J.P. Morgan Community Development Mounting in Massachusetts

Partner Insights spoke to Jenny Fauth, Executive Director, with J.P. Morgan about the firm’s community development banking efforts in Massachusetts. Recent legislation and a refined focus on affordable housing is sparking high hopes for filling the housing and vital resources gap.

Commercial Observer: What are J.P. Morgan’s Community Development Banking goals in Massachusetts?

Jenny Fauth: J.P. Morgan is the largest bank in the country, but we know the value and importance of being deeply rooted in the local communities we serve. Over the past five years, we’ve opened more than 80 Chase branches in Massachusetts, provided more than $30 million in philanthropic dollars and facilitated the preservation and construction of more than 1,000 units of affordable housing in the region. Our goal is simple: we want to strengthen and improve communities where we work and live, and we believe that increasing the supply of high quality, attainable housing is critical to achieving that goal.

Are you seeing any emerging trends or areas of interest in your community?

Everyone knows we’re facing a housing crisis, but it’s particularly acute in Massachusetts. On the upside, we are also incredibly fortunate to be in a State where the local government leaders not only acknowledge the problem but are also advancing effective strategies and committing resources to addressing the lack of affordable housing.

Last year, we saw the $5.16 billion Affordable Homes Act signed into law, which is the largest single housing investment in the history of the Commonwealth. The bill has several strategic priorities and resources dedicated to addressing the under supply of housing at a variety of income levels. From local municipalities dedicating more town and city resources to housing, to the Commonwealth’s unprecedented financial commitment, it’s an exciting time to be working in community development in Massachusetts.

What external factors are making development challenging in the region?

We’re in an incredibly uncertain time right now. We don’t know what cornerstone affordable housing development programs are going to look like in the coming years, including ones that have been the backbone for decades like the HOME program and Community Development Block Grants. On the other hand, very few industries have as strong bi-partisan appeal as housing and the recent increase in the availability of Low-Income Housing Tax Credit (LIHTC) and eliminating the sunset provision on New Markets Tax Credit (NMTC) illustrate the support our sector continues to receive.

We’re committed to being a strong and positive force and continue to invest in housing and community-led development.

What type of projects are you working on that exemplifies the firm’s regional impact?

We recently closed on an acquisition bridge loan for Newton Gardens, an 112 unit property in Newton, MA. Prior to the acquisition, the community—situated in a prime location right outside of Boston— was not subject to any affordability restrictions and was at risk of becoming a high-rent redevelopment if left to market forces. WinnCompanies worked with state and local public funders and private capital providers to preserve the naturally-occurring affordability levels. Winn, the City of Newton, MassHousing, the Commonwealth of Massachusetts, and Boston Financial, ensured that no household will be priced out and that the units will remain attainable in the long term. All of this at a fraction of the expense of building new units. Without using traditional LIHTC resources, J.P. Morgan was able to provide a workforce housing solutions short term bridge loan for the acquisition so Winn could purchase the property on the seller’s timeframe while working through the longer timelines for subsidized financing.

“The preservation of Newton Gardens is the perfect example of what can be accomplished when public and private financing partners work together. This is a highly unique transaction of converting an existing market rate property to a mixed income community at a 30% discount to replacement cost. There is no doubt in my mind that absent these efforts, in a fantastic community like Newton, the middle-income housing would have been lost forever,” shared Meade Curtis, Senior Managing Director of Investments at WinnDevelopment.

Describe an ideal developer to work with – what attributes, best practices and things should future clients consider?

The quality I look for most in a developer is they must have an unwavering commitment to the mission of developing and providing housing.  Developing affordable housing is hard and trying work, so having a partner who is motivated by the mission and driven by the need is critical to the success of any project. I think of developers playing the role of a quarterback, so they need to have a deep knowledge of the field of play and a clear vision for the desired outcome. They need to understand all the players, be responsive to the current conditions and persevere in the face of unexpected conditions.

Massachusetts has an incredibly strong, sophisticated and diverse affordable housing community. J.P. Morgan evaluates each individual project and development team and is eager to support high quality, much-needed housing production and preservation transactions.

What makes J.P. Morgan unique? Why would someone want to work with you?

We play an essential role in developing and strengthening communities. We have, and will continue to, provide capital for affordable housing, even in challenging real estate cycles, because we are dedicated to being a stable and reliable partner.

Our team prioritizes long-term relationships, and we’re focused on ensuring that we support our banking clients in whatever challenges they’re experiencing. We have a robust Community Development Banking treasury and payments group that distinguishes us by really knowing the challenges and complexities facing affordable housing owners and operators.

What types of financial challenges do you typically help your client solve?

The most basic is solving budget gaps. The cost to develop housing has seen an incredibly steep increase over the past five years.  We’ve seen volatility with interest rates and supply chain disruptions.

Oftentimes when you compare market conditions between when the deal gets funded to when it closes, they’re happening in very different financial realities.

We work with developers by reaching into our toolkit to figure out the best product for the time which could mean going from a fixed-rate loan to a floating rate or vice versa.

What do you see for the future of the bank’s role in financing affordable and workforce housing in Massachusetts?

With the expansion of the LIHTC supply, I expect there will be more opportunities, especially in Massachusetts where the industry has been historically limited by the volume cap. We’re hoping to see the acceleration of the timeline of how long it takes a deal to move from being awarded to when it closes.

I also see a tremendous need for new programs addressing the increase in supply for “little a” affordable, including workforce housing, preservation of naturally-occurring affordable housing and affordable homeownership.

Can you talk about the event that took place in town last month?

Building Boston was an opportunity to convene developers and policy makers to learn about barriers to production, preservation opportunities, and current gaps in the community development market. We listened to innovative ideas and strategies to advance policy goals and increase the region’s housing supply.

It enabled us to reintroduce J. P. Morgan Community Development Banking to stakeholders in the region and gave us the chance to highlight the depth and knowledge of our group, from NMTC and Historic Tax Credit equity investing, to balance sheet and agency lending.

Why was the event so successful?  

It gathered the right mix of people who know the industry well, brainstorm creatively, and are guided by a dedication to the mission. When you get all those working together, the solutions to problems emerge.  At the end of the day, it’s an under supply of housing and vital resources, so figuring out how to do more despite the challenges is key to the region’s success.

For a long time, we would talk about the under supply of just affordable housing, but there’s not enough housing period. Getting these skilled and thoughtful people together to start talking about what’s working and what can we improve was instrumental to moving the needle on economic growth.

If you’d like to learn more about J.P. Morgan community development financing opportunities in Massachusetts reach out to me at jenny.fauth@jpmorgan.com.