How JBG Smith's New Impact Investing Head Aims To Improve D.C.'s Housing Affordability
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JBG Smith in May launched the Washington Housing Initiative, in partnership with the Federal City Council. It hired AJ Jackson from EYA to lead its efforts to develop or preserve over 2,000 units of affordable workforce housing in the next decade.
Jackson, who will speak Dec. 6 at Bisnow's Major Projects event, said the Amazon news makes his initiative even more urgent.
"The reason we launched the initiative is we have a need to increase production of housing across the region already, and obviously this demand comes faster and is accelerated relative to what we were experiencing pre-Amazon," Jackson said. "That's one of the things we're looking at from a research perspective is what do we think the pace of acceleration will be and where do Amazon employees want to live."
Jackson's team has been doing more than just researching; it has been raising millions of dollars. He said it has already raised $50M for the Impact Pool, the private investment vehicle JBG Smith will manage to preserve and create workforce housing in the D.C. region. It set a goal when it launched six months ago to raise between $100M and $150M for the pool.
That money is coming largely from institutional investors and high net worth individuals, Jackson said. He said the fund is targeting returns in the high single digits, which would make it similar to what investors would earn from more opportunistic funds.
The impact pool will be able to generate returns while keeping its rental properties affordable by utilizing a variety of tax incentives, such as private activity bonds, and it will have lower interest costs and more favorable debt terms because of its commitment to preserve affordability.
"By attracting private capital, you can attract enough to get to scale and also have greater flexibility than traditional sources, which are public dollars and come with a lot of strings and requirements you don't have when you're using private capital," Jackson said. "That flexibility will allow us to tailor solutions to the needs of the community and the building as opposed to fitting into the model of a federal or state program."
The other arm of the initiative is the Washington Housing Conservancy, a nonprofit entity that will acquire and develop workforce housing. The organization will be independently managed, and Jackson said it is preparing to announce the members of its board, which will be made up of real estate and nonprofit leaders throughout the region.
The private investment vehicle and the nonprofit arm will both focus on preserving affordability in what the Washington Housing Initiative calls "high-impact locations."
"For us, high-impact locations are places that are affordable today, but over the next five to 10 years we think will face increasing cost pressure," Jackson said.
That category includes some residential neighborhoods near Crystal City, where JBG Smith landed Amazon for its HQ2 campus.
"Columbia Pike and Arlandria are what we would consider high-impact locations and have been areas of focus for us in the housing initiative, like they've been for Arlington and Alexandria, in terms of target areas to preserve naturally occurring affordable housing as those areas redevelop," Jackson said.
While the initiative will target both preservation and development opportunities, Jackson said it is much easier to buy existing affordable properties and keep rents down than build new product with affordable rents.
"We think that the way to have the greatest impact is through preservation of existing, naturally occurring affordable housing that in the normal course of things might be sold and improved and then have the rents raised beyond levels that are affordable to the workforce and families," Jackson said.
Jackson will discuss this initiative at Bisnow's Major Projects event, Dec. 6, at The Watergate Hotel.