Michael Shapcott Director Affordable Housing and Social Innovation

Michael Shapcott, Director, Affordable Housing and Social Innovation, The Wellesley Institute Social Economy Series University of Toronto March 23, 2011 © The Wellesley Institute www. wellesleyinstitute. com

Housing finance 101: Three bags of money required for housing Operating $$$s Reserve $$$s Development/ acquisition $$$s © The Wellesley Institute www. wellesleyinstitute. com

Ownership housing innovation – 1940 s Long-term mortgage and mortgage financing assistance “Job for life, mortgage for life” © The Wellesley Institute www. wellesleyinstitute. com

Long-term mortgages Development/ acquisition $$$s Reserve $$$s Operating $$$s Owner obtains loan, various gov’t subsidies and incentives Owner pays, various gov’t subsidies © The Wellesley Institute www. wellesleyinstitute. com Owner pays, various gov’t subsidies

Ownership housing innovation – mid-2000 s Sub-prime mortgages; complex derivatives “NINJA financing: no income, no asset” © The Wellesley Institute www. wellesleyinstitute. com

Sub-prime mortgages Development/ acquisition $$$s Reserve $$$s Operating $$$s ? ? ? Owner gets financing, risk bundled into MBSs, etc. ? ? ? ? ? © The Wellesley Institute www. wellesleyinstitute. com

Social housing innovation – late 1940 s Governmentdeveloped, governmentowned, governmentmanaged “The garden city” © The Wellesley Institute www. wellesleyinstitute. com

Public housing financing Development/ acquisition $$$s Reserve $$$s Operating $$$s Government finances Tenant rents and government subsidies © The Wellesley Institute www. wellesleyinstitute. com Capital reserves (? ? )

Social housing innovation – 1973 Funding for community-based non-profit, co-op and municipal housing “Affordable housing is a social right of all Canadians” © The Wellesley Institute www. wellesleyinstitute. com

Social housing financing - then Development/ acquisition $$$s Reserve $$$s Operating $$$s Various capital subsidy mechanisms, gov’t backstops mortgage Tenant rents, RGI subsidies © The Wellesley Institute www. wellesleyinstitute. com Capital reserves

1, 20% 1, 10% 1, 00% 0, 90% 0, 80% 0, 70% 0, 50% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 0, 60% Erosion of government investment in social housing over two decades © The Wellesley Institute www. wellesleyinstitute. com Federal housing investments as percentage of GDP

As government housing investments erode, homelessness, precarious housing grows Precarious Housing 2010 © The Wellesley Institute www. wellesleyinstitute. com

Construction budget – 50 -unit seniors housing in Kitchener 2007 Project cost: $6, 100, 000 Federal / provincial $2, 100, 000 Municipal $ 194, 750 Total government $2, 294, 750 Government share 38% Donations (land, cash) $1, 195, 000 Mortgage financing $2, 610, 250 Total sponsor $3, 805, 250 Sponsor share 62% © The Wellesley Institute www. wellesleyinstitute. com

Federal budget 2009 © The Wellesley Institute www. wellesleyinstitute. com

Government of Canada says housing investments are great for economy © The Wellesley Institute www. wellesleyinstitute. com

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% © The Wellesley Institute Assisted households: Cut 10. 4% www. wellesleyinstitute. com

Innovative options required e r u t c ru t s a r f le In b a d r o f f a o i d n u f Ontar n a o l g ity n n i u s m m u o o C h housing s d n u f n a lo Housing bonds Development/ acquisition $$$s So Social venture exchange Hous cia l im trust ing fund bo p a s nd c t s © The Wellesley Institute www. wellesleyinstitute. com Social finance

Innovative options required Univers al housing benefit nds o b t c a p m i l Socia ct a p Im g n i t inves OI SR © The Wellesley Institute www. wellesleyinstitute. com Operating $$$s