Opportunity Zone Pitch Day - March 23rd
Workforce Housing 101, With DJ Van Keuren
Workforce housing is an important issue in our society, but it’s also an appealing investment sector for family offices and Ultra High Net Worth investors.
DJ Van Keuren, founder of the Van Keuren Family Office Real Estate Institute and co-managing member of Evergreen Property Partners, joins the show to provide background on workforce housing, including facts and myths, plus a powerful underlying investment thesis.
Watch On YouTube
- Background on Evergreen Property Partners, and why family offices are interested in the workforce housing real estate sector.
- The history of workforce housing, and how it differs from subsidized housing.
- Several strategies that local governments have used to try to incentivize (or force) the creation of workforce housing.
- Why the Opportunity Zones program has been uniquely successful as a policy incentive to facilitate workforce housing development.
- Future trends that DJ predicts for workforce housing in the United States.
- The specific factors that DJ looks for when evaluating potential workforce housing investment opportunities.
Featured On This Episode
Today’s Guest: DJ Van Keuren, Evergreen Property Partners
- DJ Van Keuren.com – Official Website
- DJ Van Keuren on LinkedIn
- Evergreen Property Partners – Official Website
- Evergreen Property Partners on LinkedIn
About The Alternative Investment Podcast
The Alternative Investment Podcast is a leading voice in the alternatives industry, covering private equity, venture capital, and real estate. Host Andy Hagans interviews asset managers, family offices, and industry thought leaders, as they discuss the most effective strategies to grow generational wealth.
Andy: Welcome to “The Alternative Investment Podcast.” I am your host, Andy Hagans. And today, we’re talking about a really important issue for our society at large, and also, quite frankly, a very appealing investment thesis investment sector. We’re talking about workforce housing.
And, honestly, DJ, with all of the sectors, when I talk to families, when I talk to RIAs, high net worth investors, again and again, workforce housing. Obviously multifamily, obviously industrial, but like this is the one that it’s people can’t get enough of. And it’s funny because that’s on the investment side, but also just in the general market, we literally can’t make enough workforce housing.
So anyway, joining me today, DJ, I’ll introduce you. You are the founder of the Van Keuren Family Office Real Estate Institute, as well as a co-managing member of Evergreen Property Partners. And, DJ, to tie it in here, a lot of our viewers and listeners already know about the Institute, but could you tell us more about Evergreen Property Partners and how family offices and private wealth, how that all ties into workforce housing?
DJ: Sure. So, you know, although I’ve had 25 years of experience in real estate, last seven years, I started working in the family office sector. Worked initially for a billionaire that was a patriarch on his real estate portfolio. Then I got head hunted from the Hayman Family Giorgio Perfume, Giorgio Beverly Hills, came up with a boutique office brand strategy.
You know, worked as an employee on his portfolio. And then I’d always been asked by families to help them with their real estate investing. And I wasn’t really able to do that because I had been, you know, working for a specific family. So I brought in a partner and we started Evergreen Property Partners. It’s a family office real estate consortium.
And we’re really there to help maintain a legacy and to, you know, allow monies to be passed through future generations because families have a big problem. And that’s 70% lose their wealth by the second-gen, 90% by the third-gen. And so we take a look at it and a holistic approach at the real estate markets and where there are opportunities.
Right? And a lot of people, you know, especially families have been investing into the multi-family sector for quite some time now, and workforce housing does come up and it is of great interest. And that’s because it covers the two different areas. One is that, you know, there’s the investors that say, “Well, I’m helping a problem that we have, right, and a part of the economy and people that have this need.
But also because there’s such a demand for this product type that means that, you know, you have some favorable returns from your investment as well.
Andy: You know, it’s interesting with family offices, I mean, honestly, institutional family offices, ultra-high net worth investors, and we’ve seen this in the Opportunity Zone world, they’re all interested in making an impact, right? And they don’t necessarily segment that out from their investment in the way that, you know, maybe people did decades or it’s all kind of one thing, one mindset now.
And I think it’s very rare where the stars sort of align, where, you know, an investor can invest in something that is so sorely needed by our society so that it creates so much value for our society at large. But that also just, frankly, the market dynamics is there’s such an undersupply of workforce housing as a resource that it’s a very appealing investment opportunity.
But let’s start with what is workforce housing, Dj?
DJ: Yeah. So, you know, workforce housing’s everywhere, right? They’re especially in the urban areas, other employment centers. But when you look at some of the characteristics of what workforce properties are, it’s affordable to renters with lower incomes. Some people call it, you know, blue-collar workers.
You have people such as police officers, firefighters, teachers, healthcare professionals, dental assistants, and service workers. That could be retail clerks or it could be managers of, let’s say, fast food places, right? So this is a segment of the market where you’re the people that are day to day really out there working need a place to live, right?
And this all goes hand in hand with many states and the conversation about raising the minimum wage because a lot of renters are just, you know, cost-burdened. They’re spending more than 30% of their income on housing. And, you know, that’s as a whole, Well, then you take into consideration the lower income households, and that percentage, much of it is higher, right, for what they’re needing to put it toward.
And, you know, it could be as much as 60% to, you know, 120% of the area median income. And so it’s an area that some people are just priced out of, right? Now, this is not subsidized renters like Section 8.
A lot of people think that there’s government subsidies that are helping pay for workforce housing, but that’s not the real definition. The real definition is literally from the workforce perspective, right, because a lot of those subsidies aren’t necessarily working.
Or if they’re working, it’s very, very little. These people are working 40, 50, 60 hours a week, sometimes multiple jobs, have a family, and that’s what we’re talking about. That is the category really of, you know, workforce housing.
Andy: So workforce housing, we are talking about truly middle-class housing in urban areas like MSAs, like New York City or Chicago.
DJ: Well, it’s not middle class. You know, if you look at, and you have… So in real estate, there’s four different quadrants that people are considered, right? So A, in an A area, that’s where you’re going to have your very high-income earners, right? The houses that cost millions and millions and millions of dollars.
You then have B markets, which are really your white-collar workers. Right? Professionals. In the C, that’s really where your workforce housing falls in. And then your D is the sometimes people classified as, you know, not the most desirable area to live, right?
Andy: Well, and a lot of housing, you know, low-income housing is going to be government subsidized. It’s going to be looked… It’s going to be looked at a little bit differently. And workforce housing, in my mind at least, it’s almost like it’s in the gap because obviously with like mass affluent or, you know, Class A, affordable luxury, whatever you want to call it, there’s a lot of private money that’s developing that kind of housing nationwide and, you know, all kinds of localities.
And then also, you know, you have Section 8 and you have public housing, but there’s this gap where there’s an underdevelopment of affordable housing that’s in the private market. And so, you know, I say middle class, you know, maybe working class is a better term. But you’re talking about firefighters, police officers, teachers in cities like Chicago or LA or New York City.
You know, and the question is, can they even afford to live in the very cities in which they work? And so that’s workforce housing, right?
DJ: Yeah. And, you know, it’s interesting because I lived on the Upper West Side for about seven years in New York City, and often the police officers that were downtown had to live outside the city. Now, at the time, Brooklyn wasn’t being gentrified, right, so they might live out there. They might live in parts of Harlem, which is still on the island, but, you know, still extremely affordable.
But usually, it’s outside of the city because there just couldn’t… You know, there’s a gap in what they can actually afford, you know? And one of the things that also happens is, and we’ll talk about this a little bit later, but what rent subsidized or, you know, rent control does to cities as well because it has a huge impact because there’s a lot of cities and municipalities that are trying to help solve this problem, you know?
And what happened if we look back historically from this, is that the affordable housing landscape started because of the need for this workforce housing emerged, right? So from the 1940s to the ’90s, housing was affordable to many middle-income workers, right? The wages were relatively correlated with the cost of living.
And at that time too, ownership actually became affordable through the introduction of the 30-year mortgage loan. However, what happened during the late ’90s and early 2000s is that income began to lag behind the rising cost of living, right? And the housing supply for middle-income workers grew stagnant.
And so this created a huge need for workforce housing, especially in these larger metropolitan areas, just like you said, in the city of Chicago, New York. Right? And then you get into the great recession that we had of 2007 to 2009, and this just increased the issue of this housing affordability for middle-income workers, right?
And also with the reduction of the production of new housing units across the nation, you know, it just exacerbated, you know, the problem. And then if we move forward a little bit more, when, you know, renters have seen, you know, prices surge in many markets, I mean, a lot of these markets, we just keep seeing the cost of these houses, the price…
I mean, I live in Denver and how much my house has appreciated alone in the last seven years is ridiculous. I mean, it really doesn’t make sense, but it continues to grow and the supply is limited. And, of course, then you have the coronavirus and everything else. And so about half of Americans, let’s say 49%, they say actually that the availability of affordable housing in their local community is a major problem.
And that’s up 10 percentage points from 2018. I mean, it’s an issue that we have here in the U.S. that really, really needs a solution. And that’s one of the reasons why investors see this. They know that, right? We’re working on a project right now that we’ve identified down in the Houston area, and it’s actually their modular for-rent communities that are being developed with our partner.
And nationally, there’s a 7 million gap of affordable units that are needed. In Houston alone, it’s 200,000, right, for this target market. And out of our, you know, 10 communities, we’re only going to fill a 1% gap.
And that’s developing these communities over the next seven years. So if we’re only able to take a 1% gap, what is that demand there, right? And with demand provides, you know, like on our pilot program, there’s a waiting list, actually a paid waiting list, right, that’s unheard of for the most part.
And so with that, it provides an opportunity, you know, to do good, to help out but also pretty, pretty seasonable returns, sizeable returns for investors, which goes back to why there’s such an interest hitting both sides of those coins. So it’s continuing to be an issue.
Andy: So this development in Houston, this is in partnership with Evergreen Property Partners?
DJ: Yeah, exactly. So like you had mentioned before, I mean, there is a demand that are there. 70% of families invest into multi-family, and there’s the different classifications based upon what I mentioned earlier of, you know, A, which is your premium multi-family rentals down to, you know, white collar to working force.
But there’s a gap because a lot of these workers can’t afford some of those other properties. So, yeah, that’s exactly what we’re doing with Evergreen and one of our projects is really focused on that workforce housing area.
Andy: Yeah. And it’s interesting because you look at the history of workforce housing and the housing shortage in the great recession 2008 development of, well, all types of housing, but especially in this sector, it really cratered and it has never recovered. So not only was there this gap but the gap actually continues to widen in terms of the amount of workforce housing that’s being created and the demand.
And so, I mean, to me, that says we’re not just looking at market forces, we’re also looking at public policy and, you know, political decisions and policy decisions that affect this. So, DJ, let’s go there next. You know, how is workforce housing viewed politically?
I mean, maybe I’m naive, but I would think that in any MSA, you know, it would be a good thing to incentivize private capital, right, to invest and create workforce housing, but the devil’s in the details, right?
DJ: Yeah. And there’s been a lot of people that have tried to really help with this issue, right? And this has been over the year. So one of the things that was tried by the government was to have a public-private type development. So they would say, “Okay, we’re going to build out of your 200 units that you’re going to build, let’s say 50 of them are for a certain income level.”
Well, that’s great for those people, but from a developer perspective, that hurts your returns, right? So then you don’t necessarily have that incentive for a lot of developers to build those. And then there’s also been, you know, rent control.
Well, when I lived in New York, you know, I’m paying $4,700 for 11 square foot apartment, and yet somebody downstairs, and this is a number of people within the building, they’re paying like $1000 a month. And their increase is 3% a year. So you can imagine that it takes a long time for that to get up. So what does the owner do?
The owner says, “I have to make up the difference in these people that aren’t paying higher amounts.” So if that whole building was the same, maybe our rent’s only $3,000, but because they have to make it up off these other people. So that really drives rent up for the cities. And it goes back to why those police officers can’t live in this city because those rents are so high.
Well, San Francisco or California in general have talked about rent control, right? And this is exactly what’s going to happen because of that. But politically, I mean, since 2018, there’s been increases in demographic groups who say, you know, that this affordable housing in their community is a major problem.
So, for example, 55% of the adults under 30 say, “Yeah, this is a big issue.” And that was a 16 percentage point rise from the 39% that it was in 2018. So just, you know, a little bit later. And that shares with adults between 30 to 49 who hold this view has also risen from 42% in 2018 to 55% last year.
Andy: Well, that tracks with asset prices because you also saw home prices just shoot up tremendously over the past 18 months.
DJ: Yeah. And, you know, one of the things just like that has happened in the family office space is the first gens, if they could have the ability to get a 16% return and save the world compared to saving the world and getting a 13% return, they would take the 16%. It’s the younger generations that are more concerned about, you know, they’re being about what’s happened to our environment, right, or other people, etc.
Now, a lot of the younger generation are Democrats, right? And about 6 in 10 Democrats and independents, right, who lean to the Democratic party, and this is 59% of that said in 2021 that affordable housing is a major problem in the community compared to Republicans who said 36% of these Republicans said that there’s an issue, right?
So it sort of goes back between the, you know, what I said with the younger and the older generations. And so it falls in the political area as well. And everybody knows that there’s an issue, it’s just a matter of how do you really tackle that? And, you know, one of the biggest issues, the problems is, and we’ll talk a little bit more about this later, but is the zoning.
One of the reasons why we’re doing the project, and we’re so excited in Houston about it, is because they don’t have zoning laws. So you can build a hotel right next to a multifamily or industrial building. I mean, you can’t do that because of zoning laws in other parts of the country. So that allows to really develop these type of communities.
Because, you know, mobile home parks have been doing extremely well over the years. A lot of investors like those, right, for the cash flow and everything. But you can’t just go out and put a mobile home park anywhere. There has to be certain zoning that will allow it. And, you know, because a lot of people can say, “Well, a mobile home park, there’s a solution to help because it’s less expensive.”
But, you know, you can’t just do it everywhere. But there are some strategies, you know, that kind of dictate…
Andy: Well, and, DJ, yeah, I think it’s interesting because one thing you said that I just want to repeat, everyone agrees that there’s a problem, it’s just a question of what the solution is. And we see, you know, you talked about, you know, different party affiliations and so every… You know, it seems like most people agree there’s a problem, or at least a lot of people do, especially in the younger generations.
But then the solutions might differ wildly, right? Like, on the one hand, you might have some people think the solution would be rent control or other policies, and then on the other side, they’d say, “Well, that might actually be counterproductive, make the problem worse by disincentivizing the development of workforce housing.” And I just wanted to take a moment, you know, to recognize the Opportunity Zones program, which I thought was…
You know, obviously, we have OpportunityDb as a partner site with AltsDb, so we’re very involved there, and it’s a bipartisan program that’s incentivizing private capital to invest in, you know, these economically distressed census tracks. And so, you know, maybe there’s been a few aspects that have been controversial but on the whole, that program has been very, very successful.
And to me, it’s like there’s this almost like sleeping giant of private capital that I think is willing to invest in the development of workforce housing, you know, if only it will be approved, if it will be zoned, if it will be allowed.
And so, you know, the development that you’re talking about in Houston, that’s very exciting. And, you know, I understand, you know, Texas, a lot of these places in the Sunbelt, they’re just a lot more friendly to developers, right?
DJ: Well, 100%. And, you know, when you look at the opportunity zones and what they came out with, and, you know, your partner cite does an excellent job in providing information on that and talking to various developers and really getting good insight but that was one of the ways to combat this issue, right?
That was one of the reasons why they implemented to say, “Okay, let’s go into these markets or these areas that they identified that they can help regentrify or provide certain services or housing, right, in these areas. And the way we’re going to do it is we’re going to offer tax benefits,” which was actually quite smart, right?
And usually, what happens anytime you go into an area it starts to get gentrified, well, additional things happen and it grows that community, you know, and it just continues on…
Andy: Amenities, and sushi restaurants, and, you know, good and bad, but you’re talking about essentially, you know, citizens, businesses entering into an area that is economically distressed and enhancing the area from that livability point of view.
DJ: Yeah. And, you know, one of the problems, even in some of these opportunity zone areas, right, is that it’s becoming increasingly difficult for these workers, you know, to buy or rent in the area that they work, just like we said.
And this is part due to their wages, and now we have the rise in gas, which is significantly more, but they’re having to push outside in order to find these places, right, in order to live. And, you know, so that’s where, when you take an Opportunity Zone, for example, even though it might be outside of an area like some of the Opportunity Zones, they’re creating that live work play area, right?
DJ: Which is great because it’s bringing it to them. But the majority outside of the Opportunity Zone, you know, these workforce locations or where they can get rent and afford it, etc., are outside the city, you know? And that’s what they have to do.
And that’s one of the big challenges. And if they can, you know, bring that closer in, that’s great. Now, some of the issues that you run up with is, we talked about zoning, right? So that’s something that needs to be identified. You know, you have what’s called NIMBYs, not in my backyard. So you’ll get people that are like, “Okay, yeah, this is great. It’s going to help the area, but I’m for it until it’s in my backyard and I’m worried that, you know, there’s going to be a problem.”
It goes back to where a lot of people think it’s subsidized rather than hardworking people that are working multiple jobs, etc, right? But that’s a legitimate concern that a lot of people have. Now, the other ones too is, you know, that they’ve thought about using is actually not only the OZs like we’ve been talking about, but some municipalities about it creating a dedicated housing trust fund, repurposing vacant land, right, underutilized retail space, having certain inclusive zoning, you know…
Andy: DJ, have any of these other strategies worked? I mean, I think the Opportunity Zones program, I would say to a good extent, but maybe a limited extent it has worked. I mean, we’ve seen tremendous multi-family assets get built, you know, ground-up development with successful outcomes for the investors.
But some of these other strategies that you’ve mentioned, have they actually, you know, been successful in helping bridge the gap?
DJ: You know, they’ve also what they’ve done in the past, right, they came out with low-income housing tax credits, which is an incentive to build, and you’re getting money from the government to help subsidize the development. You know, there’s certain guidelines that you have to move around, and you got to jump through hoops.
But there are developers that focus on that. The returns for investors are much lower, but there is additional monies that happen. You also have new market tax credits where you can actually, once again, have money that is government subsidized to help building these. So they’ve continued to try to figure out solutions in order for this to happen. In my mind, the OZ is probably one of the best that they’ve done, but I think ultimately, you know, it’s going to come down to zoning.
Will they accept it? Will they not? You know, there’s up here in Colorado, in a town called Greeley. It’s between Fort Collins and Denver. And going through those zoning require, you know, their zoning laws. They literally said that they will allow for, you know, mobile home communities or similar modular to rent communities and they welcome it.
Right? And these communities have changed a ton over the past where…
Andy: And, sorry, are they actually living up to that? I mean, because a lot of localities will say, you know, I’m thinking of like San Francisco or something, that’s just a poster child of saying, “We’re really focused on this issue,” but then their actual policies fly in the face. So is this town actually, you know, are they putting their money where their mouth is?
Are they actually allowing this in terms of zoning?
DJ: The short answer is, yes, but the biggest difference between a San Francisco like you mentioned in Greeley if you were to pull it up on a Google, you know, Map and you looked from the satellite picture, there is so much land.
Andy: It’s not landlocked. It’s not landlocked by a body of water.
DJ: Well, it’s also like all this farmland and everything else. So there is so much land. They see that as tax dollars to help with their community. So they’re open for everything, right?
Andy: Well, that sounds like Houston with, you know, sugar land and all these suburbs that are pretty much large cities in their own right.
DJ: That’s right. But when they start, they’re just small, right? And so when they’re small, the town city will say, “Oh, how do we grow this?” Right? So it’ll get to a point at some point in time that they’ll say, “Okay, we’re cutting this off.” But as of right now, they are open to it. The thing is a lot of people, the majority of people don’t know that that is actually written in their bylaws.
Until today, after, you know, all your people watch this. But, you know, that’s what’s needed to really… It’s not incentives from the government. It’s allowing for these communities, you know?
Andy: So it’s not necessarily that you need the incentive, you simply need the legal permission, the legal ability to develop. That’s really the bottom line when you kind of cut through the subterfuge and red tape and all the programs is the bottom line is, am I legally allowed to build or not, right?
DJ: It is. And, you know, like I said, I mean, it’s much different than what people realize. In fact, when I was in Boston, I took on just a three-month contract and it was a group called Hometown America. So they said, “Okay, you know, come in.” There was two different properties that they had, “And help us figure out what’s going on,” right?
Because it would take them like a year in order to provide a request that came in from one of the people that lived there. And they had two properties. The first one was a mobile home park which is what you think of, right? Garbage everywhere, cars around, you know, which is a stereotype.
The other one I went to was a 55 and older. And they had landscaping everywhere. They had a clubhouse. They had a pool. You know, their homes were, you know, modular, but when you walked in, you would never know in a million years that they were built like that, right?
And their classification. And those are communities that can really be built that you’re not going to notice and help with this affordability perspective. You’re going to have to have smaller homes. But once again…
Andy: And, Dj, you know, modular homes are like an order of magnitude more affordable, right? I mean, it’s…
DJ: Significantly, In fact, during the time, and this was probably about 20, 15 years ago, a home on average cost $160,000. Well, in the rest of Massachusetts, it was like $450,000. So it’s considerable. But once again, they were far away from the city center, right? They had to be far out.
And, you know, there’s a perception problem. That’s why you have these people that are saying, “Not in my backyard.” And it’s more of an education and awareness, you know? And that’s why people that are looking at opportunities, you really need to take a hard look at this and understand who are the tenants because they’re not subsidized, right? These are hard-working people, police officers, firemen, you know, people that are managers of retail locations.
I mean, these are people that are, you know, they’re hardworking and they just want a place to say that they can afford and that’s nice.
Andy: Absolutely. I mean, if you’re hardworking at a job that’s adding value to society, it’s not too much to ask that you have a roof over your head that’s clean and safe and in a neighborhood, you know, with families and other amenities. So let’s switch gears for a minute because you’d sent me some notes. And specifically this case study of Breckenridge, Colorado.
And so there are, you know, you already mentioned another, I believe town in Colorado, but so some localities, you know, number one, I guess they “get it,” but number two, politically, policy-wise, however, they’ve been unable to get their act together and actually, you know, enact the policies that allow for the development of a substantial amount of workforce housing.
And, obviously, it differs from locality to locality. So what happened with Breckenridge and what kind of effects did they see when they allowed for the development of workforce housing?
DJ: Yeah. And, you know, what they did is that… And there’s a lot of cities and towns that are looking at the impact of affordable workforce housing, right, on the community, the demographics, economies, housing prices, you know, what are the options? And which is really great, right? Because when you have data, you can make better decisions rather than just making assumptions of, “Oh, this isn’t good,” etc.
So the town of Breckenridge did. Some of the reasons for promoting this affordable and below-market priced housing, specifically in resort communities, right, they range from a number of things. So it’s boosting the resident base, increasing household diversity, right, to build and maintain a sense of community.
When you’re looking at these resort communities, a lot of people just come in during the winter, right? For the skiing that happens a lot and this type of thing. Also to housing essential workers, healthcare, emergency services, education so it can improve the quality of… They wanted to see if it would improve the quality of services to residents and the visitors.
Because they are seasonal, they wanted to see if this would decrease the seasonal fluctuations in the local economy by providing local resident base that can support the local businesses throughout the year, right? Because a lot of people are just there that it’s boom or bust, and if they had zero snow, they have big problems.
And also improving employee satisfaction, right? Decreasing job turnover, reducing commutes by allowing the workers to reside in or near the community in which they work. So these were, you know, the reasons that they really wanted to dive into this. And it was very interesting because what they found out is that by having affordable housing for the workforce, at least in Breckenridge, that these workforce housing programs can have a significant impact on the demographics, the economy, the housing affordability in a community, right?
So, for example, in Breckenridge, you know, as we’re talking about the households that reside in this workforce housing units, they’re more likely to have children, be younger on average, have resided in the area less than 10 years, and report their homes are in better condition than those in the market rate housing. And, you know, this was between 2000 and 2010.
I mean, one of the reasons that are really driving all of these apartments is because of affordability and not being able to buy a home, right? Now, you also have other factors that, you know, maybe they don’t want to have their… They don’t have children yet, or they don’t want to take care of loans and everything else. But with these loans, student loans is a huge problem, right?
How are you going to pay those off and still pay for that? So, you know, some of the results that came out of records just continue there, is that it accounted by having this increase in number of families and children within the town, it actually accounted for 60% of the growth in these households. It helped the town address, you know, second homeowner pressures, increased local occupancy from 25% in 2000 to 28%.
So we’re starting to see that increase. It significantly helped essential workers purchase homes in town, so the healthcare, emergency services, education, childcare, decreased community…
Andy: Yeah, I mean, a couple of these things, DJ, you’re mentioning, you know, think of like a teacher shortage or a nursing or healthcare worker shortage. You’re going to need workforce housing, you’re going to need, you know, middle class, working-class housing in your community, or you can expect a shortage of those type of workers. And then the other interesting thing, you mentioned demographics, and I’m thinking of, you know, luxury, you know, Class A multi-family or just, in general, luxury housing and generally, you know, who’s that going to be generally?
It’s going to be older people in that more advanced stage of their career who can afford those types of homes. Whereas, you know, young families with children, you know, they’re more likely to be in that earlier stages of their career where they’re still starting to build up personal wealth.
DJ: You know, yes. And they also have more disposable income, right? So this increase that they had because remember they were going through a year-round, they wanted more people year-round. I mean, it increases expenditures by 15 million per year.
I mean, that’s a lot of money in that local economy, right? And then when you look on the housing options, it provided a variety of housing for the locals and the price points. And overall, actually, the housing held their value better during the housing recession and were much less susceptible to foreclosure than market rate units.
And so, you know, that’s a pretty big impact as a whole. Now, who benefits from that as well? Well, obviously these people that are working there does, but the other people that you just mentioned, if they’re older or if they have second homes or, you know, if they live there permanently, you know? You know, the academic director at the Family Office Real Estate Institute, you mentioned earlier, Glenn Mueller’s professor at University of Denver, he lives right outside of Brackenridge.
And he benefits because of the vitality, right? And when you have more people, then you got to have more grocery stores. Well, now that helps the other residents and stuff like that. So it’s sort of like the Opportunity Zones where it can feed off of each other.
Andy: A virtuous cycle. And absolutely, you’re right. Even the wealthiest resident of any given census track or MSA, they’re going to benefit from more teachers, you know, firefighters, police officers living in that local area that’s going to improve a community, families living in the local area.
Everybody needs to go to the doctor now and then, right? So when you go to the doctor, no matter what your income, you don’t want there to be a nursing shortage when you go to the doctor. Right? So you’re absolutely right. It does benefit everyone.
DJ: Well, also the quality of doctor, right? Because if you have a doctor that can have a thriving practice, you know, rather than just occasionally make money, you’re going to get even better doctors and stuff like that, right? And it’ll sort of feed upon it. I mean, you know, this topic, Andy, this is a huge need that needs to be addressed. And it depends how the local municipalities look at it.
Just like we said, Greeley. I think the Opportunity Zones are helping with that. It depends on how the government really looks at this. I think that it depends what party is in the government too. I think that it depends whether it’s a Republican or Democrat. And it’s pretty obvious that the Democrats are more for figuring this out.
But, also, you know, at the end of the day, and I’ve said this by the project we have in Houston where there is no zoning, I said, if somebody can figure out how to take that same model work around some of these zoning issues it’s huge. It’s a game changer because a solution is needed.
A solution is really needed.
Andy: Yeah, absolutely. And, you know, I would say the intent is not enough, you know? So, you mentioned, you know, younger people with ideals that want this problem solved, the intention is not enough. If the proposed policy solution is actually counterproductive, like, as is the case with rent control, the intent is not enough.
You need the actual solution that can exist in a market-based reality in the real world. So that being said, what do you think is the future of workforce housing I mean, nationwide? Are there any trends that you would identify? I know it kind of differs locality by locality, but I’m looking for big broad trends.
DJ: Yeah. I mean, it’s becoming more and more a discussion. You know, I don’t think you really heard much about it. Going probably five, six years ago, it wasn’t discussed as much. So the awareness is increasing, which is good. And that is being in addition to the multi-family demand, which there’s still a lot of fundamentals that are there driving what’s happening in that market.
You know, I think that from what we’ve seen with the OZ and whatnot, that there’s strides in this direction. But ultimately, you know, whether it’s Texas or the government figures out how this can be built anywhere, maybe at a certain level, but built, well, not only will it solve the problem for the demand that’s there because once again, there’s a $7 million or a 7 million unit demand.
And when I say unit, I mean where somebody would live in. But with that also comes developers that’ll be willing to build, which will help solve the problem. Investors that’ll be willing to invest because they’ll get really nice returns, which helps solve the problem, right?
And so I would say to anybody watching this is that when there’s a workforce housing opportunity that comes across your desk or whatnot, you really need to take a hard look at that because there’s such a demand and there’s such an opportunity.
Andy: So, DJ, let’s say that does come across my desk, you know, an offering with workforce housing, what are, like, the key two or three things? You know, aside from all the normal due diligence that’s always important, what are the key things that you really look for, you know, in your role at Evergreen or with the families that you work with?
What are the key factors that you’re really looking for?
DJ: That’s a good question. We always focus on the sponsor, the operator first. Can they implement? Have they done something like this before? Do they have experience? Because it doesn’t matter how great of an idea, regardless of the real estate opportunity, if that group cannot implement. So that’s the number one thing.
And that’s any real estate investment. So that’s the first thing. The second thing is I’d look at to say, okay, is the demand there? Is there.. Now we know that there’s a huge demand, but in that specific location, is it showing a demand, right? Because somebody could… There are parts of the country that there might not be those types of workers, you know, for whatever reason, or not as many as workers.
So I’d look at the area to say, “Okay, how much of that demand are we actually filling?” That’s the other thing. The third thing I would look at, and this is outside of any metrics you can look at or anything, is, would I want to live in a community like that, or could I see people living there?
Because, you know, if you saw something and say, “Well, I wouldn’t live there,” it’s probably other people are going to, you know, feel the same way.
Andy: Absolutely. I mean, that is the best test. Like, in software programming, I think the phrase is something like, you have to eat your own dog food. Meaning you got to use your own software. If you’re not even willing to use your own software, it must not be very good software. So I 100% agree from that standpoint of real estate investment and multifamily investment, workforce housing investment.
So this is the stage of the show, I know we’re running short on time here, where I normally, you know, ask, you know, where can our visitors learn more about Evergreen Property Partners? But I did want to mention that we are planning a webinar, an upcoming webinar, and I think this episode is going to air a couple of days, maybe about a week before that webinar. So if you’re listening or watching this episode, make sure to check our show notes because we’ll have more information in the show notes.
But that being said, DJ, where can our viewers and listeners go to learn more about Evergreen Property Partners?
DJ: Yeah. And one thing I just want to mention too is that investors, a lot of investors want cash flow and because of the demand, a lot of these types of communities or housing needs to be developed, right? Just because it doesn’t exist. But usually, there’s going to be some very strong cash flow coming around the corner.
So don’t let that persuade you, right, from looking into this because from a long-term investment, it’ll be extremely strong. Second thing too is when we do have that webinar that we’re talking about if you listen and got this far, you’ll see how what we’re working on falls in line with what we’ve spoken about, right?
So you’ll be actually having an actual example of everything we’ve spoken and how it’s being utilized in a practical purpose from an investment standpoint. You can find us at evergreenpropertypartners.com, big long URL, but it’s pretty simple. So evergreenpropertypartners.com.
If you have any questions, all you do is put a [email protected] as well. So but thank you so much, Andy. This is great because it’s a lot of people don’t really understand the ins and outs of workforce housing, and I think that it’s education like this that can actually help, you know, not only investors but the future demands.
Andy: Absolutely. And, DJ, just kind of a side note, I don’t think I’ve ever told you, I really love the Evergreen brand name and website and everything. Just the concept of Evergreen really jives with, like, the family office philosophy of preserving wealth and, you know, the evergreen nature of that.
DJ: Well, thank you very much. We appreciate it. We plan on, you know, utilizing various verticals to continue that theme as well.
Andy: Excellent. Dj, thanks so much for joining the show today.
DJ: Well, thanks for having me.