JP Morgan to Deploy $750B to Increase Housing Supply Via American Dream Initiative

When J.P. Morgan commits, it commits. 

The bank just announced plans to deploy more than $750 billion to increase housing supply and support homeownership in the U.S. The eye-popping amount will be deployed through 2035. 

“An affordable and resilient housing market is essential to driving economic growth and increasing opportunity,” Michelle Herrick, head of commercial real estate for J.P. Morgan, said in a statement. “We’re focused on helping more people access quality housing they can afford — and we’re working across the real estate community, local governments and nonprofits to scale housing solutions throughout the U.S.”

Building on the American Dream Initiative — launched by J.P. Morgan in late March to help expand opportunity through targeted investments — the firm will take a multi-pronged approach to deploying the $750 billion. 

The firm will focus on expanding financing through debt, equity and grants to both create and preserve housing supply, including the preservation of 1 million affordable units. Housing policy is crucial, and so the firm will also prioritize the targeted advocacy of policy that removes impediments and helps to increase housing supply. Such policies include the 21st Century ROAD to Housing Act, which became federal law on July 11 and is designed to boost housing supply and facilitate pathways to homeownership while also curbing large investor housing purchases. 

The firm said it will also endeavor to streamline processes between key housing finance bodies and federal programs to optimize efficiencies in the secondary mortgage market while simultaneously expanding the role of private capital to increase competition as well as access to affordable financing — ultimately helping lower costs for borrowers. 

Finally, J.P. Morgan said it will advance all of the above through the activation of public-private partnerships as well as partnerships with clients, stakeholders and communities in the affordable housing sector to shape housing policy at the local, state and federal levels.

The bold initiative comes just seven months into Karen Purcell’s tenure as head of community development banking at J.P. Morgan. Purcell joined the firm in December after 16 years at Bank of America.

“The promise of being able to move the needle and to make a difference in the size and scale of this platform has been real,” Purcell said. “I’m very much enjoying the firm’s commitment to solving some of the critical problems facing the country that are impeding the American dream.”

Successfully accomplishing an undertaking of this size takes a village, and Purcell said J.P. Morgan will be mobilizing multiple business lines that support the housing ecosystem within the firm to do just that. “Pulling all of those groups together helps us to start the flywheel moving a little faster, and in a more integrated fashion,” Purcell said. 

The firm will help 500,000 customers, including 200,000 first-time homebuyers, and is hiring additional professionals to support the mission by taking loan applications, reaching out to customers and working through bank branches. 

“Putting resources and capital together around that intention is how we are going to do that,” Purcell said. “We need the right policies, we need the right people at the table and we need the right economic environment, but we also know that we’re really good at innovating and solving problems, and we’re committed to being at the shoulder of our clients and stakeholders to do that. We’re expecting to be able to move through these next 10 years in a fashion where we are doing more and more.” 

J.P. Morgan will begin the rollout in five markets, including Alabama, which was an early focus for J.P. Morgan as part of the broader American Dream initiative. “We’ve been finding some real opportunities in the housing space there, and working alongside our clients and housing authorities and other stakeholders to match capital for the housing that’s actually needed,” Purcell said. 

The other markets up first are San Francisco, Philadelphia, Atlanta and Los Angeles. “Then, as always — because they are very critical cities to us — New York and Chicago,” Purcell said. 

“In San Francisco, the challenge has been extreme costs,” Purcell said. “The cost per unit, especially where there are federal programs involved, resulted in some real challenges around the feasibility — and financial feasibility is critical. There have been great numbers of entitlements and permits and shovel-ready projects in San Francisco, but not a lot of deliveries. And so it tells you that something is catching in the gears.”  

J.P. Morgan recently in San Francisco provided financing to help deliver 105 affordable apartments for middle-income residents in the city’s Dogpatch neighborhood. Working alongside public officials as well as other private capital sources, the firm managed to make the project possible at a lower cost per unit through a recycled bond solution. It then built on this momentum by providing $200 million for another multifamily community in the same redevelopment, underscoring its ability to use innovative capital structures to deliver much-needed housing to the market. 

That unlocking of affordability is exactly what the $750 billion will seek to drive forward, Purcell said. 

“It’s layered complexity,” Purcell said. “The very definition of a complex problem is that you can’t solve it by applying the same set of rules. It takes a different set of solutions, and it takes a lot of minds coming together to look at it in a number of different ways. J.P. Morgan is the largest multifamily lender and also the largest mortgage lender, and so, from that vantage point and with that scale, we have the opportunity to see what is working, and to identify solutions that can be scaled or used elsewhere. So that advisory component is really powerful.” 

Also, it’s a continuation of something the firm already does, and does very well. 

“It’s not moving away from our disciplines. It’s not moving away from fundamental, sound real estate and real estate strategies — it’s being at the shoulder of that and pushing alongside it,” Purcell said. “We’re disseminating information to equip our bankers with, and putting the policy and programs and subsidies and the whole toolkit in our teams’ hands.” 

As the rollout commences, Purcell is hopeful that real change can come. 

“I sit in meetings sometimes, and I think ‘Wow. We might actually be able to solve this,’” she said. “I believe that we can really shrink that gap between, and the mismatch between, supply and demand in many cities. I think we can drive change, I really do. What a challenge, but what a privilege of an opportunity!” 

 Cathy Cunningham can be reached at ccunningham@commercialobserver.com