Social Finance for Affordable Housing


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Social Finance for Affordable Housing

  1. 1. Social Finance for Affordable HousingAn opportunity to mobilize private capital for public good Prepared by Adam Spence December 2012
  2. 2. SummaryWhat is the objective of this presentation? What is social finance? Why is social finance important for affordable housing? What are examples of social finance in affordable housing? What are the challenges and opportunities for social finance in affordable housing? Pg 2
  3. 3. What is social finance? Pg 3
  4. 4. AboutWhat is social finance?Social finance (or impact Profitinvesting) is an investmentapproach to solve social orenvironmental challengeswhile generating financialreturns. This includesinvestments that range fromproducing a return ofprincipal capital to offeringmarket-rate or even market-beating financial returns. Planet People Pg 4
  5. 5. Planet Bean Coffee in Canoe-Creek Hydro inGuelph BC• $250k loan & share • $5M loan for the issue for expansion First Nations plant• Revenues grew • generate annual from $500k to revenue of $1.6M $2.6M Regent Park in • power for 1,700• increased global & Toronto homes local impact; • $1B revitalization doubled co-op • $450M worth of membership market-rate bonds at 5% per year over 40 years • over 6,000 mixed- income housing units & community facilities Pg 5
  6. 6. Two Key Features Energy efficiency Prime + 2% Poverty reduction Social housing units Impact + Return 8%Carbon reduction Jobs for marginalized 1% p.a. over three years populations
  7. 7. AboutWhat are the characteristics of the social finance marketplace? Global marketplace is estimated at $100 billion, projected to grow to $400 billion over next 10 years Canadian marketplace estimated at ~$2 billion in assets, projected to grow to $30 billion over next 10 years History: Canada has a long history of social finance activity Key sectors: Clean technology, sustainable agriculture, and affordable housing Strong interest amongst governments and institutional investors, with pioneering efforts from leading foundations and individual investors
  8. 8. AboutWhat is the spectrum and source of social finance investments? Project or program Loans, loan guarantees, real estate Private grant mortgages, patient debt and equity, public funding, general equity, community bonds, housing equity, fixed income donations bonds, social impact bonds, etc. Below Market Rate Market Rate Impact SUPPLIERS OF CAPITAL Conventional  Mainstream Banks Grants Impact Investments Investments Investments  Community Development Finance and Credit Unions  Foundations (Mission-related investing)  Government  Community Loan Funds  Alternative Financial Institutions and Funds  Private Equity Funds Social Enterprise Funds  Individual Investors (Angels, VCs, wealthy individuals) Negative Expected Financial Return Market Rate Expected Financial Return
  9. 9. AboutWhat are potential products and financing sources for housing providers?Products Mortgages and second mortgages Loans and loan guarantees Bonds and debentures (including community bonds)) Fund EquityFinancing Sources Mainstream Financial Institutions (eg. RBC) Alternative Financial Institutions (eg. Alterna) Alternative Lenders including funds, and foundations (eg. CAIC, IO) Private Offerings (eg. Community bond, promissory note) Internal Equity Pg 9
  10. 10. So what?Why is social financeimportant foraffordable housing? Pg 10
  11. 11. AlignmentWhy is social finance important for supportive housing providers? Housing demand: There is significant demand for new supportive housing stock in Canada, with 520,700 Canadians living with mental illness that are inadequately housed. 154,000 Ontarians are on the waiting list for housing. Financing needs: There have been a number of identified financing needs amongst individual housing providers, including mortgage financing, project bridge financing, and matched financing. There is tremendous need for stock maintenance and improvement and opportunities for energy efficiency retrofits. Government revenues: Capital funding support is restricted, and operating funding growth is constrained. Early adopters: Growing number of affordable housing providers turning to alternative financing to tackle these problems and turning to investors/lenders for funding. Financing leverage and revenue streams: You have potential revenue streams and assets for leverage to obtain financing. Pg 11
  12. 12. AlignmentWhat are key advantages for supportive housing providers in the social financemarketplace?Advantages Signature impact investments have been affordable housing investments. TCHC Housing Bond, YWCA Community Housing Bond. There is demonstrated interest in affordable housing by investors. 75% of impact investors would be interested in affordable housing bonds Social housing is a proven impact investment with a track record. Asset performance over last 30 years in Ontario. Supportive housing has the potential for scale that matches investor interest and capacity. Investment sizes in millions and tens of millions of dollars in real estate. Pg 12
  13. 13. What are examples of socialfinance for affordablehousing in Ontario? Pg 13
  14. 14. YWCA Elm Centre is an innovativeresidential community located in theheart of downtown Toronto. TheYWCA Elm Centre (an $80M project)offers 300 affordable apartments forlow-income women and theirfamilies, women living with mentalhealth and addiction issues andfamilies of Aboriginal ancestry.Innovative Financing• Community Housing Bond• Infrastructure Ontario Loan• Municipal Loan• Government credits/rebates• Cash flow driven by rent supplements Pg 14
  15. 15. Centretown Citizens OttawaCorporation (CCOC) is the ownerand developer of Beaver Barracks: a254-unit affordable housing projectlocated on Metcalfe, Argyle andCatherine Streets in downtownOttawa. The $65 milliondevelopment of Beaver Barrackstook place in twophases, comprising five buildings.The project mixes bachelor, 1-bed, 2-bed and 3-bed apartmentsand townhouses.Innovative Financing• Equity (Internal financing)• Infrastructure Ontario Loan• Government credits/rebates• Alternative Lender (Religious Pg 15 Order)
  16. 16. 25 Leonard Avenue is a four-storybuilding close to Toronto WesternHospital that was original built asdoctor’s offices. St. Clare’sMultifaith Housing converted thedoctor’s offices into smallapartment units (Phase 1).Subsequently St. Clare’s addedtwo floors with 26 prefabricatedapartments (Phase 2). Intotal, there are 77 units in thecomplex, with a development costof $8.1 million.Innovative Financing• Alternative Lender (CAIC)• Leveraged equity by extending amortization of first mortgage Pg 16
  17. 17. What are the challengesand opportunities for socialfinance in affordablehousing? Pg 17
  18. 18. ChallengesWhat are key challenges for supportive housing providers in use of social financeamongst supportive housing providers? Stable revenues: Challenges financing current stock, some funding sources are winding down, and the ability to generate income from new and current sources is limited. Financial capacity: Capacity to service debt and strength of balance sheets. Organizational capacity: Financial literacy and technical expertise. Policy barriers: Federal and provincial policy barriers can increase costs, increase the time for development, and reduce the capacity of providers to build new units. Capital supply: Familiarity with and Photo Credit: Kevin Van Paassen , The Globe and Maill aversion to nonprofit housing providers. Pg 18
  19. 19. OpportunitiesWhat are opportunities to advance social finance in supportive housing? Models: There are a number of models that can be adopted or adapted to local contexts. Constituency: There is a strong, motivated constituency of supportive housing providers, mental health advocates, government representatives and financial leaders supporting a common aim. Strategic Solutions: There are a number of strategic, pragmatic solutions that could have a significant impact on the ability to grow the stock of supportive housing in Ontario. Capacity-building: There are great tools and resources that can be shared through strong, ready-built networks to share recommendations, models and lessons learned. Pg 19
  20. 20. Thank You