David Schwartz, CEO, chairman, and co-founder of Chicago-based Waterton, was recently elected to serve a two-year term as the chairman of the National Multifamily Housing Council (NMHC). Schwartz has been in the real estate business since graduating from college and brings an ambitious approach to dealing with industry challenges and opportunities.
MFE: What was your path into multifamily?
Schwartz: I was going to the University of Illinois and saw all my friends getting these great internships with Chicago-based companies who were buying up apartment communities across the country. When I graduated, I got a job with AMLI, which was kind of an upstart in the business. I started off on the brokerage side, but they needed help on the development side so I switched over.
MFE: What do you like about the industry?
Schwartz: I like all the parts because there are so many components including investing, underwriting, the research side, understanding what’s driving the market, the macro piece, and figuring out supply and demand. Then there’s the whole physical side of things—going to a property, learning about construction, learning about sites and topography and drainage. Marrying all these separate skill sets, I couldn’t think of another career where you would get to do all that.
MFE: What is the industry’s biggest challenge?
Schwartz: We’re going through our version of disruption—we have regulation that is being driven by housing affordability, which is causing harmful policies like rent control. Rent stabilization, inclusionary zoning requirements, and similar policies may provide short-term fixes and great political convenience, but the long-term implications are disinvestment. Climate change is also impacting our industry. Ask any of my peers about their insurance renewal this year.
MFE: How is Wateron addressing your priority issues of sustainability, resiliency, diversity, innovation, and housing affordability?
Schwartz: Those underlying themes of sustainability and affordability are applied to everything we do. There’s a lot we can do to save energy, save water, and do more with respect to recycling. It’s also about the resiliency of our buildings and where we put our buildings. We can make an impact.
We have a lot of work to do on diversity and inclusion. We’ve done a lot of great work; NMHC had its women’s forum [at the end of January] at the annual conference, and we had over 500 attend. We can do a lot more with our racial diversity in the industry. We need to do a better job on looking more like our customers.
MFE: What’s ahead for Waterton in 2020?
Schwartz: Our flagship value-add fund is mainly focused on naturally occurring affordable housing. Everything we invest in we’re doing some sort of sustainable initiative to reduce our carbon footprint and get a return on it by lowering our expenses. We’re also actively investing in senior communities and active-adult communities.
MFE: What goals do you have for advancing the multifamily industry during your chairmanship?
Schwartz: We have to take the lead in educating and understanding the causes of the affordability issue, which are very complex, and provide a framework for solutions that will help guide legislators to, “how do we fix this?” We also need to work on coming up with productive ways that are sensitive to all the stakeholders because it is a sensitive issue—a lot of the issue is income inequality.
There is a lot that can be done to make building costs lower. The cost of entitlement to build a multifamily community is about 36% of the budget, which comes from the friction associated with entitlements. Land costs are another huge piece, which is ultimately a function of zoning. Outlawing single-family zoning will be very helpful in reducing the costs and allowing density.
On the technology side, we’re in the very early innings of major innovation at our properties and the way our companies are run. The NMHC will be at the forefront of all of that.
