Vancouver's novel experiment to build more housing for the thousands of workers who simply cannot break into the city's astronomical real-estate market has gained an important ally.
A new private investment fund, New Market Funds, will put money into a plan to build 360 units of subsidized housing on city land. The units are mostly intended for those earning less than Vancouver's median income, about $74,000 per average household and about $40,000 for single-parent families.
The below-median group has increasingly been squeezed by rising housing costs, stagnant pay and competition from better-off residents.
Vancouver's solution has been to provide four pieces of city land worth $22-million to a new organization, the Vancouver Community Land Trust Foundation, to build and manage a mix of units that will be rented at different rates: just below market, slightly subsidized, and heavily subsidized.
The project is notable because it would not rely on help from the provincial or federal governments.
New Market Funds has raised $11-million from foundations and individuals to invest in the project.
The fund is the first of its kind in Canada, although the concept of private-sector groups investing in community housing is not new in the United States.
"For the first time, capital is being pooled for a long-term community benefit," said Garth Davis, the fund's managing director and a former partner at Scotia Merchant Capital. He says he hopes the fund can help finance at least 1,000 affordable rental units in the city within a few years.
Mr. Davis said the fund wants to achieve a 6-per-cent return for investors, which is competitive with market-rental projects.
The 360 units being developed by the land trust foundation will be a more secure investment than market rental properties, he said, because the land is free, which eliminates a big upfront cost. Also, he added, the rents will be below normal market rates, which guarantees nearly 100-per-cent occupancy, and therefore, returns for investors.
The soon-to-be-built 360 units will be spread across four pieces of City of Vancouver property, on Kingsway and in the new East Fraserlands development near Southeast Marine and Boundary.
The federal government in 1994 ended its housing-subsidy programs, which had financed and supported thousands of units of social housing in the 50 years after the Second World War. In recent years, the provincial government has been willing to build subsidized housing for only the most destitute or disabled in Vancouver.
That has left Vancouver, like many Canadian cities, floundering to find ways to create cheap new housing for the thousands of people who are working but making the median income or less.
The foundation's project, in line with Vancouver's affordable-housing goals, will aim to provide units that households that bring in $21,000 to $86,000 can afford using no more than 30 per cent of their income.
Mr. Davis, who started working with the foundation partners two years ago when he was at Vancity credit union, said a project like this can get only so much bank financing, and that is where an investment fund such as New Market can play a role.
The foundation will get $69-million in bank loans for the project and $10-million in financing from other sponsors, including a very small amount from BC Housing, but still needs $30-million in additional investment.
Mr. Davis said the plan is for New Market to provide all of that $30-million by next June.
After that, he said, the fund will invest in other housing projects being planned by non-profits in B.C. and elsewhere.
Mr. Davis said his eventual goal is to get pension funds and insurance companies, the biggest investors around, to put money into these kinds of ventures through his organization. New Market's first investors for the project include the Tides Foundation, the Michael Young Family Foundation, the J.W. McConnell Foundation.
He believes investors can be enticed by the guaranteed, competitive returns that are possible because these projects benefit from free land and zero vacancy, which market projects do not.
That will help them view these social ventures as safe investments.
"If you can understand the big institutional boxes, you can immensely increase the velocity of money to a certain sector."