Is the development of owner occupied housing on a massive scale achievable in blighted Opportunity Zone neighborhoods? First, you have to shock the system.
Daniel Edwards and Ebony Edwards believe they are about to do just that. They are the founders of Kansas City-based Opportunity Zone development firm NeighborBuilt.
Click the play button below to listen to my conversation with Daniel and Ebony.
- A model for bringing change to neighborhoods with a lot of economic disparity.
- How the traditional market rate real estate development system fails in Opportunity Zones.
- Why NeighborBuilt is focusing on their execution system instead of funding.
- How MovementKC is trying to solve Kansas City’s housing shortfall of 17,000 units — and how their model can apply across the nation.
- The concept of attainable housing vs. affordable housing.
- How to use real estate to increase the quality of life in a neighborhood, by creating a community that integrates new neighbors with current residents.
- The territorial nature of established organizations who have had a stronghold on the community, and the challenges of working around the traditional system to rebuild neighborhoods.
- The opportunity that NeighborBuilt has to shock the housing system by targeting a different demographic of people who care about sustainability, technology, and community.
Featured on This Episode
- Daniel Edwards on LinkedIn
- Ebony Edwards on LinkedIn
- Bruce Katz on LinkedIn
- Accelerator for America’s Opportunity Zone Investment Prospectus Guide
- Accelerator for America Opportunity Zone Investor Summit
Industry Spotlight: NeighborBuilt
NeighborBuilt is on a mission to develop owner occupied housing in blighted urban core neighborhoods across the country on a massive scale.
Learn more about NeighborBuilt
About the Opportunity Zones Podcast
Hosted by OpportunityDb.com founder Jimmy Atkinson, the Opportunity Zones Podcast features guest interviews from fund managers, advisors, policymakers, tax professionals, and other foremost experts in opportunity zones.
Jimmy: Welcome to the Opportunity Zones Podcast. I’m your host, Jimmy Atkinson. Can Opportunity Zones facilitate the development of owner-occupied housing on a massive scale? Kansas City-based development firm NeighborBuilt thinks that they may have cracked the code. And joining me on the podcast today, are NeighborBuilt’s founders, Daniel Edwards and Dr. Ebony Edwards. Daniel is an architectural engineer, and Ebony has a doctorate in community psychology. They joined us today from their home in Kansas City, Missouri. Daniel and Ebony, welcome to the show.
Daniel: Thank you.
Ebony: Thanks for having us.
Jimmy: Yeah, absolutely. It’s good to have you guys on the show. So first of all, just to start us off here, tell us about NeighborBuilt, what is it? And which markets are you in specifically and what makes it different from other Opportunity Zone developers?
Daniel: Yeah, well, so NeighborBuilt was really founded with the aha moment that Urban Core Neighborhoods that are typically and cities and metropolitans around the country do not know how to rebuild themselves, which is why we have Opportunity Zones in the first place. And we wanted to create a system that would allow these Urban Core Neighborhoods to actually have their own capacity to come in and rebuild. Planting their neighborhoods with owner-occupied housing, and surrounding that with supporting commercial amenities. And I think what makes us different is that we actually target neighborhoods that have…that are adjacent to thriving market, but have typically been demolished by urban renewal, experienced mass depopulation, have had a highway that is kind of split through the neighborhood and community to separate either the north side from the south side or the east side from the west side.
And we target these neighborhoods that have just really struggled to bounce back from white flight, black flight out into the suburban communities and surroundings. And we come back in and we build a single-family owner-occupied housing at volume. And then we provide the supporting commercial amenities to support those new rooftops, all based on the identity of who the community was and who it wants to be when it grows up. So I think that’s what really makes us different, is the focus on the owner-occupied nature of resetting neighborhoods.
Jimmy: Good. And I believe that your first such development is in your hometown of Kansas City, Missouri. Is that correct?
Daniel: Yes, that’s correct.
Jimmy: Good. I’ll ask you a bit more about how that’s going toward the end of the show. But first, I wanna back up a minute and see if you guys can give me a little bit more of your background story. Maybe you can go into your personal backgrounds a little bit and tell me how NeighborBuilt come about and how it evolved out of MovementKC?
Ebony: Yeah, sure. So actually, we’re both originally from Kansas City as well. Grew up not too far from the neighborhood we’re developing and Daniel actually went to high school in this neighborhood. And so it was very intimate with the neighborhood. I had gone away for undergrad and grad school. And he got me to move back to Kansas City from Chicago where I had everything at my fingertips, and basically took me house shopping and told me knowing kind of that precedent that Chicago had set that he would find me a neighborhood that was diverse, that had downtown views, that had a running path, and all of these things.
And we went to the neighborhood where he went to high school at where he always wanted to live, drove around and basically couldn’t find a house. Found one house on a block where there were no other houses on the block and tried to rehab that property, but it was too expensive to get a loan on. And so at that point, we realized that it was gonna be unfeasible to develop one home in the neighborhood. And our next kind of path of action was to find people that were interested also in building a home in the neighborhood with us so that we could make it justifiable really to banks at that point.
And that’s basically how MovementKC was started really. It was the idea that in order to make building in neighborhoods that have a lot of vacancies, in order to really be able to provide neighborhood amenities and make those, again, justifiable for the neighborhood, that we need to find people who have the same vision that wanna see change happen in neighborhoods and cities, where there’s often a lot of disparity in real estate and therefore and amenities and services such as schools in cities.
And with that, we were able around that time to also then acquire kind of a mass amount of property to make that possible. And so we actually found some landowners in the neighborhood, acquire the land and started MovementKC with this idea. And really started to look for people who, again, had the same vision and wanted to see a change and recognize that they could kind of partner to make this happen through homeownership.
Jimmy: Good. I’m gonna ask you more about homeownership in a couple of minutes here. But first, I wanna talk about just Opportunity Zones in general. Daniel, when we spoke on the phone a few weeks ago, you said something that really captured my attention. You said something along the lines of this, that the systems that are designed for real estate development instantly fail the second they come into contact with Opportunity Zones. What did you mean by that? And how can we turn this around and ensure that Opportunity Zones benefit local residents?
Daniel: Yeah, so yeah, that’s exactly right. I mean real estate development, anybody who’s been in the industry knows that it is a machine. It’s based on a solid pro forma and a good execution vehicle. The pro forma instantly fails and the execution vehicle instantly breaks down the second that you cross over into blighted distressed census tracts, which is where these Opportunity Zones are located.
The system is designed, when I say the system that is the banking system that includes developers, builders, suppliers, manufacturers, subcontractors, as construction is picking up. The demand for work is very high and so urban core communities that are in blighted distressed neighborhoods don’t have the same attraction for developers as a market rate neighborhood. That could be literally six blocks away but on the other side of a highway in our case.
Banks also consider our projects higher risk. And so when you cross over into these neighborhoods, and the high-risk nature of a deal is really the way that a bank can justify saying that, “Hey, this is a really great project, we really love what’s happening, but it’s high risk for us.” And I mean, we’ve been across that multiple times. But we’ve also seen that every city that we’ve gone to, whether it’s the south side of Chicago, or whether it’s Memphis, Tennessee, or Jackson, Mississippi, or anywhere across the nation, where there’s an urban core population, and Opportunity Zones, this is the reason why they have not been rebuilt.
So what we have decided to do is really focus more so on the execution apparatus to rebuild Opportunity Zones, and not necessarily the funding. There’s always money and there’s also always resources. That was one of the big things. I just spent a week out in Montana with a group of Opportunity Zone champions around the country. And most of the conversation there was about funding, funding, funding. Let’s talk about this fund. Most of the conversations in Kansas City have been about the funds, the investors. Very rarely has that conversation actually gotten down to the ground level of, “Well, who’s executing these deals once we have the funds available?” And then how are those deals actually gonna benefit the residents at the local level?
So we realized that the best way to wealth for any person historically has always been through homeownership. And these neighborhoods where we’re going into, they don’t have the execution vehicle to actually create the homeownership that’s required. So our focus for NeighborBuilt has really been the vertical integration of that execution platform that simplifies. We really broaden in… I’ve worked for the top 25 GC in the nation, our business partner has been with the top 25, 3, 7 GCs in the nation. And so what we’ve done is we’ve taken the construction practices that we’ve gained on the commercial level, and we’re just applying them to single-family at a volume scale.
So I think that we are able to bring in the equity and the wealth back into neighborhoods through the families and through their actual homeownership. And that ends up sparking out additional wealth throughout the neighborhood, the economy and throughout the city. So really focusing on the system approach to outside of just the funding, how do we make sure that everything else is in alignment from banking, to contractors, to subcontractors, to suppliers and everything down that line.
Jimmy: Yeah, that’s a huge challenge for Opportunity Zones development. You know, possibly the Opportunity Zones neighborhoods that need this type of development the most it’s obviously the hardest to start the ball rolling on, I suppose just because the systems in place just aren’t designed to handle that amount of economic distress. So, yeah, it’s definitely a huge challenge that you’re facing there.
Daniel: Yeah. And I think the reason why… You mentioned in the intro that we’ve cracked the code on this. I think one of the big things that is different from us and most developers is that Ebony and I have put our family on the line in this process. So meaning that we are closing on our first round of houses right now, and our family is one of the first rooftops to go into this neighborhood that we’re developing. So for us, it’s not us being an outside developer going into a neighborhood doing something to a community, we want it to be a part of the community that we wanted to rebuild, that we grew up in. And because our family has been put on the line, and we’ve been all in on that area, it really helps us to really think about this holistically of like, what kind of neighborhood will we wanna see? How do we build trust with residents around us? How do we build trust with contractors, developers, suppliers, manufacturers? Because we wanna make sure that our home quality is just as great as our next-door neighbors and surrounding us as well so. I think that’s why we’ve worked to crack the code, is that we’re actually putting our own family on the line. And so our patients in working in Opportunity Zones, these distress census tracts has just been, I guess, our patients is just it’s been patients. And in the truest sense of the words so.
Jimmy: Yeah, absolutely no, you guys are not standing back at a distance watching this happen. You are right in the middle of it and your lifestyle is at stake here. So you definitely have quite a bit of skin in the game, so to speak. I wanna talk about the housing affordability crisis that’s affecting much of the country. So a two-part question for you actually, one, first of all, can you characterize the housing deficit. And perhaps you can tell us a little bit about your local market of Kansas City and then following up to that part two of the question is, how is the NeighborBuilt model that address that shortfall?
Daniel: Yeah, so locally, I mean, affordability is a crisis nationally. And I think that a lot of the attention even towards Opportunity Zones has gone to the top 5% performing Opportunity Zones. So if there’s a…we’re talking about Opportunity Zones and markets that are pretty much already thriving and successful, they just now have a little bit better incentive. But there’s 95% of the rest of the country that had Opportunity Zones that are just regular everyday type neighborhoods and communities.
And so in those neighborhoods and communities like Kansas City, we are currently experiencing a 17,000 house deficit of existing Kansas City residents that need homes. This study was just put out in 2018. So that’s 17,000 houses that are required for existing residents, not including new people who will be moving into Kansas City. And I think the issue that when we think about affordability, in Opportunity Zones, I think that the affordable housing, the term or phrase “Affordable housing” has experienced a negative connotation of low-income tax credit projects or poor neighborhoods. But in our case, we need 10,000 homes of buyers that are at the AMI level or the workforce housing level. We need 17,000 homes of buyers that are at the extreme poverty level.
So that 10,000 home mark, the buyers at market rate to affordability there’s a huge opportunity for the entry starter home buyer, and we have no one in Kansas City to address that need. So NeighborBuilt has really positioned ourselves as the entry-level and above volume home builder. The average new construction costs in Kansa City right now is only attainable to the top third earners of employees in Kansas City. And so that leaves out our school teachers, our city workers, our everyday nurses and just regular workforce. And all of the volume builders that we have in Kansas City have not come into the urban core because, again, it’s the system doesn’t work in the urban core for those builders.
So we figured that if NeighborBuilt can be the high volume home builder for the entry-level price points up to we really haven’t put a cap on the amount that buyers could do, but really just trying to really build the neighborhood around community, around an attainable price point. So we really have kind of scrapped the word “Affordable housing” and we went to “attainable housing.” And for us attainable housing is really whatever buyers can afford to purchase at is what we should be able to build housing at. And we have switched from…we’ve really focused more on affordable living, as opposed to affordable housing.
And so affordable living for us is how can we get housing costs to be, with utilities included, at 25% of a buyer’s take-home pay. And because we are building a volume, because we’re doing things and we’ve almost we really…we haven’t engineered our homes or we’re not manufacturing our homes. But we’ve manufactured our process and how we approach development, we’re able to streamline and cut costs so drastically, that instead of us being an average price $12,375 for the Kansas City market, we’re actually at $225,000 for that perfect entry home sweet spot for most of Kansas City buyers.
Jimmy: Well, that’s great. I wanna drill down into that a little bit more, that housing attainability. You mentioned that you’re able to get down to $225,000 but can you go into a little bit more detail there? How exactly are you able to get your costs down? You know, part of what makes your model so powerful is that it is scalable. And I understand you are able to achieve some economies of scale when you’re building it at huge volumes. Maybe you can talk a little bit about the types of volumes that you’re seeing and exactly how you’re able to get your costs down. I’d love to hear your thoughts on that.
Daniel: Yeah, so typically, when we approach communities in Urban Core Neighborhoods, most city officials and developers are looking for onesie-twosie projects. “Here, let’s just do this one house and this one rehab.” When Ebony mentioned earlier that we tried to purchase that home and it was too expensive to rehab, it wasn’t too expensive for us to rehab, it was just that there were no supporting comps around it to support that type of that scale of rehab. So the bank again considered that as a high risk nature because it was a onesie-twosie project in the middle of an urban core blighted neighborhood.
So what we’ve done is that we acquire real estate at a volume scale. So that gets our costs down. We partner with local government entities in order to get tax abatements on property so we are able to keep the cost low. And also the holding costs. We break ground really in sequence, so just as an assembly line for a car manufacturer would break or would build, we do the same exact thing with our lots. Our lots are side-by-side. We break ground in cohorts. We actually recruit our buyers and cohorts which is drastically different than most other developers that we’ve seen. So our cohorts, and I’ll let Ebony speak a lot more to that. But we’re able to recruit our buyers in bulk, we’re able to procure our materials in bulk, our contractors, instead of them pouring a onesie-twosie foundation, they are doing 10 foundations at a time. So they’re able to keep all of their crews on board, they’re able to keep all their equipment on board.
So it’s really, like I said before, like it’s more so us just manufacturing our process using the same exact tactics that we would use at the top 25 GC construction firms, and just applying it to an industry, the single-family housing industry in a different way because, you know, single-family housing has always been done this way for all this time. So, over the last four years, we scoured the country to find easy to use, easy buildable materials that are long-term sustainable. So our homes actually end up being net-zero ready out the box. And they’re able to be erected in five days because we use technology to streamline all of our processes.
Jimmy: Good. So I wanna hear more about…and I think I’ll address Ebony now. I wanna hear more about the development of the community of the neighborhood in terms of the people that you bring in. Daniel, you mentioned that you recruit your buyers in cohorts. Can you explain that process for us a little bit more, Ebony, and what goes into doing that?
Ebony: Yeah, it’s actually something that kind of organically happened when we think about, you know, how companies, I guess, are infused with the founder’s personalities. I think this is something that just was organic for us, is going back to what I was saying earlier about when we needed to find buyers to build homes with us in the neighborhood. We just, you know, organically started having dinners, having people over, having events, getting together with people and having playdates when there were kids involved. We’re just doing kind of really normal things to get to know one another in order to build a community that actually ended up, I think, increasing trust and establishing relationship between one another. People that had a lot of questions about moving into the neighborhood were able to ask those questions in a circle of people that they trust and feel comfortable doing that.
And so that’s actually become a strategy for us now going forward, is having these social experiences, again, that can be as intimate as dinner parties and small gatherings too. We’ve done some kind of bigger meetings. And in this particular neighborhood, Daniel mentioned that we approach neighborhoods thinking about the identity of the neighborhood. And our neighborhood where we’re developing, it actually has a very rich jazz history in that, for example, the late-night jam session actually was founded in our neighborhood at the Mutual Musicians Foundation, which is the oldest jazz house in the country. It was home to the first colored musicians union that was acknowledged by the American Federation of Musicians. Just some really cool jazz history in our neighborhood. And we actually, Kansas City claims jazz, if you don’t know that already. And so we do live.
Jimmy: Swing jazz.
Ebony: Well, swing jazz, but it’s, yes. Okay, swing jazz it is. So we do live events as well on the neighborhood and really kind of talk about what we’re doing through that venue as well. And so it’s been really, like I said, good strategy for us to recruit buyers and people who just wanna make a difference in the neighborhood and add to what’s going on, maybe business owners. In this particular case, musicians who are looking for a space to create and also to play and show off their talents. And so that has really been really important for our buyers, I think to have that community before actually than building in the neighborhood and becoming a community. And so we target around 10 to 15 people at a time that we’re building for bulk in.
And so another thing that we do as well is to have gatherings in the neighborhood. And so there may be people who don’t have that kind of exposure to the neighborhood exactly. But it’s also a way for us to kind of bring together people who are interested in moving into the neighborhood with people who currently live in the neighborhood. And with my background, I’m really interested in developing community between the existing residents in the neighborhood and people who are moving into the neighborhood, and understanding, how can we use real estate and kind of the increase in population and density and diversity that comes with new homebuyers to increase the quality of life in the neighborhood.
And I think the major way that we do that is through creating a community. And, you know, I think that in a lot of ways needs to be facilitated, and we can’t just expect for it to happen. And so that’s some of the other work of MovementKC, is making sure that, again, those relationships establish and happen. And over time, hopefully, we have some plans to see, you know, some resource sharing as well between neighbors.
Jimmy: Good. And I can certainly understand how that could work in a small community that you’re a part of, you know, with 10 to 15 households, but how do you scale that nationally?
Daniel: Yeah. So 10 to 15 households is really what… That number is not as random as just throwing out a number of 10 to 15. We can typically fit 10 to 15 rooftops on half of a block. And so when you think about who are you gonna live the rest of your life around or the next five to seven years around, you really wanna have more intimate knowledge of who those people are before you get there. So even when we scale this project, we are looking at, because we’re targeting neighborhoods that have experienced mass demolition from either urban renewal, or just mass slum clearance, or anything of that nature, even targeting neighborhoods that have experienced mass devastation from natural disasters as well. What we are doing is targeting 1,000 rooftops per neighborhood.
And so when we think about scaling, for us, we still would break ground or we still would recruit our cohorts in that 10 to 20 range because those are still the people that are gonna be there. It’s just that instead of us breaking ground on a cohort of 20 every 2 months or 3 months, we’re now breaking ground on a cohort of 20 every 2 to 3 weeks. And so in order for us to really hit our targets, that’s how you scale. That’s really how we… The big idea for this is we kind of knew this was a long-term vision and we were approached by Bruce Katz. And Bruce Katz came to KC and told us that if we could figure out this model, that this would be outrageously amazing for a scalable product so.
Jimmy: Yeah, I wanna hear more about that. When did you first discover the opportunities on this program, first of all, and when did you know that you had some serious traction with your NeighborBuilt model? You mentioned Bruce Katz, he helped author “Accelerator for America: Opportunity Zone Investment Prospectus Guide.” He took notice of you a few months back, it sounds like. I mean that must have been an incredibly good sign for you guys. Can you tell us a little bit more about that story, how that unfolded?
Daniel: Yeah. So, Opportunity Zones, you know, we didn’t realize that we were an Opportunity Zone when the legislation first came out. We had been working on the deal. We just assembled our land shortly before the legislation came out. And so we had already had this plan in play. We just were more of a “Hey, let’s recruit our friends and family to come be our neighbors.” And then Kansas City started working on a city-wide investor prospectus.
Bruce Katz, Ross Baird, both came here to Kansas City to really try to champion Kansas City down a pathway of creating a process that was inclusive to developers in our communities. And Bruce Katz actually came out to visit our site in mid-March. He did a site walkthrough. Loved the topography, also loved the fact that it’s really just vacant land. So we’re talking about several hundred acres of vacant land within a minute and a half of our central downtown business district that has no one to come in to develop it. And Bruce being just so politically involved in the housing market or in the housing industry politically saw that if we crack the code, that we have really have the scalable model to rebuild these Urban Core Neighborhoods demolished by urban renewal across the country and listed off, you know, 10 or 15 cities just right there in front of us saying like, “These people need you, these people need you.”
Bruce, then a week later invited us out to the Opportunity Zone Summit for that Accelerator for America put on with Mayor Garcetti out in Palo Alto. We were able to pitch to the Roman investors. And that pitch for us was really instead of funding a single site deal invest in us as a real estate Opportunity Zone business and we will build out the new system that will supply every other city or every other deal in these urban core community. So really investing in the vertical integration of the execution platform, as opposed to the deal-by-deal scenario.
And since then, I mean, Bruce has invited us across the country, we have been invited to eight cities, the state of Massachusetts to bring housing. Everyone is waiting for us to prove the model here in KC and they have signed up because there’s no volume single-family builders that are actually addressing this need in Opportunity Zones.
Jimmy: And I understand you’re still in the early stages, how far along are you with that model in Kansas City?
Daniel: So we’re closing on our first round and we should be breaking ground the next 40 to 45 days. So the bank is just in due diligence process, ordering land appraisals, we are ready to go we are shovel ready, our buyers are ready. That’s one of the other big things that we do as a developer. Because these deals are so high risk, we have also found it to be really helpful on our end, that all of our buyers are pre-qualified. So all of our homes are actually pre-sold before we even touch dirt. So that eliminates all the risk. Even in our new cohorts as we start to recruit, add volume, all of our buyers, the way that we will take them in is based on who can get pre-approved and who’s ready to go at that point in time because we were not doing any speculative housing developments. So that way it de-risk the investment for investors, it de-risks investment for the banks. And it really de-risks our investment of time and energy on our end to make sure that we’re just not doing speculative housing. Kansas City, we have that option of having 17,000 homebuyers that need a house. And so it’s been really easy for us to use that model of pre-selling everything because buyers are just hungry to be stable and planted in their own space.
Jimmy: Good. It sounds like you’re pretty far along there and you’re ready to break ground pretty soon. What have been some of your biggest challenges so far?
Daniel: Well, so one of the biggest challenges which other communities may experience. You know, I think that it’s been pretty eye-opening to look at Urban Core Opportunity Zones, my wife and I, we’re African-American. That neighborhoods that we have targeted typically have been neighborhoods that have been historically African-American, which, you know, have been separated by either a highway system or, again, most of the population has left. We are not trying to build African-American only communities, but we just know the nature of where this real estate is located, it’s just those are just the communities that we are targeting.
But in these neighborhoods, I think one of the biggest challenges that we were not aware of before we started this project was territory and market-rate communities. Market-rate communities are driven by a capital markets system. If you have a strong market, you can bring in money, the deal gets done. Again, the system works flawlessly in thriving market-rate communities. When you come over to blighted urban core, historically severely distressed communities, you run into territories. And there are people who have, you know, stake their territories, they’ve been working on these deals for 20 or 30 years trying to get a project off the ground, but they never had buyers or they never really had the experience that they needed in the real estate development side.
I think one of our biggest hurdles, at least locally in the Kansas City Market, has been trying to deal with the territorial nature of established organizations. And not necessarily even established real estate development organizations, but just established organizations who have kind of had the stronghold on the community. So I think locally, that’s kind of been our…that’s probably been our biggest issue. And then those territories, you know, also, they’re well connected into the established system of banks and everything like that. So it’s really trying to work around the system to just go rebuild neighborhoods.
Ebony: Yeah, I’d add that there have been a lot of people that have access to resources, I’d say that want us to just build one home, or just build two homes. And, you know, we say that that’s impossible, there’s no way to hit this attainable housing, attainable living mark that we talked about earlier if we were to approach it like that. So in fact, we actually need to develop more than just one house at a time. And you know, for us, we have a strategy to accomplish that.
Daniel: Yeah, the onesie-twosie approach, those are things that really killed deals because there will be cost overruns, there will be unknowns, there will be things that happen. And the second then you move to a onesie-twosie approach, you have completely blown the budget of someone who may not be able to afford an extra $70,000 increase on their property. So for instance, $70,000, again, is not a random number but when you come into these urban core blighted communities that have been left, one of the things that you need is to get the participation from public dollars as well to go back in and redo the streets, to redo the sidewalks, to redo the curbs, to redo all the surrounding infrastructure so that budget is not attached to each of our buyers. So if we were to attach that budget to redo the streets and curves and sidewalks, to a buyer who can only afford $225,000, we just put that buyer’s cost literally at $300,000 and it’s no longer an affordable home for them or an attainable home for them.
An affordable house in the Kansas City market will be, just for reference, will be about $125,000 to $130,000 if we were talking about 80% area median income. So a house at $225,000, it’s not necessarily the most expensive house in the world, but it is still market rate for the local community. So one of the… That was also the biggest hurdle that we have come across, is getting those public dollars to actually convert over in Kansas City. We did receive some federal dollars through the city that allowed us to address portions of the infrastructure and housing. It’s just that those funds haven’t been released to the project. And so that has put a delay on the project that we weren’t expecting coming into this. So yeah, I think it’s that combination of the territories, the onesie-twosie approach. And really the public partnership that is 100% required in these targeted neighborhoods to where we can, you know, really work with public institutions and governments too. If they can put in, you know, $15,000 to $20,000 per house in order just to clear up the streets and sidewalks that these buyers are wanting to come back to, that changes the entire dynamic of the project so.
Jimmy: Right. Yeah, your model takes advantage of economies of scale. And if you’re only building one or two homes at a time, you can’t achieve that and you can’t get the city to buy into fixing up the infrastructure because that makes perfect sense. And then, you know, in a way, your housing model, particularly where it’s located is, you know, requires a bit of a paradigm shift, which can be slow-moving at sometimes, particularly getting some of these slow-moving institutions, banking institutions, etc., on board. So that’s what it sounds like have been your biggest challenges so far.
Daniel: Yeah. And I think Bruce Katz is always…when he came to our site, he said that, “You guys have the opportunity to shock the system.” And the way that… When he said, “Shock the system,” the system, it needs to be shaken up. And I think that where we’re at today, where we were, you know, Kansas City, or you know, the history of our country has not been at prior to now is that we have a growing generation of millennial homebuyers that are ready to step into homeownership. And they need a place to live. I don’t think that that was the case, you know, 10 years ago, it wasn’t the case four years ago when we started this project. But the millennia homebuyer market is a huge market that is untapped.
And I think that we have the ability to disrupt the housing system by really just targeting a different demographic of people who care about sustainability, who care about technology, who care about really, you know, community, who don’t necessarily need the huge mega-mansion home, but can fit into a home that is more the size of homes of how they used to be, and really, you know, partner community with a lifestyle. So I think that that’s where the biggest difference is, is that we have access to that market. So by us shocking the system is really going on to get, you know, 100 or 200 of these buyers pre-approved that are ready to go. And that really gives comfort back to the bank and to the other systems that say like, “Okay, well, now there’s a market here. And now we can go ahead and move forward with this deal.” So I think what we’re really after is trying to create something that does shock the system, that shocks the communities. But it’s also healthy for everything around it as well.
Jimmy: Right. So what is your long-term vision for NeighborBuilt? I mean, if all goes according to plan, what do you see NeighborBuilt looking like a few years down the road here? How many rooftops are you gonna put up around the country?
Daniel: Yeah, so long-term, short-term, regardless of long-term or short-term, we are still gonna start with our first starter block. We are gonna build 50 single-family rooftops on one single block here in Kansas City. We are using that block to solidify all of our practices, designs, everything of that nature. And then we are scaling rapidly in order to meet this demand across the country. We will scale in Kansas City. So we will go from 50 homes in year 1 to 1,000 homes in year 2. In year 3, we will scale up to 6,000 homes. And then we will just continue to build and ship across the country. We are right now in the process of acquiring a local building material supply company so that way, we can control our own supply chain. That building material company is located on a rail spur. So we will be able to ship nationally. So our goal is that Kansas City will become the local headquarters for about a five-hour radius that is supplying these volume homes around the country and products and materials.
We have looked for not… Again, I don’t wanna use, well, we found a panelized system that allows us to erect our homes in four days. So we believe that through this housing development, we’re actually able to create, you know, jobs and career paths for local residents in these communities as well. We’ve identified 13 different workforce career training paths that we can take communities and people on that are all within the built space.
So for us, I think we really want to scale to be a national homebuilder, but also creating that national opportunity for a thriving economy through the workforce. I think that the numbers say, the research says, the data says that 100 single-family homes creates more than two and a half times the same impact from the financial side for the actual investor or developer, all the way down to the amount of jobs that it creates than a 100-unit multifamily deal. And so we figured that if we’re creating 1,000 or 6,000 homes in a community or in a local region, we’re now able to create thousands of jobs that has an economic ripple effect back on that neighborhood and community long-term.
So yeah, I would say our goal for us is to become one of the high-volume homebuilders around the country, based out of Kansas City. That we’re able to really address these neighborhoods that have been overlooked for, you know, half a century at this point in time.
Jimmy: Yeah, it’s an incredible model you guys have, an incredible vision and I wish you nothing but the best going forward. Before we go, can you tell our listeners where they can go to learn more about you and NeighborBuilt?
Jimmy: Sounds good. Well, for our listeners, I’ll have show notes for today’s episode on the Opportunity Zones database website. You can find those show notes at opportunitydb.com/podcast. And you’ll find links to all of the resources that Daniel, Ebony and I discussed on today’s show and I’ll be sure to have a link to neighborbuilt.com so you can look into their model and find out more about Daniel and Ebony on that website. Daniel and Ebony, thanks for coming on today.
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