2 Dallas Execs Selected For National Program To 'Ramp Up The Bench' Of Diverse Developers
When James Armstrong III was first starting out as a developer, he went to the bank for a loan. The loan was denied, but not for lack of financial acumen — Armstrong, a Black man from West Dallas, was a former banker. The denial, he said, came down to exposure.
“I just didn’t have the experience,” he said. “As a kid, no one told me that you could one day be a real estate developer — it was basketball player, football player, or do a city job … This world was not exposed to me, and I was not exposed to this world.”
Today, Armstrong is the president and CEO of Builders of Hope, a community development corporation that builds affordable units in urban areas of Dallas. His list of career accomplishments is long, but those successes have not always come easy. As a Black developer, Armstrong faced systemic barriers that kept his business from reaching its full potential. But a new program aims to level the playing field for minority developers like Armstrong.
Through a $30M grant from the Wells Fargo Foundation, the trio of Capital Impact Partners, Reinvestment Fund and Low Income Investment Fund launched the Growing Diverse Housing Developers program, which seeks to increase racial equity in development while also addressing the country’s shortage of affordable homes. Armstrong is among 27 nationwide participants, along with Jason Brown, president of Dallas City Homes, a nonprofit focused on preserving and creating affordable housing.
Over the course of the four-year program, $15M of capital will be available in the form of enterprise-level grants to address business-related objectives, and another $15M will be leveraged to finance affordable housing projects. The developers will also have access to monthly training sessions focused on management, development and other real estate topics.
Brown and Armstrong said accessing sufficient capital for projects has been a consistent hurdle for them. Biased property valuations in minority neighborhoods are a major contributor, Brown said.
“Banks historically only want to give you 80%-90% of [the cost of] a project,” he said. “Just because of where my projects are, banks will only give me half. So that means my gap is a lot larger.”
Limited balance sheets often prevent developers of color from securing loans from large financial institutions, Brown added. This hamstrings their ability to do projects of scale, but participation in the Wells Fargo program removes that obstacle.
“We’ll be able to use the organization’s balance sheet to leverage our strength as a borrower to go out and get these deals where the banks don’t seem favorable,” he said. “Having a stronger balance sheet and stronger financials allows us to get more favorable terms and favorable debt.”
Brown said the program will allow him to invest money in staff, consulting services and vendors who can help him operate at a higher level. This ensures long-term stability for his business, he said.
“Money is great, money is always good,” he said. “But being able to tap into folks that have done this for generations or have experience that far exceeds my experience or anyone's in our marketplace is phenomenal.”
Builders of Hope has more than 300 units across nine projects in its pipeline, and each requires different levels of subsidies and capital structures. His $7.4M Trinity West project, which dedicates a portion of units to families making below 50% of area median income, includes five sources of capital, with soft costs covered by Capital Impact Partners.
The program not only enables Armstrong to address the growing demand for his services, but also helps him advance the pool of diverse developers by setting an example for his peers.
“We currently have a waiting list of over 400 applicants who are looking for some sort of affordable housing, and our production has been between 20 and 25 units a year,” he said. “My biggest hope is that I’m able to grow as a developer and really provide a blueprint for other developers like myself who will come after me to say, ‘This is how you get it done.’”
Minorities make up only 5% of the developers nationwide, according to Wells Fargo. Armstrong said a lack of diversity in the industry is directly linked to the country’s shortage of affordable housing. Recent estimates show Dallas is short more than 200,000 affordable units, and enabling developers of color to build capacity is a big part of the solution, he said.
“We have to produce, and in order to do that, we have to ramp up the bench,” he said. “We have to pull people aside who are doing one to two homes a year and ask them what they need to take that one to two homes to 20. That’s the only way we’ll be able to close the gap between the supply of attainable housing and the demand for attainable housing.”