Our second featured customer needs almost no introduction: Habitat for Humanity. UrbanForm co-founder and CEO Quang Truong had a conversation with Director of Land Development and Senior Construction Project Manager Tonino Pacifico. Tonino shares how HH approaches land development deals, their unique take on housing and housing affordability, how they use UrbanForm, and how the recent multi-million-dollar gift from Mackenzie Scott has changed the trajectory of Habitat for Humanity in Portland and beyond.
Below are edited and condensed excerpts from our interview.
Quang Truong
Okay, so let's get started. I would love to hear from you just a little bit about what your perspective on what Habitat for Humanity’s mission is and what you guys do to achieve that mission.
Tonino Pacifico
Sure. Habitat is dedicated to fostering affordable home ownership and improving communities by building and improving affordable housing with an emphasis in the city of Portland and the surrounding suburbs. We develop work in partnership with low-income families, volunteers, donors and organizations to receive donated materials, volunteer labor and financial gifts to accomplish this goal. Future homeowners are selected based on their level of need and their willingness to partner with Habitat and their ability to repay the mortgage. All of our homes are sold, and there is an outside lender that we work with. I hope that gives you a good sense of our background and mission.
Quang Truong
Yeah, it's about providing housing to those who need it and wouldn't have traditional means of getting it otherwise.
Tonino Pacifico
We're working families that simply can't afford local market conditions. The average home in Portland now is around $625k, $630k. And these are families that don't qualify for mortgages, and it's hard to have 20% down. They're lucky to have 5 or 10 percent down cash. And then closing costs used to be rolled into mortgages, and now you get to also come up with the closing costs as cash, in addition. So there's several barriers to working families to have an affordable home, which creates stability. We really try to make it where the house payment is only 30% of their income. And that's kind of a good rule of thumb that banks use. Unfortunately, wages have stagnated and prices have gone up over the last 20 to 30, maybe even 40 years.
Quang Truong
Part of what I saw in HH’s mission was that you're basically trying to remove barriers and obstacles for people to achieve their goals. And that's something that, of course, I'm extremely sympathetic to. Can you tell me a little bit about yourself and how you came to Habitat for Humanity?
Tonino Pacifico
Similar to you, Quang, I volunteered with Habitat years ago, and I was doing that when I was in college. I went to Michigan State and I was in a construction management program. I didn't have much background in building, but I've always had an affinity for architecture. I was in a program for construction management. I didn't take architecture as my path; I was intimidated by my own inner vision. But I wanted to be a part of the industry, so I looked for volunteer opportunities. I came across Habitat. They started giving me some experience that I wanted to use and build on to help me be a construction manager. Because that's really what I saw myself working in, residential construction.
And Habitat, like I mentioned, through those series of donations and coordinating with government grants, they really find ways to make good homes affordable. So it's just always been a soft spot for me as well. And over the years, I worked at several different homebuilding companies, a lot of them national. And I ended up on the west side of the country and working in Portland. Now for the last ten to twelve years, it was just on my radar and periodically I would just look for new positions and I saw this one and applied and it was kind of like a dream job. That was really the basis for it; just got lucky, applied for the position, and was along in my career where I had enough experience and training to help them with what they were looking for, which is project management.
My role is to help them, not necessarily finding raw land, we're kind of getting leads given to us, but once we're given land leads, then I help assist our leadership team, our CEO, in assessing it initially and then trying to get under contract. Once you have it under contract, then I go and work on the due diligence, the fact finding, and I provide that information to help our leadership team decide whether we want to purchase the property. That's been my role now for the last two years. Been here about almost three years in July, the three years.
Quang Truong
Right. So that's kind of how you came across UrbanForm, correct? Would you share a little bit more about how you found out about UrbanForm and how UrbanForm has helped you?
Tonino Pacifico
Sure. Well, Quang, you were the primary reason why I heard about UrbanForm. You reached out to Steve Messinetti [President and CEO of Habitat for Humanity Portland Region] who then shared your information with me because of the role that I'm in. And it was very apparent to me that one of the areas that I'm lacking, not having a background and formal training and land analysis, I thought, well, this seemed intriguing. Wouldn't it be great to have a software to help assess and get an idea about whether we can do ten homes or can we do 20 homes? That's a very important number to start with when we're evaluating property, because the cost of a parcel, if we can only do a certain number of homes on it, the more our costs are. That's the divider.
And it also ties into our mission. We're trying to find parcels, on average, at least ten homes or a little more. Ten to 20 is kind of like our sweet spot based on the market that we're building in. So having that initial help is very useful. It gives us confidence in what we're looking at, and then we take it to local civil engineering firms that we work with that kind of get more serious once we put it under contract.
But UrbanForm helps the initial what I would call smell test: like, do we even want to pursue this? Do we even want to put it under contract? It helps us with all those very early questions. Yes, the seller wants X amount of dollars. But if we don't think we can deliver or build a certain number of homes, it starts making the land deal less attractive. It could be a great location for certain neighborhoods that we really are fond of to help support our mission. But again, if we don't have that understanding of how many homes that we could build, it really starts making that potential less attractive.
Quang Truong
I think I started to see the zoning code become a little bit like the tax code where, in order to know basic things about it, you sort of needed an expert to be there. And having access to those experts became a bigger and bigger barrier, especially to people who weren't doing as much consistent land use development as professional work. So the goal of UrbanForm was to break down that barrier and to allow somebody to understand really quickly what you can do on a piece of land.
Now you don’t need a zoning expert or you don’t need to have access to high priced architects or land use consultants: UrbanForm allows anybody to quickly see the regulations. Hopefully, it's like having your own tax attorney available instantly.
I'm really glad that it's working for you in that way. That's exactly how I hoped it would work, to basically give people an extra leg up in order to kind of understand what you can do with things, especially for an organization like Habitat for Humanity.
To dive into it a little bit more specifically, is there a specific situation where a particular piece of information that UrbanForm provided you was particularly helpful?
Tonino Pacifico
Sure. I think this is relevant: we're just now looking at a parcel on I think it's [redacted] street. And I recently pulled a report for that parcel, and the seller is thinking we can do 20 homes. I didn't prepare for the call, but I think UrbanForm was saying around 15 or 16. So it's kind of helping us get more realistic numbers to at least approach that land deal. And then we back into whatever the number of homes, we think this is how much we want to pay per home. So then we can come up with an offer, maybe a counter offer. So that's very valuable to us.
And I'm just now actually working on this specifically, hopefully to drive out there next week to look at it. I'd like to go look at the parcel next and get some initial feedback from engineering. I've shared your report with them to also give me some other awareness of the infrastructure around there.
So I'm working with your information and with our civil engineers to then make a recommendation to Steve [President and CEO of Habitat for Humanity Portland Region] because he likes the parcel and we wanted to see if there are any surprises. Is it going to be what we expect? If there’s no big surprises, fine. But if we have to start, say bringing in new power or bringing in more sewer than we thought, those are things that we're just not normally expecting.
So we're just at that stage of trying to put something under contract, and we're using your services to help us with that main primary part. How many homes do we think we can build on that parcel? And it's lining up with what we hoped. So it's looking good, actually. We're using it as an indication of we can probably proceed based on the number of units. Now we just want to get some more information and due diligence. Once we have it, the next step is to get it under contract, get it off the market so we can kind of spend some time looking at it.
Quang Truong
Yeah, I think people are always surprised at the amount of due diligence and research that's required at the beginning of a project. And zoning is something that feeds into it. And you mentioned a lot of other things that every development project has to look into. Utilities, of course, and any other kind of natural elements. Soil conditions and geotech, for example. The zoning is just one part of it.
So that's fantastic, and that's exactly the way that I hope you would be using it. Before UrbanForm, how much time did you typically spend looking at the zoning? And how much does UrbanForm cut that down?
Tonino Pacifico
Before UrbanForm, we had a lot of land already purchased, so I wasn't working a lot on new land leads. It's only been the last year or two that I've actually been working on land leads and the parcels. You mentioned it almost feels like working with a tax attorney or an accountant. Now with RIP and RIP 2 [editor’s note: RIP stands for Portland’s Residential Infill Project ordinance], I'm just trying to wrap my brain around FAR. It's more challenging.
Before, I would say if we had a parcel, we had a parcel on Foster Avenue that we have it owned for almost ten years. It was straightforward zoning. You took the total square footage, almost two acres, divided by 2000. We can easily determine we're going to get probably 40 to 42 homes on this. And then you can maybe take a deduction for, say, 20% for future roads. Simple, easy math. A lot of the zoning was like that. But with the new zoning that's trying to help put more homes on the same parcels, there's some initial intimidation. At least to someone like myself, it is somewhat confusing.
Using UrbanForm we've actually reached out to local architects to look at some parcels. I've been able to see how your math is working. It's all tied to Title 33 [editor’s note: Title 33 is Portland’s zoning code]. It's kind of like going back to school for me. If I know the formula and I can see how someone got the answer, I can kind of reverse engineer and build my own confidence. I'm using UrbanForm for that initially so I can help learn this new code
But now that we're getting into the new zoning, I see it's very reassuring, very insightful, quick. It's saving a lot of time. On my own, I would probably spend two to 3 hours trying to figure it out, where I can get a report now in less than two minutes, three minutes. And I can then, maybe out of curiosity, see if I can recreate the numbers and understand them.
Quang Truong
Yeah. I think with the zoning code, I trust that the best intentions are there, but the way that the process works is that it's always kind of additive. They're adding exceptions, they're adding bonuses, they're adding things. So it becomes more and more confusing.
I'm glad to hear that UrbanForm saves that amount of time, because that was my experience, also. I would work with teams in architecture offices and we would spend hours debating. You forgot this chapter over here. Oh, you did the math wrong over there. And we would just spend so much time to understand the basic parameters of what you could do on the site.
So it's matching up with my understanding, which is really fantastic to hear. Okay. So hopefully some more fun stuff. Tell us about the project that you're most proud of and why.
Tonino Pacifico
Personally working at Habitat, I've been really proud of our Cherry Blossom project. It was a piece of property that Habitat purchased where the land use was already approved, and we had a two-year window to then apply for permits and get actual approved drawings and permits. When I was hired and joined Habitat, it was just going into design phase, where we hired a local architect to now go from the conceptual approved drawings. I just kept guiding and shepherding them through the process. The permits were submitted, permits were issued and it was really exciting for me to actually develop it.
I've never worked on land development before, nor have I ever worked on the behind the scenes of how the drawings get ironed out from the schematics design drawings to the permit set, then actually getting the construction drawings that don't always match the permit set. So that was kind of new to me as well. The city doesn't need to see all the information that we need as builders, so that's been a great experience to see really behind the curtain, because for so many years for me, I've always been on the construction team. After all those approvals. And here's your drawings, it's approved. Now. Go build and build fast. By the way, that's usually what most builders want. Go build it fast.
So that's been exciting for me. I'm very proud of that and it's because it's a personal journey of really seeing all this work that's underneath that iceberg. I'm used to seeing the tip of the iceberg of the finished homes and all this stuff is below it and years of review and feedback and here we are, we're building it.
So I oversaw the development of it. We hired a good company that worked on it and it was very great to learn a lot of challenges and I'm proud of the fact that it's 50% done right now and it's been two years under construction. And then we've been able to reproduce that on our Foster, which is 40 units. I developed that as well. And that's 15 buildings, little different products, different architect, but I'm kind of building on that experience and I'm looking forward to now taking it to two more in the pipeline that are getting ready to start moving the dirt, clearing the trees, so just keep doing the next one.
Quang Truong
Yeah, that's great. I think that is so much of what's interesting about the built environment that you take so many years to kind of see it from initial feasibility all the way to construction. And you mentioned so many things that I think just takes a long time to see: something from where you design it and you go for the initial land use review to permitting then through construction. At each moment, different people need different documents and information and it's just an incredible network of different stakeholders who have different things to say about how we build our environment and all the processes.
And I think that's part of the reason why I use that exact analogy of the iceberg as well, because the architecture that we see is really just the tip of it. And then underneath it there's construction and engineering and zoning and all these regulations that go into it.
That's great. I'm always happy to hear about the projects that people are proud of because it just represents a moment where they and other people kind of came together to make something positive happen in the community. I think that's always really kind of fun to hear about.
Okay. I can't avoid it. I do want to ask about the recent gift from Mackenzie Scott and how that has impacted both you and Habitat for Humanity and what you see going forward.
Tonino Pacifico
Well, thanks for asking. We're still in that honeymoon phase of. Wow, what a blessing, what a gift. And leadership hasn't really made any clear decisions. Clearly it's going to make us more solvent to not worry about paying our current construction cost. That's a blessing onto itself. Because even though we individually, our Habitat received a little over 8 million. I think the Habitat overall almost received half a billion. It was distributed among, I think, 80 or so different affiliates and that's just in the United States. I think there's around 1000 Habitat affiliates in the entire world. So we are one of the 80 that received the donation from Mackenzie Scott. It was so new to us; we weren't expecting it. There isn't anything earmarked that is going to be used for, but I suspect it's just making our cash flow more solvent and also probably will translate into a transition into a potential land deal. I'm starting to see some interest from Steve on some parcels and we're getting more leads too.
Quang Truong
Yeah. I think with a gift like that, it's kind of a “keep doing what you're doing” gift.
Tonino Pacifico
Unlike a lot of funding, there's no set requirements of how many homes to build, or in this city and not that city, etc. It was really great: keep doing what you're doing. And it kind of goes back to, I think what we said earlier, that slow and steady reputation of Habitat. All that they do here. And I've worked for a lot of for-profit builders. Everything we do here is just to buy parcels and build as many affordable homes as we can. Good homes. They're not just thrown together, but they're really high quality. We put a lot of emphasis on energy and sustainability as far as reducing monthly costs. So that lends us to do better building practices, really pay attention to building envelopes, the energy system, mechanical ventilating. It's not just throwing up a house. It's quite impressive.
Quang Truong
And I think that's kind of the benefit of an organization like HH is that you guys have a mission that is outside of what is typical on the private market. And that mission, I think many people see as positive. So I'm glad we share this history of working for Habitat for Humanity.
So very happy to talk to you, Tonino. Really happy to have this conversation with you.
Okay. I think that's it. There was one question, actually. Anything else that you would like to see from UrbanForm in the future?
Tonino Pacifico
If you extend to the rest of the Portland Metro area, that would be helpful because honestly, less of our land leads come from the city of Portland these days. It's more of the surrounding areas. So that would be helpful as well. But that's a whole undertaking of creating all those rules to understand every different city's zoning. So that'll be interesting if that works. That's my initial thought for you.
It's such a useful tool. And if other cities have that same ease for me to go and type in address and get a lot of information, that would be it. But in the meantime, from the conversations we've had over the initial use of it, I've seen you made refinements. I may go months without having a land lead, and then all of a sudden I have two or three. So it's still been that way for us.
Quang Truong
Well, that's great. That's the goal. Hopefully we cover more and more geography with more and more jurisdictions, with more and more information, and we're starting to do that now. We've just incorporated Seattle; Seattle's now live, too. But of course, the idea is that we start to cover more and more geographies. As much information, as easy to get as possible.
Tonino Pacifico
Great, thank you for your time.
Quang Truong
Thank you so much Tonino.