From Affordable to Attainable: Housing Solutions

Scott Baumberger: Hello, and welcome to the creative viz podcast where we discuss topics in architecture, development, and visual design. Today I'm speaking with Jason Moshe Zuki. He's with the NRP group in Charlotte, North Carolina. Working as a VP in development. Welcome, Jason great to see you.

Jason Moshizuki: Scott, thank you very much for having me on. It's a pleasure to be here.

Scott Baumberger: Great. Thank you so much. I'd love to hear a little bit more about NRP. I understand you guys are focusing on housing, but love to hear more about what you guys are doing. 

Jason Moshizuki: Absolutely. The NRP group, we were founded in the mid nineties at Cleveland, Ohio. We're a national multifamily development firm. Were now currently in 17 different states. We recently expanded to Phoenix and Las Vegas. Out West we're extremely active in the Midwest and the Southeast.

We have a very large regional office in Texas, and we have some offices in the Mid Atlantic and the Northeast as well. NRP Actually started its firm life as an affordable housing developer. NRP stands for Neighborhood Revitalization Partners. Kind of around the mid, early 2000s, we transitioned to market rate housing as well, and we now cover kind of the full spectrum of multifamily. I think to date we've developed over 50, 000 units. We've built, pretty close to 40, 000 or a little bit over that at this point, with a similar number of units kind of currently under management. We've really expanded pretty heavily here in North Carolina over the last couple of years.

I've been our developer basically since 2017. NRP hired me ran out of business school in 2014, been here about 10 years. It's pretty incredible because it doesn't seem like it's been that long. I started out as a development project manager at NRP primarily closing debt and equity, working on low income housing tax credit applications, rezonings, budget management.

It was a really good, solid training program to kind of segue into my role now. Around 2017, as I mentioned my manager now was covering, I think, about four to five different states, and just given the growth of this area and everything that was happening on the economic development front there was a desire at the executive level at NRP to bring someone here, more full time, and I was sort of the beneficiary of that.

What I've really enjoyed so far as VP in my current role now is the NRP has given me the opportunity to develop both market rate and affordable projects under the low income housing tax credit program. I'll abbreviate that as LIHTC, but that at NRP, as in most shops, that's usually kind of two different functions.

Based on my earlier role as a development project manager in my experience with the QAP, I was able to do both. And kind of early in my career, I would say I've definitely spent more of my time on the LIHTC side. Between 2018 and 2022 we developed four projects here in the city of Charlotte, 4 percent bond deals.

As of late, we've definitely transitioned more towards the market rate side of things. We continue to work on both. Now, given some of the challenges that you cover on your podcast and that many of the folks who listen to this are well aware with interest rates and costs and just kind of the prevailing environment.

We've definitely started looking at a third option called attainable housing, which is more of what we would determine as kind of the missing middle workforce housing, moderate income housing. It's a topic that a lot of different shops, competitors, NRP and peers and government folks are talking about just because it's such a need.

We have housing for the very lower end of people that are making low income type wages. Then we have the high end class A infill stuff. We're trying to do a better job, particularly in areas that have massive economic growth, like the triangle of trying to find housing for the workforce.

So the people that serve this area can live in this community. That's been something that we've been spending a lot of time on lately. And that's probably what I'm most excited about going forward here in 24 and 25.

Scott Baumberger: Awesome. That's really great. When I think of the missing middle, I'm thinking of ADUs. I'm thinking of duplexes, triplexes, still fairly small, modest developments. Is that what you're involved with?

Jason Moshizuki: That's a really important distinction because that is something like the city of Charlotte passed a new UDO a couple years ago. The ADU thing has been a big topic of conversation here at the municipal level. It is certainly a great way to expand the number of units that duplexes and triplexes. We originally got rid of single family zoning here in the city. Most properties could be duplexes and triplexes, and I think they're evaluating that going forward as a policy now. When I mentioned attainable housing from kind of the NRP program, essentially, it is a market rate type project, there's no tax credits, there's no public subsidies, so to speak, and these are multifamily buildings, traditionally garden style, 3 story type products, surface parking.

I would say relative to a project in south end Charlotte, for instance, that's a wrap or structured parking with urban infill type deal with really high end class a finishes and amenities. This is probably, I would say an a plus, I would say attainable housing is more kind of like an a minus where we offer very similar amenities, very similar finishes, but it's maybe a little bit stripped down a little bit more modest. The units are a little bit smaller. The amenity spaces are a little bit smaller, but it's still a very high quality product, but due to those cost efficiencies that we're generating from those design efficiencies, we are able to offer rents at a lower level than, kind of a pure class A type deal.

Scott Baumberger: Yeah, interesting. the unit mix then somewhat different as you compare attainable versus market rate?

Jason Moshizuki: It is usually. On most of our market rate deals, for instance, we have a balance of one bedrooms, two bedrooms and three bedrooms. On the base level attainable product. It's typically mostly just ones and twos. We have an attainable plus concept that does incorporate three bedroom units and does have some added, amenity type features unit finish type features to make the product more consistent with what's in that market currently.

I would say the baseline attainable product is roughly 50 50 between one bedrooms and two bedrooms, but there is some, obviously, variation depending on the site context.

Scott Baumberger: Sure and then, as we compare both of these options with quote, unquote, affordable housing, obviously, the financing, the tax incentives, et cetera, those are all very different up front, but at the end of the day, how do they compare, visually and in terms of livability, are they markedly different from the other types of affordable housing?

Jason Moshizuki: Yeah, I would say if you were to come visit city of Charlotte and see our 4 percent light tech projects, I don't think the average person would be able to look at that and say, that's an affordable development, based on the design requirements of the state's qualified allocation plan.

And other requirements that we have through the City of Charlotte that provides municipal gap financing. This is a very high end affordable product. The elevations look very nice. We have granite countertops in our units. We have many of the same overlapping features to market rate.

I guess the difference is there's very specific design requirements that are laid out that we have to do for affordable. So I definitely think those projects are going to look more similar to one another relative an NRP product versus like a cross and southeast product versus a Laurel Street. It's going to be a little bit more similar just because we have to abide by the same design requirements.

Don't think somebody that is not a housing expert would be able to go in notice that.

Scott Baumberger: That's a good thing. I'd be curious about the speed to market. Do you find that the financing, the regulatory aspects of qualifying for affordable housing, does that tend to slow down the development process, or maybe it speeds it up. does that compare with something that you were going to develop on its own market rate?

Jason Moshizuki: That's a really good question. I would say with an affordable development , you operate on a cycle of applications typically. So we have a pretty good idea about how long it's going to take. We know when you have to apply for the tax credits, we know when you have to apply for the gap financing and under the 4 percent program, it's non competitive.

So right now, we don't have a volume cap issue with bonds yet in the state of North Carolina. And so if you apply and you're meeting all your threshold requirements, you're probably going to get those And so typically after we apply, we would start our design process, moving towards full permitting.

So you have a pretty good idea about how long this whole process is going to take typically, and in places like Charlotte and places like Raleigh, I definitely think that Council in their respective cities has made affordable development priority. You have better odds of achieving rezoning approval in those specific markets.

With market rate there's a little bit more variability. Right now, I would say, given what we're seeing in the capital markets, very high interest rates and things like that. It is more challenging to capitalize these projects. For affordable deals, you still have a lot of banks that need CRA credit and things like that.

So, you're not having a bottleneck as far as getting debt, things like that. That's more straightforward. I would say on the market rate and attainable side of things, there's definitely is a lot of capital that wants to be deployed, but obviously it's a challenging environment.

We're seeing in a lot of markets that both locally here in North Carolina other markets elsewhere in the nation that NRP operates, equity is becoming a little bit more challenging right now. And so we're probably starting that process a little bit earlier, than we would in a more typical market.

The good news is we've been operating for a long time and we have a lot of good capital partners and capital relationships that we've developed over the years. So we're still able to capitalize our projects, but it is taking a little bit longer in this environment than I think we've historically seen.

Scott Baumberger: yeah, that's really interesting. Thanks for sharing that with us. I'm curious we're contrasting market to affordable. Does that play out in terms of your site selection? I imagine you go look at a site and you say, okay, this is primed for an affordable project, or this particular site is clearly ready for a market project instead.

Jason Moshizuki: There's definitely a lot of commonalities in site selection in terms of the amenities you want to be by, employment centers, those sorts of things between both product types. But on the affordable side there's a very specific set of criteria that, generally speaking, you have to meet in order to qualify for tax credits and to qualify for municipal gap financing.

Kind of a baseline criteria is proximity to neighborhood amenities. For example, you want to be within roughly a mile of a grocery store, a pharmacy, neighborhood retail, schools. Transit is obviously big plus, which has been sort of a guiding light for us in both market rate and affordable developments here.

There's some very specific demographic and locational details that you need to meet to select these projects. Probably what's less known is that there's something called qualified census tract for affordable developments. I think the definition of a qualified census tract, it's a term by HUD.

Technically the definition is something like, 40 percent of the folks that live in that census tract are at 60 percent AMI or below area median income. But you get a basis boost for being located in these specific census tracts. So the ideal 4 percent site that you would want to find would be something that meets all those locational details, proximity to those amenities.

And would also be located within a qualified census tract. There's certain features that municipalities prioritize like access to transit. I would say three of the four, LIHTC deals we've done in the city of Charlotte have all been located very proximate to the light rail system here, the blue line.

If you have that in your back pocket, when you're trying to pitch this deal to the cities to get You have a big advantage, generally speaking. On the market rate side of things, you still want to be close to all these great amenities, but I think the first thing you're looking towards is probably more rents.

You have a model that you're trying to hit certain targets. Return metrics and you have a rent in mind for whatever concept that you have. you take a look at the rent comps and you see that there is one comp or two comps or three comps that are located within X distance from the site.

And that kind of gives you a baseline to know that there's a market there. Then you start your search, looking further out towards, what else is close by? What are the major employers, how quickly can I get to the employment center? How close is transit? Those sorts of things.

There's a theme that I've heard a lot of people talk about in the last couple of years, where housing pretty much at all the different levels is becoming more commoditized, I guess you would say. There's kind of a sameness due to housing code and things like that. The one thing obviously that you can't replicate is the neighborhood and the amenities that are around it and how that makes living there a better experience for the residents.

Scott Baumberger: Absolutely. That's really interesting. Thanks for walking us through that as well. I understand NRP you manage the properties as well once they're developed. How would you manage the different types of properties differently or what is your approach to the different types I should say? 

Jason Moshizuki: So yes we are vertically integrated. Our management team, we have a market rate management team and we have an affordable management team. The reason why that is, is because on the affordable side, during lease up, there's an income qualification process. In the city of Charlotte, despite a lot of resources that politicians and everybody else, the private business community has put in, obviously, it's a very fast growing area, there's a fair amount of gentrification in these neighborhoods and rents have gone up here a lot over the last couple of years.

We do still have pretty significant affordable housing shortage here, which is not a Charlotte problem. It's an everywhere kind of problem. There really is no shortage of folks that want to live in these properties because it's affordable and it's high quality.

The first day that we go live on leasing for a lot of these properties, we might have A thousand people show up or a thousand people apply on just day one for 180 to 200 unit project. The problem necessarily isn't filling that building. It's making sure that everybody who's applying fits those and background check type requirements.

It's a little bit of a different process and it's very closely monitored regulated by the North Carolina, housing finance agency and the city and various other stakeholders in the process. There's just a lot more regulations and rules and things like that.

You need to follow that those folks are well versed and well aware of. On the market rate side of things we're at this year, and 2025, we're basically hitting a 50 year high in supply charlotte. pretty sure the triangle is similar right now.

You have roughly double the amount of units coming online. Right now there's a lot of competition on the management and lease upside.

You're definitely seeing a little bit more concessions and things like that. I definitely think that management is having to get more creative in such a competitive type of environment. On the affordable side, you're trying to make sure you're qualifying and following the rules. 

On the other side, on the market rate, you're trying to make sure that you're competitive with everyone else that's also trying to lease up. That's some of the topical differences.

Scott Baumberger; Yeah. That's really interesting. I suspect it's taking a bit longer to lease up these buildings where we're not really used seeing that on the ground?

Jason Moshizuki: Yes, we Don't have any market rate projects right now. We have 2 market rate deals under construction right now. The 1st of which is going to start leasing early next year. But, we've started leasing some affordable products that we're finishing construction on right now, and leasing is going very, very well, so far as we expected it would, but it's going to be an interesting 2025 for market rate leasing, I think.

Scott Baumberger: I was about to ask, is there a risk of oversupply? I mean, it sounds like rents could potentially drop a little bit if all of the supply is hitting at

Jason Moshizuki: Yeah, I would say right now, the city of Charlotte is projected to drop roughly four and a half percent or thereabouts this year by year end. I think that my opinion and I think a lot of opinions of my peers and other folks that are here is that we still have really good underlying fundamentals here in Charlotte and in a lot of the major metropolitan areas of North Carolina. We still have really good employment growth, still have great population growth. Charlotte has, I think something like 112 people moving here every day. Triangle Raleigh Durham has a little bit less, but proportionate per capita it's on similar levels. So I think long term, the future is very bright here.

I think most people think that 2024 and 2025 are going to be sort of speed bumps on what is otherwise going to be continuing to be a great run. I think it's going to take us longer to absorb the existing oversupply that we're seeing right now. I think that rents may be slightly off from what was projected at closing in a lot of these models, but longterm, definitely think that these properties will be well positioned for success.

I'm looking forward to seeing how we do.

Scott Baumberger: yeah, me too. I can see historically, even though if there's small dip, the rents do tend to rise over time. That's just natural how do you find that sweet spot of, we want to get just the right amount of supply out there so that we don't repeat this dynamic again, two, three years with the next cycle? 

Jason Moshizuki: That's a very difficult getting the timing of the market, right. Is always very difficult I think that right now, for instance, something that's come up a lot, just in conversation with other developers and, the higher levels of executive leadership NRP is that, when things are going good. Things are going gangbusters, like they were in , 22, for instance. There's a lot of competition for sites. probably overpaying. You're agreeing to take risks the purchase and sales agreement that you might not otherwise by waiving certain contingencies or closing faster than you would want to do ideally.

I think right now, for instance, where we're at a point in time where high interest rates and costs and various other things are slowing production here pretty significantly this year. Now it's kind of the time to start, for lack of a better word, trying to reload your pipeline, trying to find Good sites. Sites that may have dropped or that may have been coming back from developers that agreed to those overly aggressive terms when times were good and then got down the road and they were not able to capitalize the deal So think we're trying to use this time this bit of a market law, I guess you would say, to reevaluate where we want our properties to be. Where there's opportunities and where we can find favorable, land deals.

So when market turns in a year and two years that we're ready to go. The thing about institutional development is that it's a long process, you well know. I mean, most of the life cycles of these deals from the time that we find it to the time that we start moving people in the buildings, that could be four or five years depending on what the situation is.

 Sometimes you have to look for the bright side when you're dealing with temporary setbacks. So that's certainly what we're trying to do at NRP.

Scott Baumberger: Yeah. like to say it's like an eternal optimist, cause we're always looking out several years the future. You have to believe that the market's going to be there because got to make it happen today.

Jason Moshizuki: Absolutely. Yeah, when times are bad, people are overly pessimistic, and when times are good, people are overly optimistic, right?

Scott Baumberger: For sure. Well, thank you so much for that. Jason. Love to wrap up with a recent, win or success that you and your team may have had. Is there anything like that, that you can share with us?

Jason Moshizuki: Sure. We're working on our first attainable project in the state of North Carolina. I talked about this a little bit at the top of the call, but it's something that we're really excited about. We're entering sort of a new market for us, I guess you'd say, Selma in Johnston County. We have a project that we're working on.

Johnston County is something that's been on my radar for a couple of years . I think in the last 10 years, Johnston County has been the fastest growing county in the state of North Carolina. They have tons of job growth. They have a lot of fortune 500 companies in the area.

Nova Nordisk, I think has a 4 billion plant that they have that they're making Ozempic, Wigovi, and I think they have a plan to invest another 4 billion into that. They have other biotech and advanced manufacturing, type businesses out there. It's definitely an area where. You haven't seen as much multifamily development in the past but I definitely think that just given the growth of those industries that we're talking about and where those wages fall relative to our target tenant profile for attainable is very favorable.

It's definitely. new and good in the sense that we're working with the town and they've been great so far. It's a much less formal process, I guess you'd say, relative to some of the bigger areas. You can just call somebody up and talk to them and get an answer pretty quickly.

I think the attainable concept has been something we've been trying to execute here for a long time, but we haven't found quite the right site. And I think that Based on the way that Johnson County and Selma and Clayton and some of the other areas, other cities in Johnson County developing out and just how the overflow growth from places like Raleigh and Durham are shaking out, in another, two years when this is built, I think it's going to be really well positioned for success.

Scott Baumberger: that's great. Definitely one to watch. I was not aware the scale of the investment that you're talking about. That's really impressive.

Well with that I really want to thank you, Jason, for coming on. Really appreciate the insights today. Thank you so much for sharing that with us. I'll see you guys next time. Thanks so much.