave us a six-month escrow and we literally got our, the 500,000 we needed two or three days before we needed to close. We barely made it.

Eve: [00:24:25] Wow.

Jamison: [00:24:26] We ended up having 103 investors, all Arizona residents, none of whom were our friends, that were juicing the deal. All real folks. It was painful because it was like, what are we doing? Is this really a business? But we wanted to see if there was a business here, if it was…

Eve: [00:24:47] I’m sure it was very gratifying as well.

Jamison: [00:24:49] Yeah, absolutely.

Eve: [00:24:50] A hundred people who want to invest in your project, that’s significant. You know, for first project, it really is.

Jamison: [00:24:57] Yeah. And it took a lot of work and people don’t realize that, you know, raising funds from people for investments is one of the hardest things to do because whether it’s 1,000 dollars, 100,000 dollars, that means a lot to that person. And they’re not getting any product today. They’re not driving out with a new car today. It’s just a promise that we’re going to not only pay that back, but with a nice return and good communication along the way. So, it’s hard. It’s hard and it takes time.

Eve: [00:25:27] It’s very hard. Yeah, I do agree with you.

Jamison: [00:25:29] Yeah.

Eve: [00:25:29] Facebook followers do not become investors.

Jamison: [00:25:32] Right.

Eve: [00:25:34] So I have to ask how many of those investors, original 103, have invested again?

Jamison: [00:25:40] Well, that’s really what’s built our business is those folks. We did another project two or three months later, might have been six months later that about 80 percent of those invested again.

Eve: [00:25:55] And they probably told their friends too, right?

Jamison: [00:25:59] They’ve told their friends to the point now, so we’ve just hit four years, we’ve only been working in Arizona, and we have over 500 investors in Arizona, and we have 1,500 investments, in that period of time. So, those 500 investors on average have invested in three of our projects.

Eve: [00:26:18] Pretty fabulous.

Jamison: [00:26:19] And our average investment is 5,000 dollars. So, some people invest 1,000, some people invest more than that. But it’s hard work. It’s real, it’s education because people before they’re going to place an investment, rightfully so want to feel very comfortable with our team with our strategy. And this isn’t a get rich quick for anybody. It’s slow progress. And then we sold. Now we’ve sold three of our projects, including that first project. And so, it’s gone full cycle. So, our investors have received all their principal back and all their returns. And now we’ve done that on three projects total. And that’s where things really start to click in for people and they start to see that what we’re doing works.

Eve: [00:27:08] That’s a fabulous story. So, what is your latest project?

Jamison: [00:27:15] So one of the things that’s happening in Arizona is that there had always been a lot of migration to Arizona from other states. Mid-West, California, even northeast. On average, Maricopa County, which is basically the Greater Phoenix area. It’s about four or four and a half million, folks. About 100,000 people, 100 to 125,000 people move here every year, so it’s like 10,000 people a month are relocating.

Eve: [00:27:46] That’s a lot of people. Yeah.

Jamison: [00:27:49] And when COVID happened, that accelerated because you had folks in California who were tied to working in and living in the Bay Area, for example, and now they could go, move somewhere else and start working remotely. And maybe that would be a short term. And then it’s kind of turned into more of a hybrid model. And we’re seeing a lot of these companies saying Hey, you want to keep working remotely? Go ahead. Live in Colorado, live in Utah, live in Arizona.” I’m talking about the western states because a lot of that’s from California, but we saw an acceleration in that migration. And so we’ve had a shortage of housing. And in Mesa, which is one of the fastest growing large cities in the country. I think 800,000 people live there close to a million people in Mesa alone, which is a suburb of Phoenix. There’s very little housing available, and we found a deal of a hotel owner who owned 120 unit extended stay hotel. And that meant that all of the units had full kitchens. And we went and looked at the building as a potential conversion to an apartment to meet the growing demand of folks moving here. And it had actually looked and felt like an apartment building already. We did our due diligence. We have a great attorney who’s helping us and helped us with our due diligence, and we purchased the building with the intent to convert it to an apartment where we actually have already started that process with the city and have got a lot of great initial feedback. And so, our current project is this 120-unit hotel to apartment conversion. And the great thing is, it’s not a big, heavy lift when it comes to renovations, and we’ve done some projects that are extensive renovations. It’s really cosmetic. So, we’re going in and updating the carpet and the paint and the fixtures and the appliances. And we don’t have to do plumbing and moving things around to accommodate and turn it into apartment because it was already an extended stay project. There’s 20 studios, 12 two bed two bath and the balance, I think that’s 88 one bedroom one bath, which is a really great mix when it comes to apartments.

Eve: [00:30:28] Yeah, that looks like your biggest project. What’s the total cost, development, purchase price and everything? How big a project is it?

Jamison: [00:30:36] Yeah. So, it’s just over 13 million to purchase, and our renovations are going to end up being about 6,500 per unit.

Eve: [00:30:49] Okay.

Jamison: [00:30:50] Or a total of 800,000 in renovations.

Eve: [00:30:56] Ok. Ok. So then I have to ask, how are you financing this?

Jamison: [00:31:00] Well, yeah, we have some great lender relationships we’ve built over the years. And so, we had a great lender who loved the project. They’re helping us with the purchase, and we’ve already closed on the project about over a month ago. And then they’re also helping finance some of the renovation expenses. And then we’re raising money for the equity, as we have historically in Arizona from Arizona residents. And then this is our first project that we’ve opened up nationally, through the Small Change platform, and we have 25 investors or more now from that platform. And so, we’re between raising money here in Arizona and on the Small Change platform. We’ve already had enough to close on the building a month ago and now just filling out the rest of our financing needs over the next several months as we continue to fundraise on this.

Eve: [00:32:01] So, you know, you and I talked about this national push. We must have been talking about it for years. I think before you sort of…

Jamison: [00:32:09] We have, you know, I’ve been following you for a long time. Actually, you didn’t even know, but I was watching what you were doing because you’re one of the early folks in the crowdfunding.

Eve: [00:32:19] Feeling just as much pain as you were, right?

Jamison: [00:32:23] You are definitely feeling more because you’ve been in the mix of it all. And we’re, you know, from our standpoint, so appreciative that you spent a lot of time there where it wasn’t, it was a thankless job, because you had to deal with the three-and-a-half-year wait before the thing was launched and then once it was launched following all the rules correctly, you know, doing anything new as a pioneer is going to be difficult.

Eve: [00:32:50] Yeah. And actually, you know, the interesting thing about Reg CF and is that, you know, we’re regulated by the SEC and members of FINRA. So, you know, they’ve grown up with this as well. So, I don’t want to say their interpretation, but they over the years they focused on different things in the rules. And we have to change things as their opinions have changed. And so, it’s a kind of ever moving target. It is pretty tough. But so what you, like we, were talking about this for years. So this is the goal to go national and to find some alternative investment tools to be able to let people invest in your projects all over the country.

Jamison: [00:33:38] Yeah, that’s right, and I think one of the things that prompted our discussion just to go back to your point was when they did raise the limit to five million.

Eve: [00:33:50] Yes.

Jamison: [00:33:51] It was a million for so long. And so they have improved some of those rules. And I hope that continues to open things up. And the timing worked out well for us because we were now, got to a project where it was our biggest project and we wanted to go outside of Arizona and let folks who wanted to invest in Arizona. All of our projects have been in Arizona so far. We don’t think that will always be the case, but we know the market very, very well. Our projects have done well here. And so, your platform gave us a great opportunity to start building our investor base nationally and with the same idea in mind. You know, these are these are folks who are trying to put a few thousand dollars away. And we will and they’re more comfortable investing in something that is tangible that they can see and that they can understand rather than investing in crypto or something on Wall Street. That’s so far out there.

Eve: [00:34:56] I think the advantage with the value-add is interesting, too, because value-add properties, they might even be cash flowing all along, whereas a brand new ground up project, you have to wait a while for the return. So, what I find interesting about what we do is, you know, some people can’t wait for a return because they’re on a fixed income. So, they’re looking for projects that will sort of provide more continuous cash flow and other people can wait and are more excited by an idea. And it’s just, it’s fascinating to me because you say the word investor, but investor can mean very, very many different things to different people.

Jamison: [00:35:33] That’s a great point. And if you do a ground up project, you could be a few years out before you get any cash flow coming in the door.

Eve: [00:35:40] But the returns might be better. Maybe not. It’s a risk.

Jamison: [00:35:44] Yeah, yeah, but that’s not what we do. So we take an asset that’s already generating cash flow, but that is underperforming. And that’s what we had here with this hotel.

Eve: [00:35:56] Right.

Jamison: [00:35:57] And we did liquidate the building, had everybody move out because we’re doing a renovation. But the renovations are ahead of schedule, and we have, we’ll end up being closed for about two months and then it’s we start generating cash flow again.

Eve: [00:36:12] That’s fantastic.

Jamison: [00:36:13] We’ll start sending distributions in December.

Eve: [00:36:17] Yeah.

Jamison: [00:36:18] From cash flow. So, it’s a…

Eve: [00:36:20] It’s a great model. And then the other thing, you know, while you’re opening up the market to people you don’t know, I know that some of your investors on Small Change have been following you for a while in Arizona and have been frustrated that they haven’t been able to invest in your projects.

Jamison: [00:36:35] Right.

Eve: [00:36:36] And we’re pretty early in the Small Change offering, which is nice that you sort of already started developing your crowd outside those arbitrary borders.

Jamison: [00:36:48] Yeah, that came from word of mouth because, you know, we have a lot of snowbirds in Arizona, people who live elsewhere and then they come here in the winter to golf and enjoy Arizona winters, which are amazing, but they live elsewhere and then they talk to their friends there. And so, we had a lot of folks, kind of a backlog of folks, who wanted to invest and weren’t able to because we were only open to Arizona. So yeah, that’s the great thing about Arizona, and I’ve lived in multiple places, but it’s kind of a bit of a melting pot, and it’s only because we have a lot of part-time residents. We have a lot of people who have just moved here in the last year, and it’s become a really, kind of, eclectic place with a nice southwest and Mexican influence. You know, we’re two hours from the border. I have a property in Mexico that’s an Airbnb property on the beach. That’s a three-hour drive from Phoenix, so I can go to get to the beach in three hours. And then the other thing is, in Phoenix, you’re two hours from Flagstaff to the north, where there’s snow and skiing, so you can live in Phoenix and you can be, you know, three hours from the beach in Mexico, and you can be two hours from the snow in Flagstaff.

Eve: [00:38:02] You know what? That sounds like Australia where I grew up. Sydney. On the beach, you know, two hours to the mountains.

Jamison: [00:38:12] Yes and, no knock against New York, I love New York, but when I was living there, the coolest thing you could do is get out to the Hamptons, which I couldn’t afford, right? So, you know, when you get used to living in the West and you grow up out here and you’re by West Yellowstone, you’re by the Grand Canyon and the trails, it’s tough to not have that in your life. And so, I’m happy to be back out West.

Eve: [00:38:41] So, tell me, you’ve got that building purchase, do you have another one targeted?

Jamison: [00:38:46] We’re basically slated through the end of the year to finish out our existing projects, including mostly this hotel conversion, which should be done by the end of the year. So, we’re always looking for our next project, but we’re not actively making offers on anything just yet. It’ll be a few months before we’re doing that.

Eve: [00:39:07] So one last question and that is, what’s your big, hairy, audacious goal?

Jamison: [00:39:14] That’s a good question, I don’t share that with everybody, but I will share it here, is we want to double our size every year for the next five years. So, we want to double the number of investors that we have. We want to double the number of projects, assets, the funds that we’re raising for projects for the next five years. And that means, you know, that’s kind of easy the first year and maybe the second year, but the third year, now you continue to double that as the numbers get larger, you have to double it. So that’s our goal. The next five years is doubling the business, but ultimately, it’s to bring more people who have never been able to invest in these types of assets into the game. In our early days when we were struggling, we had an open house at one of our projects, right when we had got it renovated and I was kind of like, oh man, I don’t know if this is the business for me. I’d given up a lot of other opportunities to start this, and we went to the open house and there was a man there in a U.S. Postal uniform and I thought is, I went over and talked to him, I wondered, is he an investor? And he immediately said, I’m so appreciative to what you guys are doing, because I never thought I would be able to invest in something like this.

Eve: [00:40:39] Isn’t that fantastic?

Jamison: [00:40:41] I’ve been delivering mail in this neighborhood for 20 years. I saw your flyer and I thought I could actually invest in this. $1000 minimum. And he showed up to the open house before work. You know, they have to work on Saturdays, so it was a Saturday morning. And he just said, I’m so happy to be here and to be able to invest in this, and that gave me, personally, the juice that I needed that day to get through it. This is why we’re doing what we’re doing.

Eve: [00:41:15] Well, I’m really impressed, Jamison, and I hope you’re wildly successful and I can’t wait to see what you do next.

Jamison: [00:41:23] Same to you and thank you for all your support and everything that you’re doing, and we’re all in this together. So, hoping more folks get the opportunity to get involved in these great projects.

Eve: [00:41:42] That was Jamison Manwaring, CEO of Neighborhood Ventures. Jamison’s putting his determination to work, building his innovative company in Arizona. It’s a real estate company, for sure. They buy, hold and sell property. But the capital plan is innovative, with a growing pool of Arizona residents permitted to invest through Arizona intrastate securities law. He’s seen early success, and now he’s taking his plan to the national stage raising funds on my crowdfunding platform, SmallChange.co. We can’t wait to see how it turns out.

Eve: [00:42:35] You can find out more about this episode or others you might have missed on the show notes page at rethinkrealestateforgood.co. You’ll find lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.

Image courtesy of Jamison Manwaring, Neighborhood Ventures