Blended Financing for Impact

Transcription

BLENDED FINANCING FOR IMPACT:
THE OPPORTUNITY FOR SOCIAL FINANCE
IN SUPPORTIVE HOUSING
March 2013
BLENDED FINANCING FOR IMPACT: THE OPPORTUNITY FOR SOCIAL FINANCE IN SUPPORTIVE HOUSING
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PREFACE
This policy paper grows out of the rich history of supportive housing providers across Canada who have grappled with the ongoing demand for safe, quality, affordable housing to support Canadians living with mental illness and homelessness. Building on this legacy, fully
aware of governments’ interest in how social finance can be used to solve social problems,
we came together to sponsor this contribution toward the creation of new supportive housing.
We met to identify the essential ingredients of supportive housing. We learned about social
finance and the possibilities offered by these new forms of partnerships. In August 2012, we
convened a forum to learn from community-based housing providers who took risks, who
were creative, who found local, provincial and national resources, who tapped into new investment streams, and who engaged their communities to find practical strategies to build
new housing. Our goals were to capture their wisdom, to understand what is possible and to
stimulate the dialogue among philanthropists, governments, the private sector, and supportive housing providers and communities about how to meet the challenge of funding
supportive housing.
We thank the participants in the August forum, who shared the stories behind the case studies of innovative social financing. We thank Adam Spence of MaRS and Hadley Nelles of the
Housing Services Corporation for taking our collective knowledge and expertise, adding significant research and important expert and technical advice, and shaping a readable, quality
framework to further the development of supportive housing.
We thank all the members of the project committee for their wise counsel and encouragement. We hope that this paper provides some answers, identifies key elements of how to finance new supportive housing and recognizes the breadth of commitment and interest
across all sectors in achieving a common goal: to change lives and support recovery by
providing people in need with housing and support. We know that without housing, there is
no health.
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OVERVIEW
This report has been prepared by the MaRS Centre for Impact Investing and the Housing
Services Corporation as one component of a research and education project for a group of
supportive housing providers in Canada who have a focus on mental health and concurrent
disorders. It should be noted that the recommendations reflected in this report represent
the views of the Social Finance Working Group.
The objective of the project is to provide a clear pathway for supportive housing providers to
learn about and engage in alternative methods of financing for improving and developing
new dedicated housing units in Canada. This project builds upon the work presented in the
Mental Health Commission of Canada report Turning the Key: Assessing Housing and Related Supports for Persons Living with Mental Health Problems and Illnesses.
The project provides an important development step, convening the supportive housing sector and building its capacity around innovative financing methods for supportive housing
providers and providers of mental health services in Canada. Overall, we hope this project
will support the minimum goal of developing and funding 100,000 supportive housing units
and related supports over the next 10 years, as recommended in Turning the Key.
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CONTRIBUTORS
Social Finance Working Group
Driven by the work of the Mental Health Commission of Canada (MHCC), a number of supportive housing providers in Canada struck a Social Finance Working Group to explore impact-investing opportunities in the supportive housing sector. This Working Group’s focus
is supportive housing for individuals living with mental illness or concurrent disorders.
Throughout 2012, the Working Group met regularly to help guide the work of this project
and act as champions in the sector. The organizations represented on the Working Group
and the individuals that dedicated their time to shaping this work and the report’s recommendations included:
Canadian Council on Social Development: Peggy Taillon
Canadian Mental Health Association, Toronto: Steve Lurie (Co-Chair)
Centre for Addictions and Mental Health: John Trainor
Frontenac Community Mental Health and Addictions Services: Vicky Huehn (Co-Chair)
House Link Community Homes: Brian Davis
LOFT Community Services: Terry McCullum
Mainstay Housing: Brigitte Witkowski
Mental Health Commission of Canada: Catherine Hume and Jennifer Dotchin
St. John’s Community Advisory Committee on Homelessness: Bruce Pearce
Authors
Housing Services Corporation: Hadley Nelles
MaRS Centre for Impact Investing: Adam Spence
Research support
Research support on the detailed case studies in this report was provided by Liz McGuire,
Housing Services Corporation
Other advisors
Ontario Ministry of Health: Debbie Babington
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FORWARD
Although there has been considerable attention given to mental health in recent years, few
Canadians are aware of the importance of housing and support to recovery. In 2011 the
Mental Health Commission of Canada (MHCC) released Turning the Key: Assessing Housing and Related Supports for Persons Living with Mental Health Problems and Illnesses, a
report that highlighted the need for more safe, affordable housing and support services to be
developed across our country.
There are 520,000 Canadians living with mental illness who are either homeless or vulnerably housed. There are only 25,000 units of supportive housing across the country. Turning
the Key calls for a minimum of 100,000 units, along with support services, to be developed
over the next 10 years. This is almost double the number recommended by senators Kirby
and Keon in their landmark report, Out of the Shadows at Last.
One of the recommendations in Turning the Key called for an examination of how social finance strategies could be leveraged to increase the supply of housing and related services.
The last two federal budgets have indicated government interest in looking at how social finance can be used to solve social problems. Given the challenge of developing more supportive housing in these fiscally challenging times, a group of supportive housing providers
came together to fund this project, which examines the potential of social financing to help
us make the kind of investments necessary to increase the supply of supportive housing for
people living with mental illness. The discussion paper and the tool kit suggest that social
financing can play a role in the development of additional supportive housing. In order for it
to be effective, however, there has to be a collaborative partnership among supportive housing providers, private and philanthropic capital, and all levels of government.
The MHCC sees this project as building on Turning the Key and offering practical advice on
how to accelerate the investment in community capacity outlined in Changing Directions,
Changing Lives, the first Mental Health Strategy for Canada, which was released in May
2012.
We intend to work with the project sponsors, our colleagues in the mental health sector, the
private sector and all levels of government to leverage the potential of social finance to make
more supportive housing available to Canadians. The impact that supportive housing has in
changing lives and promoting recovery needs to be recognized as a key area for reform and
investment in the years ahead.
Louise Bradley, President and CEO, MHCC
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EXECUTIVE SUMMARY
In late 2011, the Community Support and Research Unit of the Centre for Addiction and
Mental Health and the Canadian Council on Social Development published a landmark report, Turning the Key: Assessing Housing and Related Supports for Persons Living with
Mental Health Problems and Illnesses. The report was designed to inform the Mental
Health Commission of Canada (MHCC) and all Canadians about the current housing and
community support needs of people living with mental health challenges in Canada.
The report’s findings were clear. There are too many Canadians with mental health issues
who cannot find homes. Hundreds of thousands of our neighbours are inadequately housed
and 119,000 of our fellow citizens who face mental health challenges are homeless.
There is a powerful moral and economic imperative for action. Canadians with mental
health challenges can face grim living conditions, which may include chronic health challenges and extensive use of emergency rooms, and greater levels of violence and imprisonment. The economic cost to both government and individuals is unsustainable. As a society,
we are accumulating hundreds of millions of dollars in lost productivity, increased healthcare costs and remedial costs (such as for prisons and psychiatric care). These are costs that
we cannot afford.
There is a clear need to act, and the solutions are simple. We need to create affordable housing for individuals living with mental health issues, while also ensuring adequate income
supports are available for this type of housing. This report picks up where Turning the Key
left off with its recommendations on housing stock, offering a pathway towards the development of new units.
Focusing the discussion: social finance and supportive housing
The current and traditional approach to the business of social housing is no longer viable. In
this new era of affordable housing, connecting the sector with social finance models means
increased opportunity. These models demand new relationships among the traditional
stakeholders, innovative approaches and an enabling environment.
This report has been prepared by the MaRS Centre for Impact Investing and the Housing
Services Corporation (HSC) as one component of a research and education project commissioned by a group of supportive housing providers in Canada who have a focus on mental
health and concurrent disorders.
The objective of the project is to provide a clear pathway for supportive housing providers to
learn about and engage in alternative methods of financing, sometimes called social finance,
for improving and developing new dedicated housing units in Canada.
This paper supports the exploration of innovative financing opportunities available to supportive housing providers and providers of mental health services in Canada. Overall, it is
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hoped that this project will support the minimum goal recommended in the Turning the
Key report of developing and funding 100,000 supportive housing units and related supports over the next 10 years.
A key audience for this report is government (at all levels). Indeed, when facing our most
pressing problems, government must show leadership; it must maintain its commitment to
protecting citizens’ basic right to shelter and to ensuring quality of life for all Canadians
through good public policy.
But we also live in changed times. At all levels, government revenues are constrained due to
ongoing economic challenges and cost pressures from rising health costs and structural financial problems. Social finance opportunities must complement existing funding and
support approaches. They are not intended to replace government dollars or traditional
funding. As this report shows, despite the increasing challenges faced by government, municipal, provincial and federal governments still have a role in supporting the affordable
housing sector. This role has perhaps changed—innovative financing calls for innovative
players—but government must remain at the table.
A core enabling financial contribution by government and/or the philanthropic sector will
continue to be a key success factor in developing any new supportive housing. This support
is absolutely essential. This project has identified that an innovative suite of financing includes government and/or philanthropic support, and that the limitations and gaps in this
support can be addressed by alternative approaches to financing.
Fortunately, the growth of social finance in Canada provides an opportunity for the supportive housing sector to acquire new financing for the development and acquisition of new
units. Capital dedicated to impact investing is expected to grow from $4 billion in assets today to $30 billion in the next 10 years in Canada.
Alongside grant funds and various other levers available to government, private capital
seeking positive social impact as well as modest financial returns can help meet the gap in
financing for housing development and acquisition. There is already a track record of social
finance success in social housing, in Canada and beyond, that offers many lessons for the
supportive housing sector.
This report identifies and outlines a number of social finance models. It also identifies principles for an effective social finance strategy for the supportive housing sector and challenges to further adoption of impact investing. Finally, it recommends actions to increase the
supply of supportive housing through the use of social finance strategies. The ideas presented here are not necessarily new, but their application, across the supportive housing experience in particular, is unique. Any further development of these opportunities must build on
the work and experience of past trailblazers, existing research and collective expertise, and
those currently embarking on similar schemes.
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Social finance models
Homelessness Foundation, Bob Ward Residence in Calgary: This $4.5
 Calgary
million, 61-unit complex for persons facing mental health challenges was developed using




a financing and in-kind support approach, including funding from the public sector (all
three levels of government), private donations and in-kind support from local builders.
St. Clare‘s Multifaith Housing Society, 25 Leonard Avenue in Toronto: An
$8.1 million, 77-unit affordable housing project funded by blending government grants,
investment from mainstream and alternative lenders, and internal equity to finance acquisition and development.
YWCA Toronto, Elm Centre in Toronto: An $80 million, 300-unit affordable housing project employing various financing strategies, including government grants, private
grant contributions driven by sophisticated fundraising, government credits and rebates,
government loans (City of Toronto and Infrastructure Ontario) and a community housing
bond.
Centretown Citizens Ottawa Corporation, Beaver Barracks in Ottawa: A $65
million, 254-unit affordable housing project in downtown Ottawa financed by government grants, internal financing (leveraging equity), government loans, government credits and rebates, and an alternative lender.
LOFT Community Services and St. Anne’s Place: A $2.4 million, 110-unit seniors’
building that required $1.7 million in upgrades, St. Anne’s Place serves seniors with mental health, addictions and physical challenges who were homeless. Financing combined
an existing Canadian Mortgage and Housing Corporation (CMHC) mortgage, fundraising, a municipal loan and a Social Housing Renovation and Retrofit (SHRRP) grant.
Each of these models employed blended financing utilizing innovative social finance approaches. A total of 11 in-depth and short case studies from across Canada were completed
for this report.
Challenges
The development of new supportive housing units using alternative forms of financing faces
a number of key challenges:




Stable revenue: There are already challenges with financing current stock, some
funding sources are winding down, and the ability to generate income from new
and current sources is limited.
Financial capacity: Few supportive housing providers have the financial capacity to service debt, and their balance sheets are rarely strong enough to obtain private financing.
Organizational capacity: The current level of internal capacity of supportive
housing providers to develop new housing units, particularly related to financial
literacy and technical expertise, needs improvement.
Policy barriers: The opportunity to improve the enabling public policy environment for alternative financing to support new supportive housing development
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
remains. Existing policy barriers can increase costs and the time for development,
and can reduce the capacity of providers to build new units.
Capital supply: The potential supply of investment funding for supportive housing providers lacks a full understanding of the sector and can be averse to financing non-profit organizations.
Priority actions
These 10 priority actions for government, housing providers and others address the challenges above. Acting on these recommendations could help make significant progress towards the goal of growing the available supply of supportive housing in Canada by 100,000
units over the next 10 years.
Federal government actions
1. Increase the ability and frequency of using grant capital funds as leverage for philanthropic contributions and private capital (lending or investment capital).
2. Employ existing federal or provincial government capital-raising institutions and facilities to raise financing for a Supportive Housing Capital Fund that would support acquisition, development and operating efficiency improvements for supportive housing providers
in Canada.
Provincial government actions
3. Increase the number of rent supplements provided to supportive housing providers
through long-term agreements and allow housing providers to use rent supplements as leverage for financing the development of new units.
4. Consider implementing models like Infrastructure Ontario in other provinces, making
additional debt financing available to supportive housing providers through existing programs.
Municipal government actions
5. Increase the usage of loan guarantees, free or low-cost municipal land allocation, permit
rebates, development fee elimination and other incentives/inducements for supportive
housing providers.
6. Eliminate property taxes for at least 10 years on new supportive housing projects.
Housing provider actions
7. Examine the feasibility of creating a Housing Development Corporation, which would
provide expertise and capital for the development of new supportive housing units.
8. Collaborate on a capital fundraising campaign to create a multimillion dollar National
Supportive Housing Trust that could provide supplementary operating support for the financing of new housing stock.
9. Establish an Equity-Leveraging Working Group among large housing providers to share
lessons and explore new mechanisms for financing new unit acquisition and development.
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10. National and provincial organizations / associations should adopt social finance as part
of their ongoing campaigns and capacity-building efforts.
The appendices includes a complete list of proposed actions, detailed case studies of those
projects identified above, and several short case studies of projects that employ innovative
approaches to providing housing to communities in need.
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TABLE OF CONTENTS
1. Introduction / 12
2. Understanding terminology / 16
3. Financing for supportive housing providers / 19
4. Social finance models / 22
5. Principles for a social finance strategy / 29
6. Challenges, opportunities and actions / 32
6.1 Stable revenue / 32
6.2 Financial capacity / 37
6.3 Organizational capacity / 40
6.4 Policy barriers / 44
6.5 Capital supply / 48
7. Priority actions / 51
8. Conclusion / 54
Appendix One: Complete list of proposed actions / 55
Appendix Two: Detailed case studies / 59
Appendix Three: Short case studies / 76
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1. INTRODUCTION
We have made great advancements in our collective understanding of mental health in Canada. Over the past decade, the vital supports that individuals living with mental health challenges need to succeed in achieving their life goals have become increasingly accessible and
sustained. Government, institutional and individual leadership, driven by decades of advocacy from those working on the front line, has fostered this increased understanding.
We now also have a greater understanding of the root causes of poverty, its effects and the
solutions required to improve lives affected by marginalization. We know that one of the key
causes and results of poverty is inadequate housing.
There is a significant supply of affordable housing in Canada: 630,000 units across the
country, supported mainly by subsidies from the federal, provincial and municipal governments.1 Yet hundreds of thousands of Canadians living in poverty still need an affordable
and suitable place to live. Over 1.5 million Canadians, or 13% of us, are in “core housing
need.” In Ontario alone, there are more than 155,000 households on the waiting list for affordable housing.2 In Toronto, the waiting list for supportive housing specifically grew from
700 to 4,510 persons in 2009.3
While affordable housing is a challenge to obtain across the country, the supply of supportive housing is even smaller. There are only 25,367 units of dedicated mental health housing
in all of Canada.4 It is well known that this supply of housing for persons living with mental
illness or concurrent disorders is woefully inadequate. There are 520,700 Canadians living
with mental illness who are inadequately housed; as many as 119,800 are homeless.5 Imagine a population the size of Hamilton, ON, without a suitable place to live. Imagine if everyone who lived in St. John’s was entirely homeless.
It is clear that we need more safe, comfortable and affordable places for Canadians facing
mental illness to live independent and productive lives.
There is a powerful moral and economic imperative for action.
Life without a home is grim. Canadians who cannot afford to live in decent housing are
more likely to experience violence, contract communicable diseases and have chronic health
conditions.6 People living with mental illness often become dependent on the health-care
1
Centre for Addiction and Mental Health, Canadian Council on Social Development. (2011) Turning the Key: Assessing Housing and Re-
lated Supports for Persons Living with Mental Health Problems and Illnesses, p.23.
2
Canada Mortgage and Housing Corporation. (2011). Households in Core Housing Need, Canada, Provinces, Territories and Metropolitan Areas, 1991 – 2006. Retrieved from: http://www.cmhc.ca/en/corp/about/cahoob/data/data_013.cfm
3 Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, p. 5.
4 Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, p. 32.
5 Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, p. 10. The results are composite figures generated from data from reports by the Canada Mortgage and Housing Corporation (2005), Kirby & Keon (2006), Patterson et al.
(2008), and Statistics Canada (2009).
6 Ontario Ministry of Health and Long-Term Care. (2006). Provincial Summary—Average Costs for CMH&A Service Recipient Activity.
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system, in part due to the lack of availability of housing units with adequate supports. Inadequately housed people living with mental illness recirculate through a range of health-care
and justice system services such as emergency rooms, psychiatric hospitals, general hospitals, emergency shelters, domestic violence shelters, foster care, detoxification centres and
prisons.
The economic impact of inadequate housing and homelessness is high. The private and public cost of poverty in Ontario is more than $30 billion annually.7 According to the Canadian
Housing and Renewal Association (CHRA), it costs $69 per day for a shelter bed, $143 per
day to keep a person in prison and $665 per day for a psychiatric inpatient bed, compared to
$25–$31 per day for supportive or social housing.8
Supportive housing is a more cost-effective, healthy and sustainable option than housing
vulnerable Canadians in hospitals, nursing homes, prisons or hostels. Although this type of
institutional care is a vital service, mental health and addiction services should be primarily
delivered in the community to reduce health costs for government, improve health outcomes and allow Canadians to enjoy a better quality of life. This approach ensures inclusion,
integration and vital connections for individuals facing isolation.
The evidence is clear. As outlined in Turning the Key, an investment in supportive housing
makes strong economic sense:
to Homes in Toronto, ON, reported that when individuals with mental illness
 Streets
were provided with housing, there was a 40% decrease in emergency room visits.
US study reported a 76% decrease in the number of days people were incarcer Aatedrecent
as a result of participation in a Housing First program.
costs of emergency and institutional shelters are about 10 times more than the cost
 The
of housing with supports. The At Home/Chez Soi study found that for every dollar in9
vested in a housing-first approach, 54 cents were saved, because participants who were
homeless and experiencing mental health challenges used other shelter and health-care
services less. For the high users of these emergency services, as much as $1.54 is saved
for every dollar invested.10
The consequences of inaction are dire. Hundreds of thousands of vulnerable Canadians will
continue to live without their basic human rights protected, while our society accumulates
hundreds of millions of dollars in private and public costs that we cannot afford due to lost
productivity and increased health and remedial costs.
There is a clear imperative for action: Canada needs to increase the available supply of supportive housing. In order to increase this supply of housing, however, there is a need for a
7
Laurie, Nate. (2008). The Cost of Poverty. Toronto: Ontario Association of Food Banks.
Canadian Housing Renewal Association. “Homelessness vs. Housing: Price Tag.” Retrieved from
http://chra.olasoft.com/document/568/costofhomelessnessincanada_CHRA.pdf
9
Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, “Executive Summary,” p. 18.
10Mental Health Commission of Canada. (2012). At Home/Chez Soi Interim Report, p. 6. Retrieved from
http://www.mentalhealthcommission.ca/SiteCollectionDocuments/AtHome-ChezSoi/AtHome_InterimReport_ENG.pdf
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significant infusion of capital. Unfortunately, due to constrained government revenues at all
levels, housing providers cannot rely on a new supply of grant funding from traditional
sources to develop or acquire new units.
Fortunately, there has been a growth of social finance in Canada, revealing a tremendous
opportunity for the sector to acquire new financing to support the development and acquisition of supportive housing units.
In Canada, the social finance or impact investing marketplace is estimated to have assets of
$2–4 billion. Over the next decade, this marketplace is estimated to grow substantially to
$30 billion. The major challenge in Canada, as it is globally, will be to find a pipeline of investment-ready opportunities for this growing supply of capital.
In order for investment-ready projects to grow, existing federal and provincial regulatory
conditions require close examination. The current and traditional approach to the business
of social housing is no longer viable. We not only require new approaches to address the
current context but we also need to ensure effective and efficient access to new capital. In
this new era of affordable housing, connecting the sector with social finance models means
increased opportunity. These models demand new relationships between the traditional
stakeholders, innovative approaches, and an enabling environment.
This new pool of available capital could significantly augment existing funding sources for
additional supportive housing units based on blended financial models, and it provides an
opportunity for governments and philanthropists to partner with community non-profit organizations. Federal, provincial and municipal governments are not the sole funders of new
supportive housing units; instead, partnerships with community organizations, the private
sector and philanthropists can create many more safe, comfortable places for Canadians to
live.
Summary
This discussion paper offers a roadmap to leverage a social finance strategy to improve and
develop new supportive housing units in Canada by:
an overview of terminology related to social finance and supportive housing;
 Providing
a primer on current financing for supportive housing providers and housing
 Providing
units;
a number of social finance case studies and key lessons learned from these
 Outlining
models;
principles to guide a more comprehensive strategy for the adoption of social fi Offering
nance strategies for the growth of supportive housing stock;
a number of key challenges with the development of new supportive housing
 Describing
units using alternative forms of financing; and
priority actions for government, supportive housing providers and potential
 Presenting
investors
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This report aims to push government, housing providers, the philanthropic community and
impact investors to explore more innovative approaches to financing, in order to better address residents’ needs, build much-needed new housing and reinforce the strength of the
supportive housing sector in today’s changing context.
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2. UNDERSTANDING TERMINOLOGY
What is social finance?
Social finance, or impact investing, is an investment approach that focuses on achieving
positive social and/or environmental impact alongside some form of financial return. This
includes debt and equity investments that range from producing a return of principal capital
to offering market-rate or even market-beating financial returns. Impact investing encourages positive social or environmental solutions at a scale that neither purely philanthropic
supports nor traditional investment can reach.11 Philanthropic grant making and programrelated investments can also fall under the broad umbrella of social finance.12 However, a
narrow definition of social finance would only include investments that could generate some
form of return.
Examples of impact investments could include:
equity investment in a local community solar power firm such as SolarShare
 AA $5,000
loan to a fair trade, organic coffee company such as Planet Bean Coffee
 A $50,000
$450
million
bond issue for a social housing project such as Regent Park, in Toronto,
 ON
Impact investing is a large and growing asset class. In the United States, JP Morgan and the
Rockefeller Foundation analyzed five key sectors—affordable urban housing, rural access to
clean water, maternal health, primary education and microfinance—and predicted that over
the next 10 years the impact investing market in just these five sectors will grow to between
$400 billion–$1 trillion.13
In Canada, the social finance marketplace is also expected to grow significantly. From persistent poverty to climate change, we are faced with pressing social and environmental problems at a local, provincial, and national level. Unfortunately, the ability of governments to
tackle these challenges is constrained due to ongoing economic challenges and structural financial problems.
Social housing providers are longstanding innovators and practitioners of social finance approaches in Canada and around the world. In Canada, we have been experimenting with
debt and equity financing approaches to purchase, build or improve housing with a positive
social impact for decades.
What is supportive housing?
Supportive housing includes housing units or complexes funded specifically for persons living with mental illness and/or mental health problems, persons living with concurrent disSVX. (2012). Invest for Impact: FAQs. Retrieved from http://thesvx.org/?page_id=27
Socialfinance.ca. (2012). Glossary. Retrieved from http://socialfinance.ca/knowledge-centre/glossary/term/social_finance
13 The Rockefeller Foundation. (2012). Impact Investing: An Emerging Asset Class. Retrieved from
http://www.rockefellerfoundation.org/what-we-do/current-work/harnessing-power-impact-investing/publications
11
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orders (co-occurring mental health and substance use issues) or other persons who need
support to live independently. Individuals living in supportive housing could include older
adults managing illness, persons who are chronically homeless, persons with disabilities, or
other persons with mental health challenges.14 “Housing First” is a variation of supportive
housing that relies primarily upon private market apartments in scattered sites in the community. This is the approach that has been implemented in At Home/Chez Soi. Portable
rent subsidies are key to this model, which enables tenants to rent apartments in locations
they choose. The subsidies provide the difference between market rent and the amount
available for rent through social assistance. Supportive housing providers have been using
this approach to partner with private-sector landlords to increase the supply of rental housing where it is available.
In addition to ensuring affordability, supportive housing exists to provide supports to tenants. An affordable, secure home is essential to assisting individuals to realize their life
goals. In Canada, affordability means that the market price or rent is affordable to low- and
moderate-income households, measuring 30% or less of their gross household income, not
including government supports. Affordable housing includes what we commonly refer to as
social housing: housing built with the financial assistance of governments to provide assistance to low- and moderate-income households. It includes supportive housing, non-profit
housing, co-operative housing and housing supported by rent supplements. These monthly
rent charges are usually geared to income.15
What advantages do supportive housing providers have in the social finance marketplace?
Supportive housing providers have a number of key advantages in the social finance marketplace and might appeal to a variety of impact investors.
Signature impact investments have been affordable housing investments. The
$450 million bond issue by Toronto Community Housing Corporation (TCHC) and the $1
million community housing bond issue by YWCA Toronto are consistently cited as leading
examples of impact investments.
There is demonstrated interest in affordable housing by investors. According to a
recent survey of Canadian impact investors, 75% would be interested in affordable housing
bonds.16
Social housing is a proven impact investment with a track record. Social housing
is a proven debt investment class with a low-risk profile and stable, but not sizable, returns.
For example, it is known that there has not been a default on a social housing mortgage in
Ontario since the mid-1980s. Social housing represents an infrastructure investment opportunity like other real estate opportunities in line with many investors’ interests, with one key
Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, p. ii.
Housing Services Corporation. (2012). Glossary. Retrieved from http://www.hscorp.ca/resources/glossary
16 MaRS Centre for Impact Investing. (2011).
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difference: demonstrable impact. There are few investments that have the proven ability to
generate a modest financial return while reducing poverty by providing someone with a
comfortable, safe place to live. If social housing were its own asset class with regularly
tracked data, it would be considered a strong option for Canadian investors.
Supportive housing has the potential for scale that matches investor interest
and capacity. The size of potential investments in supportive housing projects matches the
interest and capacity of potential investors who are looking for larger opportunities to place
capital. The cost of due diligence is often the same for an investment, whether it is $50,000,
$5 million or $50 million. Many current impact investment opportunities face challenges
because of their smaller scale. Large supportive housing real estate developments can be
more of a fit for impact investors.
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3. A PRIMER: FINANCING FOR SUPPORTIVE HOUSING PROVIDERS
When considering innovative, alternative financing mechanisms for supportive housing, it is
vital to understand the current sources of operating funding and typical costs for these facilities.
Government
contributions
Rental
income
Philanthropic
contributions
A. Where does ongoing operating funding for
supportive housing providers come from?17
Although there is significant variability between organizations, ongoing operating funding for supportive housing providers generally
comes from a variety of sources, as shown in
Figure 1, below:
Other income
Government contributions (70 to 90%):
In Ontario, for example, the vast majority of
income derived by supportive housing providers is provided by the Ministry of Health and
Long Term Care, Local Health Integration Networks (LHINs), the Canada Mortgage and
Housing Corporation (CMHC) (note: these funds include the declining federal investments,
which by 2030 will equal zero), and some municipal sources.18
Rental income (5 to 15%): The next most significant portion of income is derived from
rental income provided by tenants, often under strict affordability criteria, largely calculated
as Rent Geared to Income (RGI).
Philanthropic contributions (2 to 10%): In general, philanthropic contributions represent a small but growing portion of income. These contributions include individual donations and major gifts, foundation and corporate grants, and money raised by fundraising
campaigns and events.
Other income (0-5%): Housing providers also generate income from interest, other
earned revenue activities and other initiatives.
B. What are the typical costs for supportive housing facilities?
When considering the development of supportive housing units, there are three major cost
centres: capital, operating, and programs and services costs.
These figures should be interpreted with caution, as they are not statistically representative. The proportions are designed to outline
rough percentages of funds from a variety of sources. These figures are based on a small sample survey of five supportive housing providers in Ontario.
18 Details on other provinces can be found in Turning the Key (Centre for Addiction and Mental Health, Canadian Council on Social Development. (2011). Turning the Key)..
17
19
Capital costs. There are a number of capital costs for the development of housing projects,
including predevelopment, construction and permanent capital budgets.
a. Predevelopment: site selection, planning and feasibility studies, architectural
drawings, environmental testing and community outreach;
b. Construction: hard (materials) and soft (labour, lawyers, consultants) costs for
building; and
c. Permanent capital budgets: set aside for capital reserves in operating budget for
repairs and contingencies.
In 2006, the estimated capital cost per unit in Ontario was $150,000–$200,000.19 This
figure is estimated to be roughly within the range of cost per unit today.20
Capital funding comes from a mix of federal, provincial and municipal governments.
Federal and provincial governments will often provide a portion of financing in the form
of grants or subsidies. Municipalities can contribute by eliminating property taxes,
waiving development charges, land grants or contributing funds.
In addition, financial institutions and intermediaries like the CMHC provide Proposal
Development Financing (PDF), seed funding, mortgage insurance, and partly forgivable
loans.21 Beyond these sources, housing providers can obtain support through in-kind
donations, philanthropic contributions, private lenders, or mortgage financing.
Operating costs. Operating costs include management staff, utilities and maintenance.
These costs are often referred to as Manageable Costs per Unit, which includes: building operating costs; contracted services, staff and external service providers; office supplies and
miscellaneous administrative costs; corporate overheads such as office space, telephones,
technology, insurance; and bad debt expense.22
These costs are often combined with ongoing capital costs for a Total Cost per Unit Calculation. This includes Manageable Costs per Unit, plus mortgages, taxes and capital expenditures divided by the total number of units; it is expressed as a dollar amount.23 While these
costs are common across social housing providers, there are increased costs associated with
supportive housing providers specifically, as a result of the additional costs of tenancy support. The gap in operating costs can be financed by rent supplements and/or operating subsidies and contingency funds.
Legislature of Ontario. (2006). Affordable Housing Financing. 2006. Retrieved from
http://www.ontla.on.ca/library/repository/mon/15000/268446.pdf
20 Given examination of a number of Ontario projects and the completed case studies. A recently completed business plan for a project in
Espanola, ON, had a cost of $180,000 per unit.
21 Canadian Research Network for Care in the Community. (2007). Fact Sheet: Supportive Housing from the Group Up: Frequently Asked
Questions. Retrieved from http://www.crncc.ca/knowledge/factsheets/pdf/InFocus-SupportiveHousing-FromtheGroundUpFrequentlyAskedQuestions.pdf
22 Halton Community Housing Corporation. (n.d.) Performance Measurement Definitions. Retrieved from
http://sirepub.halton.ca/cache/2/yysycz45h0xjy3qylzzwn2rs/12277408112012111702957.PDF
23 Halton Community Housing Corporation. (n.d.) Performance Measurement Definitions. Retrieved from
http://sirepub.halton.ca/cache/2/yysycz45h0xjy3qylzzwn2rs/12277408112012111702957.PDF.
19
20
Program and services costs. Funding for personal support and care typically comes
from ministries of health, health authorities and/or social services. Beyond government
funding, supportive housing providers may obtain funding from user fees and philanthropy
(individual donations and large gifts).24 These costs can be combined with ongoing capital
and operating costs for a Total Cost per Unit.
24
Canadian Research Network for Care in the Community. (2007). Fact Sheet.: Supportive Housing from the Group Up: Frequently Asked
Questions. Retrieved from http://www.crncc.ca/knowledge/factsheets/pdf/InFocus-SupportiveHousing-FromtheGroundUpFrequentlyAskedQuestions.pdf
21
4. SOCIAL FINANCE MODELS
Important lessons can be learned from existing social housing models that have employed
social finance approaches. In order to develop the recommendations found here, it was important to complete a series of case studies depicting the use of social finance in social housing. A set of criteria was established to inform several in-depth case studies and some
shorter case studies, as well as to document trends identified in, and lessons learned, from
the research. Although the case studies here focus on broader social housing experiences,
the information is also applicable to the supportive housing sector.
Criteria
A set of criteria was established for case studies, including:
housing focus: Each project must have a focus on affordable housing,
 Affordable
though not limited to supportive housing projects. This did not exclude projects that fea-




ture market rent units.
Investment capital: There must be some form of debt or equity investment capital in
the project.25 This investment need not represent the entire project cost.
Geography: Case studies focused on projects in Canada, with potential inclusion of
some American and British examples.
Project purpose: The housing project could be one or a combination of the following:
acquisition, new development, refurbishment and/or retrofit (including changes made
for energy efficiency).
Beneficiary: Although private developers might be involved in the project, the ultimate
beneficiaries were non-profit or co-operative housing providers who were maintaining or
adding permanent stock to the affordable housing marketplace.
In-depth case studies
In-depth case studies were completed on the following initiatives:
Calgary Homelessness Foundation, Bob Ward Residence, Calgary, AB. In 1998,
the Calgary Homelessness Foundation (CHF) was established as a non-profit organization
to facilitate capital funding for affordable housing projects. One of its first projects was the
Bob Ward Residence, a $4.5 million, 61-unit complex for persons facing mental health challenges. Tenants are low-income earners between the ages of 35 and 64; and the primary diagnoses of clients are schizophrenia, depression or affective disorders.
The model CHF employed was a financing and in-kind support approach that included
funding from the public sector (all three levels of government), private donations, and inkind support from local builders. The City of Calgary provided the site (valued at $935,000),
governments provided capital funding (over $1 million), CHF engaged in focused fundrais25
Exceptions could be made in the case of a very unique financing model.
22
ing efforts and the Calgary Home Builders Foundation provided $1 million in direct funding
and in-kind support.
The Bob Ward Residence opened in October 2003, six months earlier than planned, mortgage-free and half a million dollars under budget. The project was the first of its kind in Calgary and is a model of coordinated fundraising and leveraged government support,
including grant and land contributions. This approach to supportive housing, and the project’s success in creating permanent housing solutions, were also factors in the City of Calgary’s ability to close some shelter beds.
St. Clare’s Multifaith Housing Society, 25 Leonard Avenue, Toronto, ON. St.
Clare’s Multifaith Housing Society originated through Toronto Action for Social Change
(TASC), an organization that focused on finding evicted street youth a place to live. St.
Clare’s first affordable housing development success came in 2000 at 25 Leonard Avenue, a
former medical office building that was converted into 77 units of affordable housing, with a
total project cost of $8.1 million.
The project was divided into two phases, employing a novel social finance approach that
blended grant and investment financing. In Phase One, the federal government (in partnership with the City of Toronto) gave St. Clare’s $2.65 million and St. Clare’s fundraised another $100,000. A conventional first mortgage was secured for $1.7 million, and an
alternative lender, the Canadian Alternative Investment Cooperative (CAIC), was the lender
on a second mortgage for the final $300,000. This mortgage financing approach provided
an alternative way for St. Clare’s to finance development without using CMHC insurance. In
Phase Two, the federal government and the City of Toronto provided St. Clare’s with $1.5
million in grant financing. St. Clare’s provided $1.6 million in equity by extending the amortization of the first mortgage when the building was refinanced.
Beyond the use of blended financing approaches, there were a number of additional lessons
from this model. First, St. Clare’s was able to secure capital via the cash flow stream of fiveyear guaranteed rent supplements. Potential investors and lenders saw this as a stable income stream that would provide additional stability for the project beyond the governments’
grant commitments. Second, there is an opportunity for housing providers to leverage equity in existing assets in order to finance new development. Third, there was an element of assumed risk: given their St. Clare’s track record, the Board of Directors was willing to
understand and assume risk in order to expand their housing portfolio.
YWCA Toronto, Elm Centre Project, Toronto, ON. The YWCA Elm Centre project is
an innovative residential community located in the heart of downtown Toronto. The Elm
Centre offers 300 affordable apartments for low-income women and their families, women
living with mental health and addiction issues and families of aboriginal ancestry. The Elm
Centre also houses YWCA Toronto’s administrative headquarters, a 200-seat auditorium,
meeting spaces and a restaurant. This $80-million initiative is a leading example of blended
23
financing in affordable housing that has employed innovative social finance approaches to
create one of Canada’s largest housing projects in the last decade.
YWCA Toronto was able to employ a variety of financing strategies, including government
loans (City of Toronto and Infrastructure Ontario), grants, credits and rebates, private grant
contributions driven by sophisticated fundraising and a community housing bond. The
breakdown of capital financing is quite remarkable: 42% of the funding was provided
through government loans, 38% through government grants and rebates, 19% through
fundraising and 2% through the private debt offering.
The YWCA’s financing model offers many key lessons. As with the St. Clare’s example, the
success of the YWCA’s financing strategy is partially based on the guaranteed cash flow derived from rent supplements. The YWCA also demonstrated the potential and need for a sophisticated fundraising machine to raise philanthropic funds to finance affordable housing.
Additionally, governments employed important levers beyond traditional grant financing,
including loans, rebates and land grants. Finally, the YWCA demonstrated the capability of
a non-profit organization to raise low-cost debt financing independently through a simple
bond offering, as shown through the $1-million investment (10 years at 4% per year) made
by the Muttart Foundation.
Centretown Citizens Ottawa Corporation, Beaver Barracks, Ottawa, ON.
Centretown Citizens Ottawa Corporation (CCOC) is the owner and developer of Beaver Barracks, a 254-unit affordable housing project located on Metcalfe, Argyle and Catherine
streets in downtown Ottawa, ON. The $65-million development of Beaver Barracks took
place in two phases, comprising five buildings. The project mixes bachelor, 1-bedroom, 2bedroom and 3-bedroom apartments and townhouses.
Like the YWCA, CCOC employed an innovative blended financing model, using various social finance strategies, including government grants, loans, credits and rebates, an alternative lender and internal financing (leveraging equity). CCOC received $19 million in
combined federal/provincial funding in two phases under the 2008 program year of the
Canada-Ontario Affordable Housing Program. CCOC also benefited from $12 million in
grants and in-kind contributions from the City of Ottawa. In addition, CCOC financed a further $31 million through two debenture agreements with Infrastructure Ontario. Through a
special mortgage arrangement with a religious order, CCOC secured an additional $1.5 million in low-cost mortgage financing at 2% per year.
The remaining financing came through an internal loan mechanism provided by CCOC itself. This internal financing was perhaps the most novel feature: a cumulative $2.25 million
in loans at the Government of Canada Long-Term Bond Benchmark Rate for a 40-year term
from CCOC’s own assets. Now that the Beaver Barracks project is completed, CCOC owns
and manages 54 properties with more than 1,595 units, combining both market rent and
subsidized housing across downtown Ottawa.
24
LOFT Community Services and St. Anne’s Place, Toronto, ON. A 110-unit, $2.4
million seniors’ building that required $1.7 million in upgrades, St. Anne’s Place serves seniors with mental health, addiction and physical challenges who were homeless. This project
was funded by a blend of an existing CMHC mortgage, fundraising, a municipal loan and a
Social Housing Renovation and Retrofit Program (SHRRP) grant. A significant fundraising
gap gave the project a higher risk profile.
St. Anne’s Place had been a general seniors’ residence. The non-profit organization operating the facility could no longer sustain it and sold it to LOFT for $1. LOFT took the risk to
convert the building into an apartment building for seniors with mental health, addictions
and physical challenges who were homeless. When LOFT took over the building there were
many vacancies; LOFT immediately began to accept at-risk seniors. Today, these individuals
make up 85% of the residents and the building is at full occupancy.
LOFT assumed an existing CMHC mortgage for this property in the amount of $456,000.
Initially, $2 million in donations from LOFT were required to upgrade the building. Later,
the building required further upgrades; the City of Toronto provided a loan of $1 million
(due in 2018) and an additional $1,728,000 in SHRRP grants were secured. In addition,
82% of the tenants have rent supplement funding. The mortgage is at an interest rate of
5.75% to be completed by 2020 (it was originally a 50-year mortgage). The loan from the
city is without annual interest payments until 2018, and then at a rate of prime plus 1%.
It was necessary for LOFT to take significant risk to take on this project, but the risk was
mitigated for LOFT because the organization had access to charitable dollars and a low-cost
mortgage. The risk was acceptable to LOFT because their board, staff and service users
(consumers) strongly believed that there was (and continues to be) a critical societal need to
serve seniors with significant mental health and/or addictions challenges. LOFT believed
that taking this risk was in line with its mission as a large non-profit charitable organization
and decided to contribute its financial, management and donor resources to this project in
the absence of sufficient government initiatives and community resources for homeless seniors with mental health, addictions and physical challenges.
In-depth case studies on these projects and others can be found in Appendix Two.
Short case studies
Short case studies on examples of social finance in social housing were completed on the following projects:
Buffalo Housing and Development Corporation, Regional Municipality of Wood
 Wood
Buffalo, AB
Community Housing, “Blend and Extend,” Ottawa, ON
 Ottawa
Community Housing Corporation, Regent Park, Toronto, ONWoodgreen Com Toronto
munity Services, First Step to Home, Toronto, ON
 Stella’s Circle, Multi-Unit Acquisition Strategy, St. John’s, NFLD
25
 Frontenac Community Mental Health and Addiction Services, Kingston, ON
These short case studies can be found in Appendix Three of this paper.
Overall trends and lessons learned
The following trends were identified based on the completed case studies and associated research.
Housing providers have been experimenting with unique and innovative alternative financing approaches for more than a decade. The use of social finance for social housing in Canada is not new. Leading organizations and governments have been engaged in innovative
alternative financing approaches for more than 10 years.
Alternative financing arrangements in social housing require long-term planning and cultivation of internal and external supporters. It is not possible to finance and build a supportive housing facility overnight. When factoring in social finance strategies, it is necessary to
cultivate external supporters and investors, and build internal buy-in through ongoing
communication and engagement. Supportive housing providers and new investors will need
patience, as this process can take years to complete.
Some housing providers have greater flexibility to leverage new funding and unique arrangements without federal government involvement in debt financing. Although government support is a necessary condition for success, many housing providers have found
greater flexibility without federal government involvement. A number of those studied indicated that they had greater flexibility without CMHC financing or mortgage loan insurance.
Providers were able to leverage new and unique sources of funding without significant restrictions or covenants. If a decrease in CMHC insurance uptake is realized, the accumulated surplus from this program could be better served. As the recommendations suggest, the
capital could be invested in a different type of social finance tool, such as a sector-based capital fund.
Government involvement at multiple levels is a necessary condition for success. To ensure success, all levels of government, including federal, provincial and municipal governments, should be engaged in some capacity. Their support can provide important
leverage to secure other forms of grant and debt financing.
Governments are moving beyond traditional grant funding and using other levers to support
the development of affordable housing. Governments have more tools at their disposal than
just traditional grants. Many innovative governments have been successfully employing additional levers beyond grants, including eliminating or reducing development fees, granting
municipal land, providing loan guarantees, creating investment incentives and even opening
up alternative financial institutions for social housing providers. These tools are more important now given that government funding sources can be constrained.
26
Supportive housing providers require diversified, or blended, sources of capital funding, including grant and debt financing. It is not possible to finance a new
housing project with a single source of government funding, nor is it possible to finance a
project solely using private capital. Supportive housing providers are employing sophisticated strategies to obtain government, philanthropic and investment funds from a variety of
sources to support development. This includes using ongoing rental revenues to address operating and debt-financing costs.
Sophisticated fundraising infrastructure may be required to support largescale projects. There is often a need for significant grant money to support capital or operating costs for facilities that utilize social finance strategies. In all cases, a sophisticated
and substantial fundraising infrastructure is required to attract grant funds or individual
gifts, and charitable status is required to issue tax receipts to donors.
Smaller lenders play a large role in alternative financing for social housing in
Canada. There are a small number of private lenders and investors in Canada providing financing to social housing providers. These relatively smaller lenders, like the CAIC or religious orders, play a vital (and outsized) role in supporting a large number of organizations
engaged in alternative financing approaches.
FIGURE 2: CAPITAL FUNDING SOURCES FOR DEVELOPMENT OR ACQUISITION OF
SUPPORTIVE HOUSING
Government Grant Funding
Government Grants and Contributions
Traditional Funding Model
Emerging Funding Model
Philanthropic
Contributions
Philanthropy
Direct Lending and Mortgage Loan Insurance
Direct Lending and Mortgage Loan Insurance
and/or
Debt offerings including debentures, promissory
notes, and bonds
Loans and mortgages from alternative lenders and
financial institutions
Leveraging equity from existing housing stock or
assets for financing
Lev revenue streams to support financRent supplements have been used as stable
ing. Obtaining stable revenue is a challenge for affordable housing providers, but some organizations have leveraged rent supplements as stable revenue streams to support financing
Lending
and Mortgage Loancan
Insurance
for the development of new units. The utilization Direct
of rent
supplements
be just as costand/or
effective as a one-time allocation of capital funds. The benefits to government are that rent
Debt offerings including debentures, promissory
supplements spread the financial contribution over a longer
time
realizing a lower
notes,
bonds,frame,
etc.
Loans dedicated
and mortgages from
alternative
lenders and budgets.
annual liability, and these are often funds already
within
government
financial institutions
Providers also leveraging equity from existing housing stock or assets for financing
Lev
27
However, while the fixed nature of rent supplements might prove favourable to government,
housing providers’ allocations do not increase in relation to increases in rent or operating
costs. This means that without an increase in the number of units covered by rent supplements, providers are challenged by an ability to cover a decreasing number of units as operating costs increase. (Figure 3)
FIGURE 3: RENT SUPPLEMENTS VERSUS ONE-TIME CAPITAL PROJECT FUNDING
Rent Supplement:
$6,000 per
unit
One time capital allocation:
$50,000 - 150,000 per unit
One time capital allocation:
$50,000 - $150,000 per unit
28
5. PRINCIPLES FOR A SOCIAL FINANCE STRATEGY
There are clear risks and rewards associated with alternative approaches to financing supportive housing in Canada. For example, although there is a potential pool of private capital
available to support development, this should not be seen as the sole source of funding moving forward. In order to manage the risks and reap the rewards, it is vital that there is a
common understanding about the principles that should guide any individual or comprehensive social finance strategy.
Accordingly, the following nine principles should guide the development of an effective approach to support the growth of the available stock of supportive housing units in Canada by
100,000 over the next decade through the application of innovative social finance strategies.
1. Canada must move to create new supportive housing units with security of
tenure. Our key objective is to identify how to increase the available supply of supportive
housing units in Canada. These supportive housing units need to be developed to ensure
long-term security of tenure for existing and future residents. This principle recognizes that
although income supports and the private rental market play an important and ongoing role
in supportive housing, they are insufficient to meet the needs of a growing number of Canadians and the estimated 520,000 people living with mental illness who are vulnerably
housed or homeless.
2. Non-profit organizations must play a leadership role in the governance of
new supportive housing units. One of the most effective means of ensuring security of
tenure is to ensure that non-profit organizations play a leadership role in the governance of
new supportive housing units. In other words, these units would be under the control or
stewardship of organizations with a public benefit mission as defined by law. This does not
preclude private sector development where security of tenure is guaranteed, or sharedownership partnerships between private housing developers and non-profit organizations
on multi-unit complexes. This also reveals an opportunity for government to reach out to
non-profit organizations to invite them to play a role in addressing the market gap in available affordable rental housing—one that the private market has not yet been able to satisfy.
3. Supportive housing providers must clearly understand and manage risk.
Housing providers, including their staff members and boards of directors, require the full
capacity to effectively understand and manage risk. Without the ability to appropriately
manage and mitigate risk, a minor (or catastrophic) failure could prevent further adoption
of these strategies. The sector may also be paralyzed in the traditional mode of problem
solving, which has not resulted in the development of units to meet the tremendous need.
Supportive housing providers must pair effective risk-management practices with an overall
increase in capacity for business practices.
29
4. We can build more units of supportive housing using blended financing
models, including government grants and contributions, philanthropic contributions and private investment capital. Over the past decade, numerous successful
examples have demonstrated the necessity of moving beyond the traditional approach of relying solely on government grants and contributions toward approaches that involve more
blended financing models. The potential for scaling these models may also be greater today
given the growing pool of private capital that is seeking both return on investment and positive social and/or environmental impact. This does not represent an ideological shift of responsibility from government to the private sector. Rather, social finance opportunities
must complement existing funding and support approaches. They are not intended to replace government dollars or traditional funding. It should be noted that the expected financial returns from lending or investing in supportive housing projects would be steady but
modest.
5. We need to implement practical short-term solutions while working on longterm sector-wide fixes. Many actors are already moving forward with innovative, workaround solutions to address the challenge of an insufficient supportive housing supply. It will
take many years to build political and economic capital for system-wide impact and change.
As we work on these long-term solutions, providers have recognized that in the short-term
they need to scale and replicate models that work. In addition, there is a need to work with
governments to modify policies and regulations and use existing levers to meet the ultimate
objective of increasing the available supply of supportive housing.
6. Governments must create an enabling regulatory environment for social finance strategies to succeed in the area of supportive housing. The federal and
provincial governments should create an enabling regulatory environment that encourages
and allows non-profit housing providers to effectively finance the construction, acquisition
or repair of housing units, while also considering sustainability and the providers’ long-term
needs.
7. The provision of supportive housing is a shared responsibility requiring the
support of all stakeholders. An effective strategy must involve collaboration between
community, government and private stakeholders, including foundations, municipal, provincial and federal governments, and local community organizations. This does not mean
that stakeholders should lessen their commitment. In fact, governments at all levels should
not be absolved of their responsibility to provide ongoing financial support. It is recognized
that governments and the philanthropic community have a limited ability to dedicate significant pools of grant funding, but there is certainly capacity to dedicate more political and
economic capital to this issue than is currently being contributed.
8. Supportive housing providers must have long-term financial capacity for
new and existing stock. Supportive housing providers must be able to sustainably finance the construction, acquisition, repair and operation of new and existing housing units.
30
In order to maximize efficiency, it may be necessary to make difficult decisions including the
consolidation of housing portfolios. In addition, any effective financing strategy cannot focus solely on capital financing models to fund acquisition and construction. We must also
examine approaches to decrease costs or increase revenues through energy efficiency and
social enterprise approaches, as shown in Figure 4.
9. An effective strategy for developing new supportive housing units must go
beyond bricks and mortar. Canadians who face mental health challenges require more
support than just four walls and a roof. The supportive housing sector relies on capital to
build new homes for clients and provide adequate funding to cover the operations of these
assets. In addition, funding is required to ensure that residents are supported and able to
succeed. Because the supportive housing sector’s clients have unique needs, residents require services beyond traditional housing supports in order to positively contribute to their
community and succeed in achieving their life goals.
FIGURE 4: CASH FLOW FOR SUPPORTIVE HOUSING UNITS
Traditional Model
CASH FLOW
 Government grants
and contributions
 Rental income
Emerging Model
Operating &
Capital Costs
CASH FLOW
 Government grants and contributions
 Rental income
 Rent supplements
 Earned revenue (social enterprise) activities
 Energy efficiency improvements
Operating &
Capital Costs
31
6. CHALLENGES, OPPORTUNITIES AND ACTIONS
There are a number of key challenges in developing new supportive housing units using alternative forms of financing, including: stable revenues, financial capacity, organizational
capacity, policy, legislation and alternative capital supply. Key opportunities and actions
have been developed to help address some of these existing challenges; they are highlighted
throughout. (The following section features a summary of 10 priority actions taken from this
section.)
The actions outlined below should expand capital availability, allow for scaling and sharing
of successful models, increase financial capacity and expertise for governments and providers, decrease operating and capital costs, and increase the ability of housing providers to
earn revenues, without significant financial impact to government treasuries or the bottom
line of community organizations. By actively implementing these proposed actions,
Canada could make significant progress toward the goal of growing the available supply of supportive housing by 100,000 units over the next 10 years.
6.1 STABLE REVENUE
Housing providers need stable, ongoing revenue streams in order to support existing housing and utilize new alternative financing arrangements. Unfortunately, there are already
challenges with financing current stock; some funding sources are winding down and the
ability to generate income from new and current sources is limited.
a. Current supportive housing operations already experience challenges financing existing operations. Half of all supportive housing providers in Canada report
that they have inadequate income to maintain their existing housing stock.26 This challenge
was clearly articulated in Turning the Key:
“Aging and deteriorated housing stock is a problem in many provinces. Many
housing providers, who are leaders in innovative housing and supports, said that
it was a constant struggle to find the funds for maintenance and upkeep...while
options in securing capital funding for housing stock development exist, there
are few opportunities to secure new, annualized funding to support tenants, subsidize rental costs, and sustain operational costs. Deteriorating stock was also a
significant concern expressed by housing and service providers during one-toone conversations across the different provinces.”27
The cost of operating supportive housing will face increased pressures as providers are faced
with the challenge of deferred maintenance and energy costs that increase faster than inflation and are unmatched by rent supplement levels.
26
27
Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, p. 40.
Centre for Addiction and Mental Health, Canadian Council on Social Development. Turning the Key, “Executive Summary,” p. V.
32
b. There is a compounding problem with the impending and ongoing decrease
of federal housing subsidies. Although the federal government will continue to play a
role in funding supportive housing, its level of support is projected to decrease significantly
over the next decade. Federal expenditures on social housing are expected to decline from
$1.7 billion in 2010 to $500 million in 2020.28 This reduction in financial support could
have a negative impact on the ability of all social housing providers, including supportive
housing providers, to maintain existing stock and build new units.
A report by Steve Pomeroy of Focus Consulting in May 2011 examined a sample of 200
agreements covering 8,600 units of social housing. It concluded that 80% of the units sampled would be economically unviable when federal subsidies expire at the end of their mortgage terms.29 Inadequate underlying capital reserves will also create tremendous challenges
for maintenance of stock: 70% of respondents had insufficient capital reserves to maintain
existing assets beyond the expiry of the federal subsidies.30 Only 30% of units would be viable following the expiry of the subsidy agreements.31
These challenges were underscored in the 2009 Annual Report of the Office of the Auditor
General of Ontario:
“Under these circumstances, some housing projects would no longer be financially viable because rental revenues are insufficient to cover operating costs,
even when the property is mortgage-free. Properties housing a high proportion
of households that pay low rent would be affected the most because they depend
largely on government subsidies to meet operating costs. The expiry of these
funding agreements without commitments to establish new ones could force
non-profit and co-operative housing providers to stop providing a large number
of social housing units. The majority of Service Managers who responded to our
survey noted that they have yet to find a solution to deal effectively with this issue. The Ministry indicated the province has had ongoing discussions with the
federal government regarding the pending decline in federal funding. However,
there has not been any commitment from the federal government to renew the
funding and the Ministry had not developed a contingency plan to address this
situation.”
c. The ability to generate additional income through rent, earned income activities and philanthropic contributions is generally quite limited. To acquire or
develop new units of housing, supportive housing providers need to generate additional income from new and existing sources beyond government grants and contributions. Unfortunately, there are significant constraints on revenue-generating activities.
Pomeroy, Steve. Is Emperor Nero Fiddling as Rome Burns? Assessing Risk when Federal Subsidies End. May 2011. P. 2.
Pomeroy, Steve. P. 2.
30 Pomeroy, Steve. P. 7.
31 Pomeroy, Steve. P. 5.
28
29
33



Rental income: The rental income challenge is simple and perhaps the most
significant: monthly rents do not typically cover operating costs or ongoing capital
costs. No mainstream housing provider would be able to build a business model on
rents that cover only half of their costs; with rental revenues at only half the market rate, supportive housing providers face an even greater challenge. Given a hypothetical monthly tenant contribution of $475 per unit and an average monthly
operating cost of $1,000 per unit, a significant revenue gap must be filled before it
is possible to create a stable revenue model for financing further acquisition or development.
Earned income activities: Supportive housing providers may supplement their
revenue base through various earned income activities. However, there are some
regulatory barriers to engaging in earned income activities, as described by the
December 2010 Report of the Canadian Task Force on Social Finance. Charities
are only permitted to engage in “related businesses” run substantially by volunteers or that are linked and subordinate to a charity’s purpose.32 In addition, a
charity cannot have any profit-earning purpose. There have been some recent
changes to the regulatory environment, with some relaxation of standards by the
Canada Revenue Agency33. However, even if the pathways for earned revenue activities are clearer, developing these kinds of social enterprises requires prolonged
periods of time before the organization can realize significant positive revenues.
Philanthropy: Another common source of funds beyond rents and earned revenue is philanthropic contributions from individuals, foundations and corporations.
However, there are significant challenges with deriving new revenues from philanthropic sources. In general, philanthropic contributions are currently, at best, stable, though they often reflect the economic climate. Although average donations
have grown significantly (66.6%) since the early 1980s, the relatively small but
steady donor pool has shrunk over time, from 25.7 per cent of tax filers in 1984 to
23.1% of tax filers in 2009.34,35 In addition, recent years have seen a decline in total donations, with a steady reduction from $8.6 billion in 2007 to $7.8 billion in
2009, based on tax filings.36 There are significant organizational requirements to
generating large philanthropic contributions. A supportive housing provider would
require a large, coordinated and mature fundraising infrastructure to generate the
substantial funds required for new housing development.
Report of the Canadian Task Force on Social Finance, p. 21.
Corriveau, Stacey. (2012, July). CRA releases new 2012 guidance on CED in relation to charitable status. BC Centre for Social Enterprise. Retrieved from
http://www.centreforsocialenterprise.com/f/CRA_releases_new_2012_guidance_on_CED_in_relation_to_charitable_status_072812.p
df
34
Lasby, David. (2007). Trends in Individual Donations: 1984–2005. Ottawa: Imagine Canada.
35 Lasby, D. Imagine Canada. (2010). Statistics Canada Releases Most Recent Charitable Donor Stats, Table 1: Charitable donation statistics, 2009. Blog@Imagine Canada,
36 Lasby, D. Imagine Canada. (2010). Statistics Canada Releases Most Recent Charitable Donor Stats, Table 1: Charitable donation statistics, 2009. Blog@Imagine Canada, Dec 6, 2010)
32
33
34
Opportunity: Rent Supplements
A rent supplement is “a subsidy paid to a landlord on behalf of a household in need of rental
assistance. It is meant to help bridge the difference between the rent that a household can
afford to pay and the actual market rent of a modest unit.”37 These rent supplements are
provided to non-profit and for-profit landlords, often through long-term agreements. Rent
supplements are one of the areas in which provincial governments can spend federal funds
as determined by the Affordable Housing Framework 2011–14.38
In some cases, organizations will lease units at market rates and sublet them to clients on a
rent-geared-to-income (RGI) basis. Provincial governments, often through ministries of
health, can subsidize leasing costs by providing dedicated rent supplements to mental
health support organizations. Rent supplements allow these organizations to fully cover the
leasing costs. However, the housing is not typically owned by the organizations themselves,
which forces non-profits to use private landlords to house clients. This detracts from nonprofits’ ability to utilize their own rent supplements. Accordingly, there is no long-term security of tenure for low-income individuals who require supportive housing and private
landlords assume any net financial benefits of the rental income. Rent supplement funds
are typically allocated over a long period of time (four to 10 years), with an individual award
that allows a household to pay market rent. For example, an individual may receive an
award of approximately $500 per month or $6,000 per year.
Rent supplements are provided by provincial governments across Canada, either directly to
individuals or to designated organizations. However, an additional challenge remains in
some jurisdictions, such as Ontario, where there is no legal commitment from the government to continue rent supplements past a 30-day “wind-down period.” This makes it increasingly difficult for non-profit organizations to utilize these supplements to leverage
additional funding or secure long-term support.
Ontario. The government of Ontario provides rent supplements to families on fixed incomes and the Ministry of Health and Long-Term Care provides rent supplements to people
living with serious mental illness.
Alberta. In Alberta, the provincial government provides rent supplements through two
programs: the Direct-to-Tenant Rent Supplement, provided directly to eligible high-need
applicants, and the Private Landlord Rent Supplement, provided directly to private landlords who enter into appropriate agreements. There may also be block funding for rent supplements provided to municipalities.
37
38
Government of Ontario. (2011, August). Investment in Affordable Housing for Ontario Program Guidelines, p. 40.
Canada Mortgage and Housing Corporation. (July 4, 2011). Press release: Federal/Provincial/Territorial Ministers Responsible for Housing Announce a New Framework for Affordable Housing. Retrieved from http://www.cmhc-schl.gc.ca/en/corp/nero/nere/2011/201107-04-0930.cfm
35
British Columbia. In British Columbia, the provincial government’s general low-income
rent supplements and Independent Living BC provide targeted rent supplements for individuals in private assisted-living developments.39
Given that rent supplements allow providers to obtain market rent, and ideally financial
sustainability, there may be an opportunity to use revenues from rent supplements as a stable, sustainable revenue stream to allow for the development or acquisition of new supportive housing units. Essentially, rent supplements could be leveraged to provide a stable cash
flow guarantee to improve the ability of providers to obtain financing, as shown in Figure 5.
FIGURE 5: HYPOTHETICAL MONTHLY COST AND REVENUE BREAKDOWN FOR
ONE-BEDROOM APARTMENT IN A SUPPORTIVE LIVING FACILITY40
Total Cost:
Assumed at
$1,100 per
month per
unit
Housing Provider Contribution: Government Funds, Earned Income, and
Philanthropy at $625
Tenant Contribution:
Assuming Rent-Geared-to-Income
(RGI)
at $475
Housing
Provider Contribution: Gov-
There is a very significant gap in financing.
Contribution is relatively uncertain and
subject to change on
an annual basis. It is
not a stable, predictable source of funds.
ernment Funds, Earned Income, and
Philanthropy at $625
Total Cost:
Assumed at
$1,100 per
Actions:
month per
unit
Assuming Rent Geared to Income
(RGI) at $475
Stable Revenues
Federal government
Housing Provider Contribution: $125
Rent Supplement:
Government subsidy valued at $500
Housing Provider Contribution: $125
Assuming Rent-Geared-to-Income
(RGI)Supplement:
at $475
Rent
Contribution is relatively certain and set
on a multi-year basis. It
is a stable, predictable
source of funds that
could support financing
for acquisition or development.
Government subsidy valued at $500
There is a very significant gap in financing.
Contribution is relatively uncertain and
subject to change on
an annual basis. It is
not a stable, predictable source of funds.
Assuming Rent Geared to Income
(RGI) at $475
Contribution is relatively certain and set
on a multi-year basis. It
is a stable, predictable
source of funds that
could support financing
for acquisition or development.
Bolster and extend long-term federal funding for existing housing and homelessness programs until 2017.
Extend energy-efficiency grant programs, loan programs and credits to new supportive
housing projects to decrease costs for providers.
Review existing legislation and regulations governing charities and non-profits to remove
other outstanding barriers to social enterprise and earned revenue activities.
Amend the Income Tax Act to establish a profits “destination test” treatment of related
business, to serve as the primary regulatory mechanism for social enterprises established
and run by charities and non-profit organizations.
39
40
Government of British Columbia. Housing Matters BC. P. 8-9.
This figure is only meant to be illustrative of the potential for rent supplements as a viable and sustainable cash flow mechanism to help
finance supportive housing units.
36
Provincial governments
Maintain long-term commitments to the level of operating and capital funding for supportive housing providers.
Maintain long-term commitments to rent supplement programs.
Increase the number of rent supplements provided to supportive housing providers through
long-term agreements (from five to 20 years) and allow housing providers to use rent supplements as leverage for financing the development of new units.
Extend energy efficiency grant programs, loan programs and credits to new supportive
housing projects to decrease costs for providers.
Review existing legislation and regulations governing charities and non-profits to remove
other outstanding barriers to social enterprise and earned revenue activities.
Municipal governments
Eliminate property taxes for at least 10 years on new supportive housing projects.
6.2 FINANCIAL CAPACITY
Housing providers need significant and ongoing financial capacity to sustain any new alternative financing arrangements. Unfortunately, few supportive housing providers have the
financial capacity to service debt, and their balance sheets are typically not strong enough to
obtain private financing.
a. Few housing providers have the financial capacity to service debt. Housing
providers who provide all or a significant number of their units as rent-geared-to-income
will have limited financial capacity to support an additional loan. According to a recent report commissioned by the Housing Services Corporation (HSC), more than 83% of social
housing units in Ontario do not have available cash flow to qualify for additional debt. 41 In
addition, some housing providers are already faced with accumulated deficits or existing
debt obligations from current projects or ongoing operations.
b. Few supportive housing providers have balance sheets strong enough to obtain funding to finance new developments. Both businesses and non-profit organizations need a strong balance sheet to obtain financing. However, many housing providers
have limited assets and/or significant liabilities. Without sizable assets or stable revenues,
smaller supportive housing providers find it difficult to build or acquire new units of hous41
Pearson, Stewart. (2010, December). Financing Capital Improvements and the Renovation of Social Housing in Ontario. Housing Services Corporation. p. 28.
37
ing. This is a particular challenge in northern communities, small towns and cities, and rural regions of Canada. Accordingly, the ability to enter into alternative financing arrangements may be limited to a select number of larger housing providers. Smaller housing
providers will need to consolidate and coordinate their alternative financing approaches, or
a large pool of capital will need to be made available to backstop future financing.
c. Pre-development costs for housing projects can be substantial. Housing providers need to invest substantial funds into feasibility work before even considering financing for development. Depending on the scope of the project, these costs can range from
$25,000–200,000 or more, and often need to be absorbed by the housing providers themselves. Housing providers may be averse to spending these funds up-front without knowing
for certain that there will be funding available for acquisition and development.
Opportunity: Leveraging equity
Despite challenges in financial capacity at a sector level, many individual housing providers
have utilized equity in their existing housing stock or through unrestricted reserve funds to
acquire or develop new housing units. Housing providers that have leveraged equity include: Centretown Citizens Ottawa Corporation, Stella’s Circle, St. Clare’s Multifaith Housing Society, and Ottawa Community Housing. There is an opportunity to scale the use of
equity as leverage for financing new units by studying the lessons these housing providers
learned.
Actions: Financial capacity
Federal government
Maintain the government’s commitment to providing pre-development and other capital
costs for supportive housing providers through the Canada Mortgage and Housing Corporation (CMHC).
Existing federal and provincial government capital-raising institutions and facilities should
be employed to raise financing for a Supportive Housing Capital Fund to support acquisition, development and efficiency improvements for supportive housing providers in Canada.
This would employ models such as Infrastructure Ontario, which issues debentures to provide new funds for social housing and other projects.
38
Canada Mortgage and Housing Corporation (CMHC)
Extend direct-lending options to non-profit, co-operative and private-sector partnerships
that increase the supportive housing stock.
Re-invest all or a portion of the accumulated capital surplus from CMHC in a social finance
tool such as a supportive or social housing capital fund.
Modify criteria for health capital funding programs that are only open to institutions such as
hospitals and nursing homes to allow supportive housing providers access.
Review policies related to providing loan guarantees and contingent liability for social housing projects in order to increase the potential pool of capital available for acquisition, development and repair.
Explore the potential of local improvement charges as a financing mechanism for housing
energy retrofits for supportive housing providers.
Provide tax exemption or tax credits for affordable housing investments, or include affordable housing as an investment category for new or existing community economic development fund incentives, to encourage investors to finance new supportive housing projects.
Provincial governments should consider implementing models like Infrastructure Ontario,
making additional debt financing available to supportive housing providers through existing
programs.
Increase the usage of loan guarantees, free or low-cost municipal land allocation, permit rebates, development fee elimination and other incentives/inducements for supportive housing providers.
Make supportive housing for individuals with mental health issues and concurrent disorders
a priority when assessing funding allocations from federal/provincial/territorial agreements.
Housing providers and organizations
Alter financing models for the acquisition and development of new units so they are less reliant on up-front grants from government.
Set aside up-front funding for pre-development costs, with the support of provincial and
federal governments.
Examine housing stock portfolios to determine if they could leverage equity in existing
complexes for the development and acquisition of new units.
39
Collectively examine the feasibility of creating a Housing Development Corporation to serve
the entire sector (or specific geographic regions), providing technical expertise on development of and financing for new units.
Collaborate on a capital fundraising campaign to create a multimillion dollar National Supportive Housing Trust that could provide supplementary operating support to finance new
housing stock.
Utilize innovative social financing products and strategies such as community housing
bonds (promissory notes) and debentures to finance a minority (less than 25%) of new projects.
Others: Investors, philanthropic community, intermediaries and financial institutions
Conduct a feasibility study on the development of a national or provincial supportive housing fund or supportive housing real estate investment trust.
6.3 ORGANIZATIONAL CAPACITY
Beyond internal finances, there are also challenges with the current level of internal capacity
of supportive housing providers to develop new housing units. Financial literacy and technical expertise are particular concerns.
a. Although they are highly skilled and experienced, some boards of directors
and management staff of supportive housing organizations do not have sufficient financial literacy. A significant amount of very specific financial knowledge is required for organizations to effectively engage in alternative financing strategies. Boards of
directors and staff teams need to have: a comprehensive understanding of the overall financial health and position of their organization; knowledge of relevant federal and provincial
policies and regulations; knowledge of best practices in financial management and risk
management (particularly related to debt financing); and an understanding of the many
risks and rewards of alternative financing strategies. A lack of knowledge can lead to debt
aversion (that is, an unwillingness to take on debt to finance new developments), or the development of strategies that could be detrimental to the financial and overall health of an
organization. The challenge of building sufficient financial literacy is not unique to supportive housing providers; it is an issue for all non-profit organizations across Canada.
b. Specialized technical expertise for development and financing is not available in many supportive housing organizations, or it is cost prohibitive. General
knowledge of financing is a necessity, but not a sufficient condition for the further adoption
of alternative financing strategies by supportive housing providers in Canada. There is a
40
clear need for specialized technical expertise in housing development and financing that is
not available to many providers. If unavailable internally, accessing technical expertise can
be cost prohibitive for housing providers. Similar to the challenge of financial capacity, the
challenge of specialized technical expertise is particularly acute for smaller housing providers. There are very few dedicated service providers or technical experts in Canada who have
experience in alternative financing for social housing providers.
Opportunity: Successful models, leaders and networks
Fortunately, a tremendous capacity to scale successful innovative approaches to financing
supportive housing exists. There are many successful models, leaders and networks across
Canada that could be effectively utilized to improve the organizational capacity of supportive housing providers. National organizations, such as the Canadian Housing and Renewal
Association (CHRA), and local networks, like Community Advisory Boards (CABs), can be
used as channels to share lessons and successful models employed by leading organizations.
The provincial housing associations can also offer opportunities for capacity building and
support, and organizations such as the Affordable Housing Association of Nova Scotia, the
Manitoba Non-Profit Housing Association or the Ontario Non-Profit Housing Association.
Actions: Organizational capacity
Federal and provincial governments
Provide capacity-building support to increase the financial literacy and technical expertise
of supportive housing providers.
Expand internal expertise on social finance and supportive housing financing within relevant government departments through professional development and training opportunities
for staff.
Supportive housing providers and organizations
Deliver in-depth training on risk management, business planning and financial management to senior management and boards of supportive housing providers.
Increase internal capacity and technical expertise related to development and financing.
Establish an Equity Leveraging Working Group between large housing providers to share
lessons and explore new mechanisms for leveraging existing stock to finance new unit acquisition and development. For example, investigate the feasibility of using the CMHC
mortgage insurance surplus to kick-start a Social Financing Housing Trust.
41
National organizations should catalyze the sector and provincial bodies through capacity
building and integration of social finance into existing campaigns.
Mobilize the leadership role of the Mental Health Commission of Canada (MHCC) in
knowledge exchange by supporting a community of practice to share resources and lessons
on social finance approaches in supportive housing in Canada.
National and provincial organizations like the MHCC and CHRA should study the potential
for alternative financial products and tools, including social impact bonds and a national
supportive housing fund, that could be catalyzed for developing or acquiring new housing
units.
42
A first step: 10,000 units of supportive housing in five years
It is not feasible to immediately develop and acquire 100,000 units of affordable, supportive
housing. One potential first step to be considered in a proposed first step a financial product
or tool that could help providers develop 10,000 supportive housing units across the country, using a blended social finance strategy that involves private capital, philanthropic capital and government support.
This strategy would work to mobilize capital to reduce homelessness and increase health
and employment outcomes by providing:
1. Supportive housing units. The capital costs to acquire and develop housing units
would be $2 billion This amount is not unprecedented, given the success of the $450 million
debt capital raised for the $1-billion revitalization of Regent Park in Toronto, ON.
2. Targeted rent supplements. Rent supplements would require $72 million per year
from government and philanthropic sources.
3. Support Programs. A basket of services such as Assertive Community Treatment case
management and/or other comprehensive support programs would require $98.8 million
per year from government and philanthropic sources.
Compared to hospital, jail and shelter costs, this intervention could generate raw annual
savings of $8,100–9,300 per person or $81-93 million per year. Overall, when taking all
public costs into account, this intervention could reduce health, justice and social care costs
by $26,215 per annum, per person for high needs individuals.
The funding for targeted rent supplements and support programs would increase housing
affordability, improve desired client outcomes,, and provide financial sustainability for the
private debt financing on the development and acquisition of new supportive housing units.
There are a number of strategies that could be examined, including:
 A blended financing model, whereby grant and private investment capital funds finance housing capital costs, and governments finance ongoing rent supplements and program costs
 A social impact bond or outcomes-based financing approach, whereby investors
would provide up-front financing (capital, rent supplements and program costs) via private
capital and governments would provide funding for program costs and interest on the investment capital, based on the achievement of desired outcomes that reduce government
costs and show measurable improvements in people’s lives.
43
Government and community partners could support an examination of these models. The
intention of the initial scope of work would be to support feasibility and development over
the first six months, to model the financing and evaluation regime, and to determine investor and service provider interest. In order to deploy the actual product or strategy to meet
the established target, participants would engage in the project through four phases: feasibility, development, execution and evaluation.
6.4 POLICY BARRIERS
Federal and provincial policy does not create a fully enabling environment for alternative financing and new supportive housing development. These policy barriers can increase costs,
increase the time required for development and reduce the capacity of housing providers to
build new units.
a. Government requirements often slow the development of new housing units.
Governments often put important safeguards in place to reduce risks, ensure due process
and accountability, and contain costs. However, in Ontario, for example: “Local Health Integration Networks (LHINs) are required to review projects to ensure alignment with local
health system priorities and operational cost implications, and the Ministry of Health and
Long-Term Care (MOHLTC) reviews the projects to ensure compliance with applicable
building codes, Heating Ventilation/Air Conditioning systems (HVAC), health and
safety….”42 Community health service providers must receive LHIN and MOHLTC approval
for all capital projects with a value greater than $100,000. This additional review requirement could significantly slow or even prevent the development or acquisition of new units of
housing, adding another hurdle for housing providers to overcome in their financing process.
b. Although it is a tremendous asset, policies of the Canada Mortgage and
Housing Corporation (CMHC) increase the cost burden for supportive housing
providers. CMHC is the most significant provider of financing for affordable housing providers in Canada through low-cost mortgage insurance and direct lending. As of March
2011, there were $7.07 billion in mortgage loans outstanding on provincially funded projects
in Ontario alone.43 However, the cost of CMHC mortgage insurance and substantial prepayment penalties represent significant cost burdens for supportive housing providers. As
of December 30, 2011, the mortgage insurance premium for Multi-Unit Affordable Housing
ranged from 1.2% (loan-to-value ratio less than 65%) to 3.8% (loan-to-value ratio 90 to
42
43
Ministry of Health and Long-Term Care. (April 16, 2012). Memorandum: Community Capital Projects Directive.
Ontario Mortgage and Housing Corporation. 2010/2011 Annual Report. Retrieved from
http://www.mah.gov.on.ca/AssetFactory.aspx?did=9505
44
95%), as a percentage of the total loan value. 44 This could add a cost of $12,000–38,000 per
$1 million per year financed by supportive housing providers.
The CMHC’s Certificates of Insurance and mortgage charges registered as security can also
be restrictive to changes such as increasing the outstanding balance or extending the amortization term.45 This can be a challenge for housing providers looking to refinance existing
units in order to free up money for the acquisition or development of new units.
c. Significant changes in financing structure may require ministerial consent in
some provinces. The requirement of obtaining ministerial consent can slow or halt
changes in financing approaches by housing providers. This was a significant barrier in Ontario that was recently removed following a concerted effort by affordable housing stakeholders. The Housing Services Act, 2011, removed this consent requirement: “for a range of
activities related to financing, Board of Director matters and other changes to social housing
properties. The only exceptions are a continued requirement for ministerial consent to the
proposed sale of social housing projects, which is consistent with the province’s stewardship
role for the housing system and a continued requirement for ministerial consent to opt out
of bulk purchasing of utilities and insurance.”46,47 The ability to sign off on significant
changes has been designated to local service managers. Some provinces, including British
Columbia, still require ministerial consent for new financing or changes in financing structure.48
d. Federal and provincial governments have shown limited interest in taking
on further liabilities or providing more significant subsidies for affordable
housing. During a period of austerity, provincial governments may be limited in their ability to add further liabilities to their balance sheets by increasing their contingent liability,
providing loan indemnities or guarantees, or supporting trust vehicles. The bending of cost
curves across ministries and departments also makes it difficult for housing providers to receive new, additional funding from government, even via limited subsidies for debt servicing. Supportive housing providers will find it extremely difficult to obtain and maintain
alternative financing arrangements without significant credit enhancements and some support on debt servicing from government. Municipal governments can provide support with
credit enhancements but this capability is likely limited to larger city centres.
Canada Mortgage and Housing Corporation. (December 30, 2011). CMHC Multi-Unit Affordable Housing. Retrieved from
http://www.cmhc.ca/en/hoficlincl/moloin/rean/rean_013.cfm.
45 Pearson, Stewart. (2010, December). Financing Capital Improvements and the Renovation of Social Housing in Ontario. Housing Services Corporation. P. 34.
46 Ontario Ministry of Municipal Affairs and Housing. (March 23, 2012.) What Does the Long-Term Affordable Housing Strategy Mean To
Municipalities and Service Managers. Retrieved from http://www.mah.gov.on.ca/Page9194.aspx
47 Legislative Assembly of Ontario. 2011. Bill 140: Strong Communities through Affordable Housing Act, 2011. S.O. 2011 C.6
48 Ministry of Lands, Parks and Housing Act. [RSBC 1996] Chapter 307. Current as of August 1, 2012. Retrieved from
http://www.bclaws.ca/EPLibraries/bclaws_new/document/ID/freeside/00_96307_01
44
45
Opportunity: Non-profit housing organizations can play a leadership role in new rental development
Current practices employ an expectation that the private housing market will fulfill the
growing need for new rental units. However, the development of new rental opportunities is
increasingly uncommon as condominiums continue to be in demand. The intention to utilize rent supplements to house individuals in new private market buildings is no longer a
strong option given the high costs of condo living. This reality presents an opportunity for
governments to reach out to non-profit housing providers, rather than private developers, to
address the needs of the rental market and fill the gap in necessary affordable rental units.
At Issue: Contingent liability
According to International Accounting Standards, contingent liabilities are a possible obligation of either an uncertain future event or a present obligation when payment is not probable or the amount cannot be measured reliably. In general, if a contingent liability is only
possible (not probable), or if the amount cannot be estimated, a journal entry is not required. However, a disclosure is required. When the possibility of a contingent liability is
remote, then neither a journal entry nor a disclosure is required.
Within the context of housing and government financing, a contingent liability means that
should a mortgage payment on a supportive or social housing building not be paid, the responsibility falls on CMHC to make good on the mortgage insurance payments. In return,
CMHC bills the province for any monies paid.49
Given the very low default rate of social housing financing in Canada, the stated level of contingent liability for provincial governments may be significantly overstated. Put simply, the
governments carries too much of the value of social housing mortgage liabilities on their
books, which prevents the uptake of additional debt financing (or liabilities). In the past, the
concern around contingent liability, “...has become a barrier to use available and effective
refinancing approaches and is currently standing in the way of accessing capital through
private sector markets.”50 If the social housing sector were able to refinance its mortgage
debt, it is estimated that $1.45–5.5 billion in new funds could be raised for repair and new
development in Ontario alone.
Pearson, Stewart. (2010, December). Financing Capital Improvements and the Renovation of Social Housing in Ontario. Housing Services Corporation. P. 28.
50 Pearson, Stewart. (2010, December). Financing Capital Improvements and the Renovation of Social Housing in Ontario. Housing Services Corporation. P. 28.
49
46
Opportunity: Leveraging Energy Efficiency Policies and Programs
Despite existing policy barriers, governments have other programs and policies that could
be leveraged to support the efficient development of new housing units. Clearly, there is an
opportunity to utilize existing energy efficiency programs employed by governments across
Canada to reduce long-term operating costs for supportive housing facilities. There are dozens of financial incentives, grants, and technical assistance programs delivered by the federal, provincial and municipal governments that could be modified to ensure access by
supportive housing providers. These programs provide the benefit of employing existing resources to improve energy efficiency while decreasing long-term operating costs for supportive housing providers.
There are also opportunities to leverage existing government programs that have multiple
benefits. For example, Winnipeg’s Building Urban Industries for Local Development
(BUILD) is a partnership with the Government of Manitoba which provides energy efficiency retrofits for homes through a training and employment program for low-income individuals.51 This kind of program could be employed for supportive housing projects to decrease
energy costs and improve organizational cash flow for new units.
There are also promising social finance vehicles in Canada, the US and UK driving energy
efficiency which do not require grants and subsidies including on-utility- bill financing, and
on-property-assessment financing.
Manitoba and British Columbia are legislating utility-based financing called ‘PAYS’ or Pay
As You Save, in which energy-saving measures are 100% financed by energy utilities and
monthly repayments are lower than the resulting energy savings, resulting in no net debt
burden on participating households. The UK’s Green Deal, introduced by the government in
2011, aims to retrofit 26 million homes using utility-based financing.
Similarly, property assessment-based financing now exists in 28 US states and the District
of Columbia. Property Assessed Clean Energy (PACE) is an innovative way to finance energy
efficiency and renewable energy upgrades to buildings. Interested property owners evaluate
measures that achieve energy savings and receive 100% financing, repaid as a property tax
assessment for up to 20 years. The assessment mechanism has been used nationwide for
decades to access low-cost long-term capital to finance improvements to private property
that meet a public purpose. By eliminating upfront costs, providing low-cost long-term financing and making it easy for building owners to transfer repayment obligations to a new
owner upon sale, PACE overcomes challenges that have hindered adopted of energy efficiency and related projects in our nation’s buildings.
51
Canadian Housing and Renewal Association. Affordable Housing and Green Jobs in Canada. June 2010, 3.
47
The David Suzuki Foundation has assessed PACE for adaptation to Canada through municipal Local Improvement Charges, and a number of Canadian municipalities and the Toronto
Real Estate Board have endorsed this approach. Most recently, during 2012, Ontario’s municipal affairs minister approved changes to the Municipal Act and the City of Toronto Act
to empower all municipalities in Ontario to use Local Improvement Charges to help property owners finance upgrades that reduce energy and water costs.
Actions: Policy barriers
Canada Mortgage and Housing Corporation (CMHC)
Extend direct lending options to non-profit, cooperative and private sector partnerships to
increase the supportive housing stock.
Reduce prepayment penalties to make it easier for supportive housing providers to obtain
funds for new unit acquisition or development.
Eliminate ministerial consent for any changes in financing structure by non-profit housing
providers.
The Government of Ontario should work with supportive housing providers to expedite the
process for supportive housing project approval as per the Community Capital Projects Directive.
Explore the potential of local improvement charges as a financing mechanism for housing
energy retrofits for supportive housing providers.
Modify policies to allow housing providers with CMHC mortgages to more easily extend
amortization periods and increase outstanding balances without significant restrictions or
financial penalty.
6.5 CAPITAL SUPPLY
Supportive housing providers in Canada could tap into an available and growing potential
supply of capital seeking blended return. However, some challenges with the potential supply of investment funding remain, including awareness of and some aversion to non-profit
organizations.
48
a. Lenders and investors are relatively unfamiliar with supportive housing and affordable housing operations. Although it is a large sector with
hundreds of millions dollars in assets and thousands of units, the broader affordable housing sector and supportive housing sector are not always well understood
by mainstream lenders and potential investors. Some mainstream lenders and
investors are unfamiliar with providers’ revenue sources, ability to repay, ability
to take on mortgages or debt financing, and proven financial performance as a
sector. This lack of familiarity makes them less likely to consider housing providers for loans or special debt investments. They may incorrectly assume that housing providers have a greater risk profile. Accordingly, there is a clear need to
demystify alternative financing arrangements in supportive housing for investors.
b. Lenders and investors can be averse to lending funds to non-profit organizations. It is a commonly held belief that mainstream bankers and investors can be reluctant
to lend to non-profit organizations because they “don’t want to foreclose on God.”52 This is a
concern expressed by some financial institutions that worry they would be portrayed negatively in the media if they had to foreclose on a charity.
Actions: Capital supply
Federal and provincial governments
Increase the ability and frequency of using grant capital funds as leverage for philanthropic
contributions and private capital (lending or investment capital).
Housing providers and organizations
Encourage alternative and mainstream lenders to share knowledge and expertise at housing
conferences and meetings on a regular basis.
Leading organizations like the MHCC should work collaboratively to convene a small group
of private sector and government representatives to explore the application of social finance
to supportive housing development in Canada.
Other Actors: Investors, foundations, intermediaries and financial institutions
Explore the creation of a national intermediary or institution for supportive housing providers, or the development of a national or provincial supportive housing fund or supportive
housing real estate investment trust.
52
Hayes, David. (May 11, 2012). “YWCA’s Elm Centre is blazing a trail.” The Toronto Star.
49
Foundations should dedicate a portion of mission-related investing assets to supportive
housing investments or funds, in line with the recommendation of the Canadian Task Force
on Social Finance.
Financial institutions should modify their policies and procedures to ensure that non-profit
supportive housing providers have fair and efficient access to low-cost lending for acquisition and development projects.
50
7. PRIORITY ACTIONS
The actions proposed in the previous section for governments, housing providers and others
are important components of a comprehensive strategy that will help Canada make significant progress toward meeting the goal of growing the available supply of supportive housing
in this country by 100,000 units over the next 10 years.
However, it is important to focus and prioritize these actions in order to achieve tangible
short and long-term results. Accordingly, we have identified 10 priority actions that could
create the greatest leverage for impact. We believe these priority actions would effectively
maximize existing financial resources, increase the stability of revenue streams, build financial and organizational capacity, and catalyze new capital for the supportive housing sector
in Canada.
Federal government actions
1. Increase the ability and frequency of using grant capital funds as leverage for philanthropic contributions and private capital (lending or investment capital).
2. Employ existing federal or provincial government capital-raising institutions and facilities to raise financing for a Supportive Housing Capital Fund to support acquisition, development and operating efficiency improvements (such as retrofits to lower energy costs), for
supportive housing providers in Canada. This would employ models like Infrastructure Ontario (IO), which issues debentures to bring new funds for social housing and other projects.
Provincial government actions
3. Increase the number of rent supplements provided to supportive housing providers
through long-term agreements (from five to 20 years) and allow housing providers to use
rent supplements as leverage for financing the development of new units.
4. Consider implementing models like IO in other provinces, making additional debt financing available to supportive housing providers through existing programs.
Municipal government actions
5. Increase the usage of loan guarantees, free or low-cost municipal land allocation, permit
rebates, development fee elimination and other incentives/inducements for supportive
housing providers.
6. Eliminate property taxes for at least 10 years on new supportive housing projects.
Housing provider actions
7. Collectively examine the feasibility of creating a Housing Development Corporation serving the entire sector (or geographic regions), to provide technical expertise on development
and financing for new units.
51
8. Collaborate on a capital fundraising campaign to create a multimillion dollar National
Supportive Housing Trust that could provide supplementary operating support for financing new housing stock.
9. Establish an Equity Leveraging Working Group between large housing providers to share
lessons and explore new mechanisms for leveraging existing stock to finance the acquisition
and development of new units.
10. National, provincial and territorial associations/organizations should adopt social finance as part of their ongoing campaigns and capacity-building efforts.
A complete list of actions, including those mentioned in the previous section, can be found
in Appendix One.
In Focus: How would a Supportive Housing Development Corporation work?
One of the high-potential priority actions identified in this report is the creation of a Supportive Housing Development Corporation. Its key function would be to act as a non-profit
independent market builder for the supportive housing sector. More specifically, if implemented sector-wide, it would help governments and non-profit supportive housing providers develop and deploy solutions to preserve and expand the supply of affordable supportive
housing in Canada.
Its programs and activities could include: financial consulting; sector-wide training; one-onone technical assistance to housing providers on project planning, direct lending and capital
mobilization; and sector-wide data tracking (such as units, assets, and capital mobilized).
There are many interesting models for the Supportive Housing Development Corporation,
including Wood Buffalo Housing and Development Corporation in Alberta and the California Housing Partnership. But perhaps the most interesting model is Enterprise, an organization in the United States. Enterprise is a family of companies (Enterprise Community
Partners, Enterprise Community Investment and Enterprise Community Loan Fund) that
works as one entity with partners—including developers, investors, government and community-based non-profits—to reach their common goal: for every person to have an affordable home in a vibrant community, filled with promise and the opportunity for a good life.
The organization provides expertise and financing to governments and non-profit housing
providers through programs and services that include public policy solutions, knowledge
sharing, development expertise and construction loans.
Collectively, Enterprise holds approximately US$500 million in assets. A full description of
their activities can be found in Table 1 (below).
An initial start-up grant investment by the federal and/or provincial government(s) to create a Supportive Housing Development Corporation could leverage hundreds of millions of
dollars of investment, develop and acquire much-needed housing, and address many of the
key challenges outlined in this report.
52
Table 1: An overview of Enterprise Community Partners
Enterprise Community Partners
Enterprise Community
Investment
Enterprise Community Loan
Fund
Legal Status
501(c)(3) (non-profit) public
charity
Wholly owned for-profit subsidiary of Enterprise Community
Partners
509(a)(3) supporting non-profit
of Enterprise Community Partners
Board
Structure
Trustees elected by board; independent chair
Directors appointed by board of
Enterprise Community Partners;
chaired by Partners trustee
Directors appointed by Enterprise Community Partners;
chaired by Partners Chief Executive Officer
Businesses
 Improving public policy
 Grant making
 Impact market partner
solutions
 Capacity building
 National initiatives
 Knowledge sharing and
impact measurement












Tax credit syndication
Multifamily mortgage
Structured finance
Asset management
Development (Enterprise
Homes)
Predevelopment
Acquisition
Construction
Working capital
Mini perm
Equity bridge
Specialized loan funds
Key Indicators as of 12/31/11:
Total Assets
US$144 million
US$192 million
US$156 million
Net Assets
US$55 million
US$94 million
US$29 million
Revenues
US$48 million
US$76 million
US$10 million
Pre-Tax
Earnings
N/A
US$6 million
N/A
# of
Employees
198
276
17
1.
2.
Enterprise Homes, Inc. is a master developer of affordable housing and mixed-income communities, primarily in the mid-Atlantic
region.
Enterprise Business Partners, LLC houses the shared support services utilized by the Enterprise family of companies. These
support services include information technology, human resources and facilities management/purchasing.
53
8. CONCLUSION
This report sets out a number of attainable actions for all stakeholders in the supportive
housing sector, including housing providers, governments, impact investors, mainstream
finance and community organizations, to take in order to further explore and inform a social
finance strategy to support the building of new housing units for Canadians in need.
The supportive housing sector is set apart from other impact investing opportunities by several advantages, including: a history of utilizing social finance models; an expressed interest
by investors to engage with social housing; a proven track-record of impact and financial
success; and the potential scale and size that matches investor interest.
Moreover, the current and traditional approach to the business of social housing is no longer viable. We are entering a new era of affordable housing, a time when using social finance
models means potential increased opportunity. However, these models also demand new relationships between traditional stakeholders, collaboration with new partners, risk-taking
and the support of an enabling environment.
As explored in this report, these challenges and barriers are connected, but they also offer
significant opportunities. Successfully leveraging social finance tools will be a matter of
learning from leaders in the field, suspending our aversion to risk and being creative.
There is both a moral and economic imperative for action. Too many Canadians facing mental health challenges and concurrent disorders are under-housed or homeless. Moreover, research shows that a housing-first approach could result in significant potential cost-savings
for the public purse. New and traditional partners are eager to help strengthen supportive
housing in Canada. Social finance can emerge as a key ingredient to the success of the supportive housing sector.
54
APPENDIX ONE: COMPLETE LIST OF PROPOSED ACTIONS
Based on the lessons from social finance models, as well as the principles, challenges and
recommendations outlined above, a number of additional actions for consideration can be
offered to governments, supportive housing providers, investors and the philanthropic
community.
A. Federal, provincial and municipal governments
a. Actions for the federal government









Bolster and extend long-term federal funding for existing housing and homelessness programs until 2017.
Extend energy-efficiency grant programs, loan programs and credits to new supportive housing projects to decrease costs for providers.
Review existing legislation and regulations governing charities and non-profits to
remove other outstanding barriers to social enterprise and earned revenue activities.
Amend the Income Tax Act to establish a profits “destination test” treatment of related business, to serve as the primary regulatory mechanism for social enterprises
established and run by charities and non-profit organizations.
Maintain the government’s commitment to providing predevelopment and other
capital costs for supportive housing providers through the Canada Mortgage and
Housing Corporation (CMHC).
Employ existing federal or provincial government capital-raising institutions and
facilities to raise financing for a Supportive Housing Capital Fund, to support the
acquisition and development of, and efficiency improvements for, supportive
housing providers in Canada. This would employ models like Infrastructure Ontario (IO), which issues debentures to bring new funds for social housing and other
projects.
Provide capacity-building support to increase the financial literacy and technical
expertise of non-profit supportive housing providers.
Expand internal expertise on social finance and supportive housing financing
within relevant government departments by offering professional development
and training opportunities for staff.
Increase the ability and frequency of using grant capital funds as leverage for philanthropic contributions and private capital (lending or investment capital).
b. Actions for the Canada Mortgage and Housing Corporation (CMHC)


Extend direct lending options to non-profit, cooperative and private sector partnerships that would increase the supportive housing stock.
Re-invest all or a portion of the accumulated capital surplus from CMHC in a social finance tool such as a supportive or social housing capital fund.
55



Reduce mortgage insurance fees to decrease overall costs of financing for supportive housing providers.
Reduce prepayment penalties to make it easier for supportive housing providers to
obtain funds for new unit acquisition or development.
Modify policies to allow housing providers with CMHC mortgages to more easily
extend amortization periods and increase their outstanding balance without significant restriction or financial penalty.
c. Actions for provincial governments












Maintain long-term commitments to the level of operating and capital funding for
supportive housing providers.
Maintain long-term commitments to rent supplement programs.
Increase the number of rent supplements provided to supportive housing providers through long-term agreements (from five to 20 years) and allow housing providers to use rent supplements as leverage for financing the development of new
units.
Extend energy-efficiency grant programs, loan programs and credits to new supportive housing projects to decrease costs for housing providers.
Review existing legislation and regulations governing charities and non-profits to
remove other outstanding barriers to social enterprise and earned revenue activities.
Modify criteria for health capital funding programs that are only open to institutions such as hospitals and nursing homes to allow access for supportive housing
providers.
Review policies related to providing loan guarantees and contingent liability for
social housing projects, in order to increase the potential pool of capital available
for acquisition, development and repair.
Explore the potential of local improvement charges as a financing mechanism for
housing energy retrofits for supportive housing providers.
Provide tax exemption or tax credits for affordable housing investments, or include affordable housing as an investment category for new or existing community
economic development fund incentives, to encourage investors to finance new
supportive housing projects.
Consider implementing models like IO in other provinces, where possible, to make
additional debt financing available to supportive housing providers through existing programs.
Expand internal expertise on social finance and supportive housing financing
within relevant government departments by offering professional development
and training opportunities for staff.
Eliminate ministerial consent for any changes in financing structure by non-profit
housing providers.
56



The Government of Ontario should work with supportive housing providers to expedite the process for supportive housing project approval, as per the Community
Capital Projects Directive.
Encourage horizontal partnership and collaboration across ministries and coordinated program support.
Increase the ability and frequency of using grant capital funds as leverage for philanthropic contributions and private capital (lending or investment capital).
d. Actions for municipal governments




Eliminate property taxes for at least 10 years on new supportive housing projects.
Increase the usage of loan guarantees, free or low-cost municipal land allocation,
permit rebates, development fee elimination and other incentives/inducements for
supportive housing providers.
Make supportive housing for individuals with mental health issues and concurrent
disorders a priority when assessing funding allocations from federal/provincial/territorial agreements.
Modify policies to allow housing providers with CMHC mortgages to more easily
extend amortization periods and increase outstanding balances without significant
restrictions or financial penalty.
B. Supportive housing providers and organizations








Alter financing models for the acquisition and development of new units so housing providers are less reliant on up-front government.
Set aside up-front funding for predevelopment costs, with the support of provincial and federal governments.
Examine housing stock portfolios to determine if providers could leverage equity
in existing complexes for the development and acquisition of new units.
Collectively examine the feasibility of creating a Housing Development Corporation to serve the entire sector (or geographic regions), providing technical expertise on development and financing for new units.
Collaborate on a capital fundraising campaign to create a multimillion dollar National Supportive Housing Trust, which could provide supplementary operating
support for financing new housing stock.
Utilize innovative social financing products and strategies, such as community
housing bonds (promissory notes) and debentures, to finance a minority (less than
25%) of any new projects.
Supportive housing and social housing organizations should deliver in-depth
training on risk management, business planning and financial management to
senior management and boards of housing providers.
Increase internal capacity and technical expertise related to development and financing.
57






Establish an Equity Leveraging Working Group between large housing providers
in order to share lessons and explore new mechanisms for leveraging existing
stock for financing new unit acquisition and development.
National organizations such as the Mental Health Commission of Canada (MHCC)
and the Canadian Housing and Renewal Association (CHRA) should catalyze the
sector and provincial bodies by hosting a conference on social finance for supportive housing in 2013
Mobilize the leadership role of the MHCC in knowledge exchange by creating a
community of practice in order to share resources and lessons on social finance
approaches in supportive housing in Canada.
National and provincial organizations such as the MHCC and the CHRA should
study the potential for alternative financial products and tools, including social
impact bonds and a national supportive housing fund that could be catalyzed for
developing or acquiring new housing units.
Leading organizations like the MHCC should convene a small group of privatesector and government representatives to explore the application of social finance
to supportive housing development in Canada.
Provide alternative and mainstream lenders with opportunities to present at regular housing conferences on a regular basis.
D. Others: Investors, philanthropic community, intermediaries and financial institutions



Conduct a feasibility study on the development of a national or provincial supportive housing fund or supportive housing real estate investment trust.
Foundations should dedicate a portion of mission-related investing assets to supportive housing investments or funds, in line with the recommendation of the Canadian Task Force on Social Finance.
Mainstream financial institutions should modify their policies and procedures to
ensure non-profit supportive housing providers have fair and efficient access to
low-cost lending for acquisition and development projects.
58
APPENDIX TWO: DETAILED CASE STUDIES
Case Study One: Calgary Homeless Foundation—Bob Ward Residence, Calgary, AB
SUMMARY
1998, the Calgary Homeless Foundation (CHF) was established as a non-profit organi Inzation
to facilitate capital funding for housing projects. Its main objective is to collabo-







rate with service agencies, government and the private sector in Calgary to develop plans
for projects that provide access to housing for the homeless.
The CHF conducts research and provides consultation and education for the homeless in
order to help them achieve independence and stability.
The CHF is driven by private-sector volunteerism and philanthropic contributions.
The foundation became part of a joint venture with Horizon Housing and the Calgary
Home Builders Foundation and secured municipal funding under the City’s new plan.
Together, these three organizations brought forth an innovative social housing project,
which they named after home-building industry leader Bob Ward. The Bob Ward Residence comprises 61 apartments, ranging in size from 354-square-foot studio apartments
for those with mental illness, to 1,608-square-foot, four-bedroom apartments for people
with brain injuries.
After years of design, fundraising and political lobbying, the Bob Ward Residence opened
in October 2003, six months earlier than planned, mortgage-free and $500,000 under
budget. Tenants are low-income earners between the ages of 35 and 64, and the primary
diagnoses of clients are schizophrenia, depression or affective disorders.
The CHF is currently working to implement the City of Calgary’s 10-year plan to end
homelessness by 2018.
The CHF is in the process of developing a “community bond” project (inspired by Regent
Park in Toronto), with a social finance incubator funded by the Alberta Treasury Branch.
CHF capital projects are typically funded as follows:



70% government funded
30% through a combination of mortgages and donations
Interest-free Evergreen Line of Credit provided by First Calgary Savings
59
BASIC PARAMETERS
Project
Calgary Homeless Foundation
Residence, Calgary, AB
(CHF)—Bob
Ward
Partners and corporate Funding came from the public sector (all three levels of
structures
government), the private sector and the CHF
Total project size
$4.5 million
Funding came from a variety of sources, including:
Investment total
Resources and Development Canada:
 Human
$1,000,000
of Calgary (provision of site): $935,000
 City
Homeless Foundation: $763,357
 Calgary
Calgary
Builders Foundation: $716,631
 Calgary Home
Housing: $500,000
 Calgary Interfaith
Home Builders Foundation (in-kind contribu tions): $173,572
Pacific Charitable Foundation: $150,000
 Canadian
of Alberta, Community Facility Enhancement
 Province
Program: $125,000
Real Estate Foundation: $100,000
 Alberta
Horizon
Society: $100,000
 CanadianHousing
Oil Sands: $50,000
 Nexen: $25,000
 Imperial Oil Charitable Foundation: $20,000

Capital purpose
To create supportive housing for persons with mental illness and brain injuries.
Project description
The Bob Ward Residence comprises 61 apartments, ranging in size from 354-square-foot studio apartments for
those with mental illness to 1,608-square-foot, fourbedroom apartments for people with brain injuries. It
houses more than 70 people who require assistance and
includes a special brain-injury rehabilitation unit. To further support those with special needs, the residence has a
full-time housing coordinator and offers access to 24-hour
on-call support.
Geography
Calgary, AB
Investor focus
Private sector financial and in-kind donations
Term
N/A (No mortgage)
60
Interest rate
N/A (Donations, Government funds)
Investment type
N/A
Cost of financing
N/A
Credit enhancements
N/A
Risk profile
Low
Legal supports
N/A
Timeline
2001—2003
POLICY OR REGULATORY LEVERS
No major policy or regulatory levers were moved or applied for this project.
KEY LESSONS
Key lessons learned include:





The partnership’s ability to leverage capital from the business community eliminated the financing risk.
The long-term operating risk is reduced by the fact that the project is mortgagefree.
A partner with expertise in providing housing for the specific client group manages
the residence; as such, a portion of the project’s success can be attributed to each
partner’s motivation and commitment to serving low-income households.
A team with experience and diverse skills can enable a public-private partnership
project to accomplish more than a single partner might accomplish on its own.
The private sector played a significant role in the project’s success. As mentioned,
the CHF cultivated long-term relationships with various funding sources, brokered
partnerships and secured philanthropic contributions. More than 150 private donors made contributions, ranging in value from $1,000 to $500,000. Additionally,
many contractors and tradespeople who worked on the site donated materials or
provided them at cost. The donations and in-kind contributions of the tradespeople was the primary factor behind completing the project $500,000 under budget.
POTENTIAL FOR SCALE OR REPLICATION





There are a number of conditions that made this model possible:
significant philanthropic funding and a private sector that is willing to reinvest in
the community.
Municipality willing to offer free land
organizational capacity to handle significant donations
The scale of the Bob Ward Residence is reasonable and could be replicated.
61
Case Study Two: St. Clare’s Multifaith Housing Society— 25 Leonard Avenue, Toronto, ON
SUMMARY
Clare’s Multifaith Housing Society originated through Toronto Action for Social
 St.
Change (TASC). In the mid-1990s, after helping evicted street youth find places to live,


TASC started to look for a way to build affordable housing. TASC incorporated a legal entity, applied for charitable status and St. Clare’s Multifaith Housing was created. Rather
than attempt to develop a new building, St. Clare’s acquired an existing property that
could be converted to apartments.
St. Clare’s had its first success occurred in 2000, when they negotiated an offer on a former medical office building at 25 Leonard Avenue. The offices were converted to apartments and the building was fully occupied in December of 2001. In 2005, St. Clare’s
added 26 more apartments.
Since its initial success at 25 Leonard Avenue, St. Clare’s has developed an additional 173
units of new, affordable housing in Toronto and has another 190 units of new affordable
housing currently under construction.
BASIC PARAMETERS
Project
Partners and
structures
Total project size
St. Clare’s Multifaith Housing Society—25 Leonard Avenue
St.
Clare’s
Multifaith
Housing
Society
City
of
Toronto
corporate Government
of
Ontario
Human Resources and Social Development Canada
First
National
Financial
LLP
Canadian Alternative Investment Cooperative (CAIC)
Phase 1: $4.75 million
Phase 2: $3.1 million
$7.85 million
Investment total
Phase 1: The federal government (in partnership with
the City of Toronto) gave St. Clare’s $2.65 million. St.
Clare’s fundraised another $100,000. A conventional
first mortgage was secured for $1.7 million and CAIC
was the lender for the final $300,000.
Phase 2: The federal government (in partnership with
the City of Toronto) gave St. Clare’s $1.5 million. St.
Clare’s provided $1.6 million in equity by extending the
amortization of the first mortgage when the building
was refinanced.
62
Capital purpose
The creation of 77 affordable housing units (26 bachelor
apartments and 51 one-bedroom transitional units), in
two phases, in a renovated medical office building in
Toronto, ON
Project description
25 Leonard Avenue is a four-story building close to Toronto Western Hospital that was originally built as doctor’s offices. St. Clare’s converted the offices into small
apartment units (Phase 1). Later, St. Clare’s added two
floors with an additional 26 prefabricated apartments
(Phase 2).
Geography
Toronto, ON
Investor focus
Accredited investors and government funds
Term
Phase 1: The first mortgage had a five-year term with
10-year amortization
The second mortgage had a 10-year term with a 10-year
amortization
Interest rate
See “Cost of financing,” below
Investment type
First and second mortgages
Phase 1:
First mortgage: $1.7 million mortgage from First National Financial LLP, on a five-year term at 6.5% and a
10-year amortization.
Cost of financing
Second Mortgage: $300,000 mortgage from CAIC on a
10-year term at 9% and a 10-year amortization. CAIC
charged a 1% application fee estimated at $3,000.
Phase 2:
Refinanced first mortgage: $2,775,000 at 5.63% amortized over 25 years
Phase 1:
Credit enhancements
The Province of Ontario provided rent supplements for
the 51 units in Phase 1. The funding was initially only
for 5 years, but was subsequently expanded to 15 years.
To improve the lender’s security, St. Clare’s funded a
$200,000 capitalized operating reserve from the first
63
mortgage. The 10-year amortization reassured the lender that if the rent supplement program was cancelled,
the financing could be reconfigured to permit the project to operate without rent supplements.
Risk profile
The first phase of the project had an above average risk
rating due to uncertainty of ongoing rent supplement
funding.
Legal supports
Legal support was provided by Cynthia MacDougall
from McCarthy Tétrault (lawyers accepted fees on a deferred basis to reduce initial cash requirements).
Phase 1: The project took two years to complete (2000—
2001).
Timeline
Phase 2: The project took two years to complete
(2005—2006).
The major policy or regulatory levers moved or applied that led to success included:




No CMHC mortgage loan insurance. Using a first and second mortgage eliminated
the need for CMHC insurance, which saved money and accelerated the approval
process
Rent supplements were used to amortize loans. The development of 25 Leonard
Avenue showed that it was possible to use the money generated by rent supplements over the five-year life of the rent supplement program to pay off a mortgage.
Conventional financing: Phase 1 required mortgage financing of $2 million. The
appraised value of 25 Leonard Avenue, with all the renovations completed, is $3.1
million. The mortgages are less than 65% of value, which meant that the project
could get conventional financing.
Two development phases. The ability to refinance 25 Leonard Avenue allowed St.
Clare’s to provide more than half the capital required to add 26 new units to the
building.
KEY LESSONS

Having a previously approved line of credit was a critical factor in St. Clare’s ability to purchase the building. Being able to make a $50,000 refundable deposit on
25 Leonard gave St. Clare’s credibility with the vendor.
64



The units in Phase 2 are not subsidized. Phase 2 of 25 Leonard Avenue showed
that it is possible to operate a project if the average rent equaled the shelter component of social assistance
St. Clare’s used private-sector business strategies to achieve social goals. This attitude allowed St. Clare’s to take advantage of opportunities and develop 25 Leonard
Avenue in a cost-effective and timely fashion.
The board of St. Clare’s was willing to take risks and proceeded with work at times
when it was unclear when, or if, the project would receive funding or government
approvals.

The first phase of the 25 Leonard Avenue development showed that it is possible
to build affordably by aligning the proper resources:
a. Using a conventional first and second mortgage to provide financing (rather
than using CMHC mortgage loan insurance).
b. Using income from rent supplements to pay off a mortgage with a five-year
amortization.

The second phase of the development of 25 Leonard Avenue showed that affordable housing projects could provide equity for developing new housing by refinancing their existing buildings.
65
Case Study Three: YWCA Elm Centre, Toronto, ON
SUMMARY
result of unique partnerships and innovative financing, the YWCA Elm Centre is a
 Amixed-use
residential community located in downtown Toronto, ON.
The
Elm
Centre
has 300 affordable apartments for low-income single women, women
 with children, women
living with mental health and addiction issues, and families of abo-


riginal ancestry.
This new building occupies a city block bounded by Elm, Elizabeth, Edward and Chestnut streets.
The Elm Centre also houses YWCA Toronto’s new administrative headquarters, the 200seat Nancy’s Auditorium, a women’s community meeting room, meeting spaces and a
restaurant.
BASIC PARAMETERS
Project
Partners and
structures
YWCA Elm Centre
corporate
YWCA Toronto (non-profit, charitable corporation)
Total project size ($CDN)
$78.9 million
Investment total
million in mortgage financing from Infra $24.8
structure Ontario (IO)
million through fundraising
 $15
million in provincial mortgage grant
 $12.6
$11.6
million
federal grants and rebates
 $8.5 million inincity
loans
 $3.6 million in municipal
rebates
 $1.5 million through a community
 $1.3 million in provincial rebates housing bond

Capital purpose
Financing for 300-unit affordable housing project for
women in downtown Toronto
Project description
The YWCA Elm Centre is an innovative residential
community located in the heart of downtown Toronto.
It offers 300 affordable apartments for low-income
women and their families, women living with mental
health and addiction issues, and families of aboriginal
ancestry.
Geography
Toronto, ON
66
Investor focus
Financing
Accredited investors (foundations) and institutional
lenders (Infrastructure Ontario)
Promissory Note: $1 million
Term: 10 years
Interest Rate: 4% per annum
Infrastructure Ontario Loan: $26 million
Term: 40 years
Interest Rate: 4.9% per annum
Credit enhancements
None
Risk profile
Low
Legal supports
Legal advice provided by Sky Law and YWCA legal
counsel
Timeline
December 2010 to May 2012


YWCA worked within existing securities laws and charity regulations to issue an
exempt debt security to a foundation.
The YWCA was able to access funds from the federal, provincial and municipal
governments.
KEY LESSONS


The role of partnerships is important. A total of $38 million in federal, provincial
and municipal grants, combined with a successful fundraising campaign, resulted
in the development of the YWCA Elm Centre.
Small, lower cost debt offerings can be an ideal way to supplement financing.
67



Given that the YWCA Elm Centre is one of the largest affordable housing projects
built in Canada in the last decade, replicating this scale of development may be
challenging, especially for organizations that do not possess the capacity for largescale fundraising and donations.
The YWCA’s process does demonstrate the use of small-scale social financing to fill
in gaps in funding. In other projects, similar community housing bonds (promissory notes) could be issued to fill in the shortfalls between traditional financing
methods such as mortgages and government grants.
For organizations that are of a similar size to YWCA Toronto, replication of YWCA
Elm Centre may be possible if given access to similar funding and land.
68
Case Study Four: Centretown Citizens Ottawa Corporation—Beaver Barracks
SUMMARY
Citizens Ottawa Corporation (CCOC) is a community-owned, tenant and
 Centretown
member-directed, private non-profit housing organization. It has been developing and


managing affordable housing in Ottawa, ON, since 1974.
CCOC is one of the largest private non‐profit housing providers in Canada. Its mission is
to create, maintain and promote housing for people with low and moderate incomes.
Now that the Beaver Barracks project is complete, CCOC will own and manage 54 properties with more than 1,595 units, combining both market-rent and subsidized housing
across downtown Ottawa.
BASIC PARAMETERS
Project
Centretown Citizens Ottawa Corporation (CCOC)—
Beaver Barracks
Partners and
structures
 CCOC
government
 Federal
government
 Provincial
of Ottawa
 City
Infrastructure
 Religious orderOntario (IO)

Total project size
corporate
$65 million
CCOC received $19 million in combined federal/provincial funding in two phases under the 2008
program year of the Canada-Ontario Affordable Housing Program. CCOC also benefited from $12 million in
grants and in-kind contributions from the City of Ottawa.
Investment total
CCOC financed a further $31 million through two debenture agreements with IO.
Through a special mortgage arrangement with a religious order, CCOC secured an additional $1.5 million in
mortgage financing.
The remaining financing was provided through an internal loan mechanism provided by CCOC itself.
Capital purpose
To construct mixed-income and mixed-ability affordable rental housing in downtown Ottawa.
69
Project description
CCOC is the owner and developer of Beaver Barracks: a
254-unit affordable housing project located on
Metcalfe, Argyle and Catherine streets in downtown Ottawa, ON.
The development of Beaver Barracks took place in two
phases, comprising five buildings. The project mixes
bachelor, one-bedroom, two-bedroom and threebedroom apartments and townhouses.
Geography
Ottawa, ON
Investor focus
Government funds, accredited investors, and a religious
order
Investment type
Debentures, mortgages
1.Infrastructure Ontario (IO) debentures:
Phase 1:
Under the Phase 1 Financing Agreement with IO, CCOC
issued 30-year debentures, valued at $21 million, to IO.
This blends a 40-year financing commitment for $16.3
million with a Province of Ontario–backed 20-year
commitment for $4.7 million.
Phase 2:
Financing
Under the Phase 2 Financing Agreement with IO, CCOC
will issue 30-year debentures for $19 million, a combination of a 40-year financing commitment for $15 million and a provincially backed 20-year commitment for
$4 million.
Significant components of Phase 1 and 2 are backed by
a Canadian Mortgage and Housing Corporation
(CMHC)–insured mortgage.
2. Religious order mortgage:
CCOC secured a smaller mortgage of $1.5 million at a
below-market rate from religious order support. To
provide collateral for this mortgage, CCOC leveraged
163 James Street, a property CCOC has owned independently without government restriction since 1985.
3. Internal Financing:
70
CCOC has developed an internal financing mechanism
through which it lends new developments money at the
Government of Canada Long Term Bond benchmark
rate.
Risk profile
Low
Legal supports
Legal services provided by Soloway Wright. Soloway
Wright has been CCOC’s legal counsel for more than
three decades and has experience dealing in housing financing. Because IO has in-house legal counsel, CCOC
didn’t have to pay the lender’s legal fees.
Timeline
2007—2013




CCOC was able to get a better interest rate on its smaller mortgage by going to a
socially motivated private lender, in this case a religious order, instead of a bank.
The site of former military barracks, the land was purchased by the City of Ottawa
from the federal government in the early 1990s and earmarked for social housing.
In 2008, CCOC was awarded the land for $1, along with Affordable Housing Program (AHP) funding through a Request for Proposal (RFP).
Because CCOC had CMHC loan insurance and a portion of the financing was
backed by the province, the loan was extremely low risk.
CCOC has been able to use its unrestricted accumulated operating reserve to contribute its own equity to new developments. To ensure the long-term sustainability
of these reserves, CCOC loans the money to the property with interest and principal repayable over a specified period.
KEY LESSONS


CCOC was awarded AHP funding in 2008, but construction contracts were not
signed until years later and the final phase of project was only completed in the fall
of 2012. Preliminary budgeting must account for potentially large increases in
construction costs over such a long time span.
By regulating the maximum chargeable rent, AHP sets an effective cap on borrowing capacity by limiting net operating income.
71

Given the scale and cost of Beaver Barracks, replicating this development may be
difficult, but could be aided by:
a. Having a municipality willing to either donate land or sell far below market
value; and/or
b. Leveraging equity to secure loans, and using this equity to borrow money at
interest rates below market value.
72
Case Study Five: LOFT Community Services and St. Anne’s Place, Toronto, ON
SUMMARY
took over St. Anne’s Place, an existing seniors’ facility and its operations, and reno LOFT
vated it to serve homeless seniors with mental health, addiction and/or physical chal-

lenges.
LOFT assumed an existing Canada Mortgage and Housing Corporation (CMHC) mortgage, fundraised, and received a municipal loan and a Social Housing Renovation and
Retrofit (SHRRP) grant. A significant fundraising gap posed a risk to potential completion of the renovations.
BASIC PARAMETERS
Project
LOFT Community Services and St. Anne’s Place, Toronto, ON
Partners and corporate LOFT Community Services
structures
CMHC
City of Toronto
Total project size
In 2000, St. Anne’s Place, a stand-alone non-profit 110-unit
housing project for seniors, approached LOFT to take over its
operation, as it could no longer sustain it.
The total cost for purchase and renovation was $2,456,000.
Later, it required another $1,728,000 in upgrades.
Investment total
Raised from donations
 $2,000,000:
Loan from the City of Toronto
 $1,000,000:
City SHRRP grants
 $728,000:
$456,000:
Existing Canada Mortgage and Housing Corpo ration (CMHC)
mortgage assumed
Capital purpose
To purchase and renovate St. Anne’s Place, a 110-unit apartment building for seniors.
Project description
St. Anne’s Place had been a general seniors’ residence. The
non-profit organization operating the residence could no longer sustain it and sold it to LOFT for $1.
LOFT took the risk to convert it to an apartment building for
homeless seniors with mental health, addiction and/or physical challenges.
When LOFT took over the building there were many vacancies
73
and LOFT immediately began to accept at-risk seniors with
mental health and addiction challenges as tenants. The building is now fully occupied; at-risk seniors now make up 85% of
the residents. In addition, 82% of the tenants have rent supplement funding.
Geography
Toronto, ON
Investor focus
CHMC mortgage, City of Toronto loan, SHRRP grant
Term
The CMHC mortgage will be completed
The city loan is repayable beginning in 2018.
Interest Rate
The mortgage is at an interest rate of 5.75% (it was originally a
50-year
mortgage).
The loan from the City is without annual interest payments until 2018, and then at a rate of prime plus 1%.
Investment type
Various (Mortgage and City Loan)
Cost of financing
N/A
Credit enhancements
None
Risk profile
High:
in
2020.
There was a risk involved in raising charitable funding and
there was no guaranteed financing for future capital repairs (it
is an older building).
There was also a low level of support-service funding for the
project.
LOFT also assumed all of the existing staff from St. Anne’s
Place.
Legal Support
Through the firm of Adair, Morse.
Timeline
The building was purchased in 2000; renovations were completed in 2001.
POLICY/REGULATORY LEVERS
No major policy or regulatory levers were moved or applied for this project.
74
KEY LESSONS LEARNED



Taking on this project involved assuming significant risk. The risk was mitigated
because LOFT had access to charitable funding and a mortgage financing. However, when the project was engaged it still required rent supplement funding
(which it achieved) and additional support funding. The fact that the residence
was an older building that would inevitably require repairs and upgrades—and,
thus, additional funding—further compounded the risk. To date, this has been
handled by a loan from the city and capital repair grants.
The risk was acceptable to LOFT because its board, staff and service users (consumers) strongly believed there was (and continues to be) a critical societal need
to serve seniors with significant mental health and/or addictions challenges. LOFT
is a large, non-profit charitable organization; it decided to take the risk to contribute its financial, management and donor resources to this project in the absence of
sufficient government initiatives and community resources for seniors with mental
health and/or addictions and homelessness challenges. It believed that taking this
risk was in line with its mission.
So far the risk has been worth it: a significant number of high-risk seniors with
mental health and/or addictions challenges have been able to live successfully in
supportive housing in this apartment building, rather than in hospitals, nursing
homes or hostels.

This project could be replicated by larger organizations that have suitable infrastructure and staffing resources, have fundraising capacity and are not risk averse.
LOFT believes that more of these kinds of supportive housing projects are needed
and that showing the viability of this supportive housing service project in the
community might encourage government and other community groups to undertake similar projects.
75
APPENDIX THREE: SHORT CASE STUDIES
Wood Buffalo Housing and Development Corporation, Wood Buffalo, AB
Wood Buffalo Housing and Development Corporation (WBHDC) is a not-for-profit developer and landlord established in 2001 by the Regional Municipality of Wood Buffalo, in Alberta, with a mandate to provide housing for low- and moderate-income families. WBHDC
operates in a similar manner to any for-profit development and property management company, with all residuals reinvested into affordable housing.
The corporation has two central programs. The first is a home-ownership program for lowincome earners. The program encourages applicants to live in the more sparsely populated
regions of the municipality by financing affordable mortgages for program participants. The
second program offers subsidized non-profit rental units for low-income earners and seniors.
Total project size (value and number of units): N/A
Investment terms: Vary
Other financing: WBHDC combines outside sources of capital with its own funds to finance mortgages.
Operating revenue source: N/A
Key innovations and lessons: WBHDC was established by the Regional Municipality of
Wood Buffalo to build affordable housing. The municipality made land for housing available
to the corporation. The province allowed funding programs to be adapted for WBHDC’s innovative model. Due to the presence of the oil sands, Fort McMurray has a huge temporary
workforce. Given the housing shortage that exists in Fort McMurray, there is an extra impetus on governments to find solutions for the creation of affordable housing.
Ottawa Community Housing: “Blend and Extend,” Ottawa, ON
Ottawa Community Housing (OCH) is Ottawa’s designated local housing corporation. While
the City of Ottawa is the sole shareholder of the corporation, OCH remains an arm’s-length
entity. Formed in 2002 after the merger of the Ottawa Housing Corporation and CityLiving,
OCH is one of the largest non-profit housing providers in Ontario, with a diverse portfolio of
more than 14,800 units scattered in communities and clusters across the city.
Total project size (value and number of units): Eight OCH projects due for renewal
in 2012 are being refinanced to leverage the equity in the existing assets to fund muchneeded capital repairs.
76
Investment terms: Refinancing rates: OCH has applied to Infrastructure Ontario (IO) for
mortgage refinancing. IO offers long-term (with an amortization period of 30 years), stable
borrowing rates (currently between 3.75% and 4.2%). These rates are lower than any interest rates being paid and long-term, locked in rates reduce the risk of later fluctuations in interest rates.
Other financing: None
Operating revenue source: N/A
Key innovations and lessons: By refinancing, the current mortgage effectively gets paid
down at renewal and a new lower-rate mortgage with the same annual debt payments is put
in its place, but with a fixed interest rate for up to a 30-year amortization period. Pushing
out the amortization period and capitalizing on savings due to lower interest rates helps leverage project equity and translates into immediate working capital. The benefits of this approach are current lower mortgage rates, reduced downstream mortgage risk due to
potential interest rate increases at each renewal and realization of capital that can be applied to capital repairs or redevelopment
Toronto Community Housing Corporation, Regent Park, Toronto, ON
The Regent Park development initiative is a significant revitalization project in the City of
Toronto. The project involves six phases of development, spread over 15 years, for mixed
housing, including 2,083 Rent-Geared-to-Income (RGI) units, 700 affordable rental units
and 3,500 market rental units. In addition, 250,000 square feet of new commercial space
will be added, including a bank branch, grocery stores and national retailers. The development also includes a joint venture partnership with Corix Utilities Inc. for an environmentally sustainable district energy facility.
The Toronto Community Housing Corporation (TCHC) completed two bond transactions
totaling in the Canadian capital markets in order to finance the revitalization of Regent
Park. The total $450-million bond issue was a part of a broader debt-financing strategy by
TCHC that also included traditional approaches (CMHC-insured mortgage, conventional
mortgages) and emerging approaches (public bond, private partnerships and leveraging
land value). The deal was modeled on similar bond issues by Ontario hospitals and universities, as well as social housing providers in Australia, New Zealand and the United Kingdom.
Total project size (value and number of units): $1 billion; more than 7,000 units
(plus community and commercial facilities)
Investment terms: $450 million (two issues of senior, secured debentures: $250 million
and $200 million, respectively, with 40-year terms and 5% average interest)
77
Other financing: $60 million in government grants, $400 million in commercial interests
and lending
Key innovations and lessons: The TCHC learned a number of lessons from the bond issue:





Canadian capital markets are supportive. There was strong interest and a high
level of involvement in the deal from many major capital market players. Many of
them saw social housing as the “next” infrastructure financing opportunity.
Getting a high credit rating was critical, as it allowed investors to move into an unfamiliar sector, simplified the marketing task and created a great deal of demand.
Canadian banks were very supportive, with major financial institutions involved in
the deal. Asset security was not important, because a City of Toronto funding
agreement eliminated perceived risks.
The process took time, money and management attention. The deal took three
years from start to finish, requiring a significant amount of energy to become
familiar with the intricacies of the process.
The scale of the investment and the story behind it were extremely important.
According to TCHC, it was much easier to borrow $250 million than $15 million,
and: their borrowing costs dropped to a level nearly the same as the City of Toronto. In addition, revitalization was seen as a major, simple story, attracting major players. The support of stakeholders was critical. The board of directors was
kept informed at every step of the way, and, despite an arm’s-length relationship,
the City of Toronto ultimately had to sign off on the transaction.
Woodgreen Community Services, First Step to Home, Toronto, ON
On April 1, 2008, WoodGreen Community Services housing purchased The New Edwin Hotel. It re-opened the hotel in March 2010 as First Step to Home, community housing designed specifically to provide accommodation for street-involved and homeless men aged 55
and over.
First Step to Home combines safe, affordable housing with on-site health services and wraparound support. A first in North America, the program helps 28 seniors to overcome the severe hardship and personal challenges they have experienced surviving homelessness.
Total project size (value and number of units): $3.8 million; 28 units
Investment terms: Unknown
Other financing: Funding from the City of Toronto’s housing allocation policy, as well as
from other partner agencies, private donors and government ministries
78
Operating revenue: The program receives Local Health Integration Network (LHIN)
funding and has a referral agreement with Streets to Homes. First Step To Home is not subsidized, but follows the 30% income determinant RGI rule or shelter portion of income for
costs to residents.
Key innovation and lessons: N/A
Stella’s Circle, Multi-Unit Acquisition
Strategy, St. John’s, NFLD
Stella’s Circle is a leading social services agency in St. John’s, NFLD, which provides programs for adults and youth who have experienced personal or family breakdown brought
about by mental health issues, addictions, abuse, illiteracy and the lack of education, as well
as poverty. Stella’s Circle acquired seven houses through the Surplus Federal Real Property
for Homelessness Initiative (SFRPHI), and then mortgaged these properties in order to purchase other run-down properties. Stella’s Circle used its carpentry training program to complete renovations on these units.
Stella’s Circle was the first Canadian organization to utilize the SFRPHI to provide nonprofit affordable housing, and the first to use the equity from its seven SFRPHI properties—
in partnership with Residential Rehabilitation Assistance Program (RRAP) and a private financial institution (Scotiabank)—to acquire additional properties from the private market.
Its actions significantly increased the supply of affordable social housing in St. John’s. Between 2002 and 2005, Stella’s Circle’s creative financing approach helped secure numerous
properties for long-term affordable housing in the context of one of Canada’s hottest real estate markets.
Total project size (value and number of units): Approximately $1.6 million; 29 units.
Four properties and 20 units were acquired with SFRPHI equity and private financing. The
new properties had a purchase cost of $492,000 and an appraised cost of $608,000 after
renovation.
Investment terms: By 2005, the cumulative appraised value of the seven SFRPHI properties was $1,025,000, an increase of $303,000. Because these properties were mortgage-free,
Stella’s Circle was able to use this equity to negotiate pre-approval of $1.5 million in financing from Scotiabank to purchase up to 10 new properties, in return for taking a $150,000
line of credit.
Other financing:
SFRPHI provided seven properties to Stella’s Circle (mortgage free) with a cumula The
tive appraised value of $722,000 (at the time of acquisition).
federal/provincial RRAP granted Stella’s CIrcle $152,000 to renovate four of the
 The
seven SFRPHI houses and increase the number of units from seven to nine. Natural Re-
79


sources Canada’s EnerGuide for Houses program was incorporated into the renovation
process for one of the properties, resulting in projected annual utility bill savings of
$6,400.
The City of St. John’s waived property taxes and development fees.
Stella’s Circle deployed its home repair and maintenance training program (New Beginnings, funded by the provincial Human Resources, Labour and Employment Department) to help complete renovations in three of the new properties.
Operating revenue source: Total annual rents (including utilities) collected from the
four new properties that were acquired using private financing cover 100% of annual operating costs ($33,348).
Key innovation and lessons: The SFRPHI projects represent the cornerstone in the expansion of the corporation’s affordable housing portfolio, providing a solid foundation upon
which Stella’s Circle can continue to acquire properties and develop more affordable housing over the coming years.
The key lesson was the demonstrated ability for an affordable housing provider to leverage
the equity provided through existing stock to acquire private financing for the acquisition of
new properties. Prior to this arrangement with Scotiabank, Stella’s Circle’s efforts to find a
financial institution willing to partner in converting their equity into an affordable housing
financing formula had met with resistance.
Frontenac Community Mental Health and Addiction Services (FCMHAS), Kingston, ON
A. Montreal Street, Kingston, ON
This house had been rented by the organization for several years and the landlords took advantage of the care of the building, resulting in an increase in value of the property. New
landlords increased the rent. To avoid this spiraling of costs, the agency decided to advance
its own property acquisitions; when the came on the market, made an offer to the landlord.
This two-unit duplex has four bedrooms available in each side of the house. There is also a
common room, living room, bathroom and kitchen in each unit. It is located near downtown
Kingston, which provides residents easy access to all the amenities they require. To avoid
extra fees, 10% of the purchase price was the down payment; the remainder of the cost was
mortgaged.
Total Project Size (value and number of units): $39,000 (in 1984); two-unit duplex
Investment terms: N/A
Other financing: Municipal subsidy for property tax relief
Operating revenue: The property was and continues to be carried by the rents, which are
equivalent to the shelter allowance of Ontario Works (OW) or ODSP (disability income).
80
Key innovation and lessons: Equity from this property was leveraged to acquire an administrative building. This is an example of how to take limited funds and start by putting a
down payment on a small project to start building equity. By securing a sufficient down
payment, FCMHAS ensured that the rents were sufficient to cover the operating costs, including the mortgage payments. Eight years after this house was first purchased, the equity
in the home was used to secure other capital assets. The advantage in this endeavour was
that there was no need for government funding, which meant the limitations and requirements that accompany such financing did not encumber the future use of the equity in the
building.
B. York Street, Kingston, ON
This project was initiated in 1995, when volunteers of the Kingston Psychiatric Hospital
teamed up with FCMHAS to purchase a home. The volunteer association members pledged
to raise $30,000 and donated that amount to the agency within the year. A mortgage of
$80,000 was secured, with rents dedicated to property costs. The municipal government also provided a subsidy similar to the one received for the Montreal Street home.
Total project size (value and number of units): $110,000 (in 1996); single family, fourbedroom home
Investment terms: Mortgage of $80,000
Other financing: Fundraising provided $30,000; municipal subsidy for property tax relief
Operating revenue: The property was and continues to be carried by the rents, which are
equivalent to the shelter allowance of Ontario Works (OW) or ODSP (disability income)
Key innovation and lessons: Housing can be obtained by creating partnerships with
those who hold similar values and goals. In this case, the volunteer group associated with
the psychiatric hospital wished to lead a special project and chose to partner with FCMHAS
to create housing for people leaving the specialized care of the hospital. The chairperson of
the volunteer group passed away just prior to securing the house and the home has been
dedicated to her, acknowledging her passion to the cause of housing. The dedication of volunteers is key in the field of housing.
81

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