Building Sustainable, Equitable Communities

Keith Zakheim 0:00

Welcome to the Age of Adoption podcast. I am your host, Keith Zakheim. Today as we do with every podcast, we're gonna ask our guest one question and one question only. What is your age of climate adoption story? A little bit about the age of adoption. We live in an era where enterprises of every shape and size, regardless of industry, must rapidly transform to become more sustainable, climate sensitive, and just.

Keith Zakheim 0:30

My day job as CEO of the marketing public relations firm antenna group. Our agency works exclusively with conscious brands. What is a conscious brand? It is a brand that is conscious of its responsibility to be on the right side of history. Like most businesses, our clients are experiencing a transition from an age of innovation.

Keith Zakheim 0:51

An era in which technologists, entrepreneurs and investors focused on innovating climate and sustainable solutions to this age of adoption, which characterizes the world today. So if you accept the age of adoption hypothesis, then there's really only one salient question to be asked. What is your age of adoption story?

Keith Zakheim 1:17

Jonathan FP Rose was born what he calls a calling, the rare ability to see long before it was fashionable, how real estate development, social justice, and environmental sustainability could work together. Growing up in a family real estate business, Jonathan loved visiting construction sites as a child, breathing in the smell of concrete, and watching steam shovels, dig foundations.

Keith Zakheim 1:42

His mother's involvement in civil rights and his own passion for environmental protection created an unusual challenge for Jonathan. When he thought about the real estate business, he wanted to lead at a combined market rate development with affordable housing and green building at a time where no clear pathway existed.

Keith Zakheim 2:00

In 1989 during a recession, Jonathan left the family business with just his vision. His assistant and nothing else to start. Jonathan Rose Companies. What makes his story remarkable isn't just that he was doing an ESG investing and affordable housing development before anyone called him that. It's that he had to invent the entire ecosystem from scratch.

Keith Zakheim 2:24

And 1979, for example, when he visited a hardware store to ask for green lumber suppliers literally told him to take the wood they had or leave it. By 1989, Jonathan greeted his own version of lead ratings because the standards didn't exist yet. Fast forward to today, the Jonathan Rose Companies recently announced a successful close of its sick.

Keith Zakheim 2:46

Affordable Housing Impact Fund. The raise was 660 million impressive in its own right, but even more incredible when you consider that his first fund in 2005 was $50 million. Today on the Age of Adoption podcast, Jonathan explains how building with materials like mycelium insulation can revolutionize construction, why our current economic system cannot address the housing crisis.

Keith Zakheim 3:11

Through market forces alone and how the green building ecosystem has finally matured to make sustainability accessible. Back with Jonathan in a bit. Jonathan, welcome to the Age of Adoption podcast.

Jonathan Rose 3:25

Keith, wonderful to be here.

Keith Zakheim 3:27

So Jonathan, you've been working in the affordable and mixed income housing for a while now.

Keith Zakheim 3:34

A long while. Probably 35 years. Something around that. And. Of course been super successful at it. And another one of your niches when it comes to real estate, both the development and investing, is focusing on environmental sustainability and social equity. So you were doing a lot of things that are popular today before they were popular.

Keith Zakheim 3:53

And I guess the maximum of doing well by doing good is also applicable to you. But what I'd love to kind of understand, and I know you and I have had a chance to chat about this earlier. It's your career journey, how you got here, and I know it to be super fascinating and I know my audience will find it to be the same.

Keith Zakheim 4:10

So if I can give you the mic and, and give us a little background on how, how you were able to build Jonathan Rose Companies into one of the most prominent, successful, affordable, and mixed income housing companies in the world. Thank you.

Jonathan Rose 4:23

So I am lucky because I feel like I was born with a calling as a small child.

Jonathan Rose 4:28

I was my, by the way, first of all, I was born into a family of real estate. Owners and developers. My, there, my father was a part of a family business with his father and his uncle and his brothers, and so I grew up visiting. My father was the construction guy, so I, we grew up visiting construction sites as a child and I loved the smell, the concrete, and the guys working in the.

Jonathan Rose 4:53

Steam shovels, digging and all that stuff, and I, I love the whole process of building, but at the same time, my mother was very involved in civil rights and I was very interested in social justice and I was also very interested in the environment and I wanted to figure out how could I put these three things together and there was no clear pathway.

Jonathan Rose 5:11

When I was growing up for how to do that, I joined our family business in 1976, and at the same time I began volunteering on the board of a local community development organization, building the social infrastructure and health infrastructure of a very low income community. I. Daycare centers and senior adult centers and places, drug treatment centers and housing for homeless.

Jonathan Rose 5:35

And I wanted to figure out how to pull these two parts of my life together because with a family, I was building market rate housing. And so in 1989, I left with a vision and my secretary and nothing else, and I started my own company. Some advice for others, by the way, is in part, I started because 1989 was not a strong time in the economy.

Jonathan Rose 5:58

We're in the midst of a big recession, and so I also started doing consulted work. Basically fee development work and owner's rep work is a way to grow the company. And, and bring in income. And so lesson number one is we built some amazing projects, but we had no equity in them, and I probably spent too long doing that as a way to build the company.

Jonathan Rose 6:20

I should have gotten more quickly into the building equity side. In 2000, but along the way we did some projects basically financed with family and friends. And in 2005 I launched the world's first, as best we know, first real estate impact focused social and environmentally focused investment fund, a private equity fund.

Keith Zakheim 6:43

And you recently, I think, closed your, the sixth fund, right? In July, is that correct? Congratulations on that.

Jonathan Rose 6:49

That started as a $50 million fund and we just closed the $660 million fund. And so over the time we grew, as we built a track record and we, we continually refined our focus on affordable and mixed income housing.

Jonathan Rose 7:03

We buy. So the company does two things. We buy affordable and mixed income housing. We make it significantly greener, reducing its climate impact and other co environmental impacts. And at the same time, we bring social health and education programs to our residents. So we do that on the acquisition side.

Jonathan Rose 7:22

And then we also build, have a new development pipeline where outside of the fund where we're building. So the fund only preserves and restores existing buildings. And then our development pipeline, we build amazing new buildings that are super green and bring social health and education programs to our residents.

Jonathan Rose 7:42

I think that having a mission has been. Really helpful in communicating a clear message to our investors. It makes us very attractive as partners to cities and public-private partnerships, and it's very attractive to employees who wanna make the world a better place from an employment point of view.

Jonathan Rose 8:00

And so the mission clarity, I think, has been a key part of the growth of the.

Keith Zakheim 8:05

Yeah, I mean, we feel that way about Antenna Group as well, right? If if, if you have a really clear mission, you tend to self-select for really great people are passionate about what they do, and I think that read Downs to, you know, kinda the benefit of every part of the organization.

Keith Zakheim 8:19

Jonathan, I was actually just recently reading a book by Ezra Klein, I forget the co-author. It's called Abundance and it's, it's, it's I guess, a pretty hot book right now and it's. To a certain degree, I guess Ezra's advice to the more progressive community about what they need to do to win back the hearts and minds of at least the majority of the electorates they can take back National office.

Keith Zakheim 8:42

And a big part of that book I I, I. At least probably 20 to 25% was about affordable housing. And the analysis was fascinating. His recommendations I think are really interesting. But I'm sure, I don't know if you have read it, but if you have, I mean, this is what you've been living for a long time. So the fact that you and I are having this conversation right now, I think for me is serendipitous.

Keith Zakheim 9:04

While it's so fresh in my mind. And if I can just throw out a couple of stats that to me. Just reinforce how profound the problem is and, and, and about for affordable housing and, and, and the low income housing and, and why we need more companies like Jonathan Rose out there. And I think that'll set the stage nicely for you to answer the question of the day, which we'll get to.

Keith Zakheim 9:25

But before we get to that question, what I've read is household earning $50,000 a year. Can now afford, I think, less than 9% of home listings. Right. And that keeps going down every single year. You know, part of the upward mobile journey that this country promised for years was home ownership. And clearly that is failing.

Keith Zakheim 9:48

And then one other one that I thought was. Also striking is that housing availability for extremely low income renters 35 rentals for E for every a hundred extremely low income household across the country. So essentially it's a 7 million unit shortfall. I think I read that in Business Insider. I, I could go on and on, and I'm sure you have all those stats at your fingertips.

Keith Zakheim 10:11

Let's just suffice it to say that this is a problem that needs to be addressed, not just for political reasons, but for social reasons, humanitarian reasons, et cetera. So Jonathan, here's a question that I asked all my guests. You ready? Yes. Jonathan, what is your age of adoption story?

Jonathan Rose 10:31

So those are two different, in some ways, two different things.

Jonathan Rose 10:34

'cause first just the, the answer to your fir your first question really is, I wanna add one more stat. By the way. If you work a full-time minimum wage job in America, there is not a. Single county in which you can afford to rent an apartment with a child. Not, by the way, not a miss. Can you,

Keith Zakheim 10:52

can you repeat that?

Keith Zakheim 10:53

'cause that is

Jonathan Rose 10:54

shocking. If you rent, if you earn a full-time, minimum wage job, there is not a single county in America where you can afford the rent. So, um. So partly what this tells us is we have an income problem. We haven't raised the minimum wage, I think in 20 years or something like that. We, so we, part of it, there's an income problem and there's a cost problem and these are growing larger and larger.

Jonathan Rose 11:24

Uh. So before we get into my age of adoption story, we currently have an economic system that is, is failing and, and, and is not capable of addressing these issues from a market basis. They, we can only address 'em from a subsidy basis, and then we have to decide how do we wanna do that and how do we wanna allocate the subsidies?

Jonathan Rose 11:44

How would you wanna incentivize construction? But based on today's construction, operating costs, insurance costs, tax costs, et cetera, we cannot build. Not only we, nobody in America can build new housing that is affordable to essentially bottom quartile, renters, and bottom quartile is tens of millions of families.

Jonathan Rose 12:05

And add to that low income senior, or as part of that, or low income seniors living on social security. So I mentioned the income side, but also if you're living on social security, again, you can't afford the rent unless you're living in Section eight housing. Which is subsidized. So these are systemic issues and I am working with others on trying to rethink how would you structure an economy to resolve these systemic issues.

Jonathan Rose 12:30

Now I'm gonna get to your age of adoption story. The, so we began as a very green company in a time in which there, there wasn't green ecosystem to work in. I actually, I made my first development on my own in 1979 and the. I would like to have green lumber. I'd like to have lumber that I know was responsibly harvested.

Jonathan Rose 12:54

I actually used the phrase that you didn't rape the rainforest in creating this lumber. And the guy said, I get it from a supplier. Like, you know, either take it or leave it. Don't bother me with these questions. You know, like it is, why don't you take it? You don't want it. Don't buy it. There was no chain of title back then.

Jonathan Rose 13:10

It was almost impossible to understand the toxicity, VOC, et cetera, of chemicals, glues, caus paints, et cetera. And when I started the company in 1989, I actually created my own version of what is a lead rating to give myself a framework. To try and, uh, direct our buildings to be greener. At that time, there weren't green architects and engineers, so we were making it up as we went along.

Jonathan Rose 13:37

We, you know, what it also meant, by the way, is that in the 1990s almost every project that I did was the first lead platinum lab, the first lead gold shopping center. The first lead, first, first, that because nobody else had been doing these things. But what it meant was there wasn't an ecosystem of support.

Jonathan Rose 13:58

The architects, the engineers, the suppliers, the chain of titles, et cetera, all those things are in place now. So it is so much easier to be green and to create sustainable buildings and to be more environmentally conscious today, those, that's a very good thing. We just completed a project that is the world's largest affordable housing, passive house project in the world, passive house.

Jonathan Rose 14:23

It's a very green standard of buildings. We have triple insulated windows. Lot of technical details, real complexity in how this building was put together when the first passive house project was built in New York City a few years earlier. My understanding is it costs 12% more than a normal building. Our building costs 7% more than a normal building, and soon they're only gonna cost two or 3% more than a normal building.

Jonathan Rose 14:51

So on the environmental side, in the building sector, I see the age of adoption is often running. It's growing dramatically. It's gonna continue to grow, and this is all good.

Keith Zakheim 15:02

Yeah. What on the technology side, on the innovation side. So I think we've all seen that cost curve here starting to bend in the right direction, which is great.

Keith Zakheim 15:10

You said, you know, 7% more expensive at this point, and as economics get better, you know, we'll see a lot more adoption. But one of the, you know, the. The decarbonization of the built environment is such a monumental task that, you know, what I'm always hearing is, is the tools we have at our disposal today clearly are better than they were 10 years ago, 20 years ago, but we can, we're gonna need continued innovation, we're gonna need additional tools at our disposal that'll be able to really make a dent where we need to in decarbonization.

Keith Zakheim 15:38

From your purview, you know, what are those tools? What are those types of. Areas that we need to be really focusing on for additional innovation so we can continue to decarbonize.

Jonathan Rose 15:48

So the first thing is we need to make our buildings all electric so they're not burning fossil fuels and we already have heat pump technology and and systems to do that, and those will continue to grow and we need to continue to do that.

Jonathan Rose 16:01

The second thing is we need to use less energy in the first place, and that's where super insulation comes in. The third thing, by the way, is our building products have a lot of plastic in them, which means a lot of fossil fuels. And to me, part of the solution is what I call building biologically, is to replace those.

Jonathan Rose 16:21

For example, we can now grow insulation outta mycelium out of mushrooms. We can, there's a lot of organic. Materials we can be using more in the, in, in our building projects, there's a rising tide of using mass timber. Mass timber captures carbon. Now we've used carbon captured concrete, et cetera. But if we can build out of timber, it's a much more sustainable practice than building out of concrete and steel.

Jonathan Rose 16:48

So there's a, there's an evolution that we can see under the building sector. Then the last thing is, where do you get your, where do you get the energy from? And clearly we need to get our energy from renewable resources such as wind and solar. If I were president of the United States, instead of taxing these things and trying to onshore.

Jonathan Rose 17:14

Energy efficiency. I would let in as many Chinese solar cells as po, like the Chinese government. My understanding is deeply subsidizing solar Deeply.

Keith Zakheim 17:25

Yep.

Jonathan Rose 17:27

And my theory is. What an amazing opportunity to have China subsidize us. I would allow, I would put no tariffs on those things. I'd try and get as much cheap renewable energy systems as we could in the United States with all the foreign subsidies we can get.

Keith Zakheim 17:44

Yeah. Well, I think that's a good. Place to, I guess, end our conversation today. I don't think that's happening anytime soon, Jonathan, with this president, but you know, hopefully it's a blip on the screen and, and we're gonna get there. Thank you so much for spending the time with me. I know how busy you are and look forward to connecting again in the near future.

Jonathan Rose 18:02

Thanks. I'll see you soon.

Keith Zakheim 18:04

Yep.

Jonathan Rose 18:04

I'll see you during Climate week.

Keith Zakheim 18:06

Yes, you will.

Jonathan Rose 18:08

Alright, thanks.

Keith Zakheim 18:10

The age of adoption podcast features CEOs, investors, entrepreneurs, and policy makers sharing their climate and sustainability business transformation stories. Episodes can be found on your favorite podcast apps, including.

Keith Zakheim 18:23

iTunes and Spotify. The Age of Adoption podcast is brought to you by Antenna Group. Antenna is the home of conscious brands. We partner with companies that don't wait for change to happen. These brands shape the future, are awake and already moving. Unsure if you are a conscious brand. Or even if you are one, whether you are positioned as one, please visit our website@www.antennagroup.com and take the Conscious Compass Assessment, a groundbreaking tool that enables enterprises to assess their brand against the eight traits of brand consciousness.

Keith Zakheim 19:03

At Antenna, we partner with companies big and small from growth stage to Fortune 100 to tell their climate and sustainability stories. So once again. If you're interested in joining the Conscious Brand Movement and learning more about Antenna Group, please check out our website at www.andantennagroup.com.

Keith Zakheim 19:23

Ping us on LinkedIn and make sure to visit the conscious Compass.

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