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Financing housing alternatives

Michael Shapcott, Director, Affordable Housing

and Social Innovation,The Wellesley Institute

Social Economy SeriesUniversity of Toronto

March 23, 2011

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Housing finance 101: Three bags of money required for housing

Development/acquisition $$$s

Operating $$$s

Reserve $$$s

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Ownership housing

innovation – 1940s

Long-term mortgage and

mortgage financing assistance

“Job for life,mortgage for life”

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Long-term mortgages

Owner obtains loan, various gov’t

subsidies and incentives

Operating $$$s

Reserve $$$sDevelopment/acquisition $$$s

Owner pays, various gov’t

subsidies

Owner pays, various gov’t

subsidies

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Ownership housing

innovation – mid-2000s

Sub-prime mortgages;

complex derivatives

“NINJA financing:no income, no asset”

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Sub-prime mortgages

Owner gets financing, risk bundled into

MBSs, etc.

Operating $$$s

Reserve $$$sDevelopment/acquisition $$$s

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???????????

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Social housing innovation – late 1940s

Government-developed,

government-owned,

government-managed

“The garden city”

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Public housing financing

Government finances

Operating $$$s

Reserve $$$sDevelopment/acquisition $$$s

Tenant rents and government subsidies

Capital reserves (??)

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Social housing innovation

– 1973

Funding for community-based non-profit, co-op

and municipal housing

“Affordable housing is a social right of all Canadians”

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Social housing financing - then

Various capital subsidy mechanisms,

gov’t backstops mortgage

Operating $$$s

Reserve $$$sDevelopment/acquisition $$$s

Tenant rents, RGI subsidies

Capital reserves

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1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

0.50%

0.60%

0.70%

0.80%

0.90%

1.00%

1.10%

1.20%

Erosion of government investment in social housing over two decades

Federal housing investments as percentage of GDP

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As government housing

investments erode,

homelessness, precarious

housing grows

Precarious Housing 2010

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Construction budget – 50-unit seniors housing in Kitchener 2007

Project cost: $6,100,000

Federal / provincial $2,100,000Municipal $ 194,750 Total government $2,294,750

Government share 38%

Donations (land, cash) $1,195,000Mortgage financing $2,610,250

Total sponsor $3,805,250Sponsor share 62%

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Fede

ral b

udge

t 200

9

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Government of Canada says housing investments are great for economy

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Federal housing agency projects growing net income……as major cuts set for housing investments

CMHC net income: Up 11.5%Overall housing spending: Cut 23.5%

Assisted households: Cut 10.4%

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Innovative options required

Development/acquisition $$$s

Infrastructure

Ontario affordable

housing loan fundCommunity

housing loan funds

Housing bonds

Housing trust funds

Social impact bonds

Social venture

exchange

Social finance

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Innovative options required

Operating $$$s

Universal housing benefit

Social impact bonds

Impact

investing -

SROI

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Thank you!

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