By Marilyn Struthers, Volunteer Facilitator and Co-lead, TISGB Social Finance & Affordable Housing Group
Next steps in social finance: The Institute of Southern Georgian Bay, February 2024
In November of 2023, the Institute of Southern Georgian Bay held a community forum entitled New Ways to Finance the Housing Affordability Gap. It was a chance for a large cross-sectoral group to learn from experts in a number of rural communities across Canada on how they are using social finance tools to reach for solutions in the housing affordability crisis. These communities, like ours, are particularly concerned about solutions for affordable rental housing for people who work in lower waged sectors vital to our community economies such as health care, retail and hospitality and tourism. Video from these sessions can be viewed here.
Grey County planners using the HART Index, as well as traditional data sources, estimate that households in lower and medium wage groups can currently afford rental at $1,019/ month or less. County-wide, we face a deficit of approximately 2,400 units at this price point, predicted to grow to 3,600 by 2046. The rental rate and the deficit figures vary dramatically from community to community as household income varies. Many of our municipalities are currently engaged in calculating municipal-level data to better link economic development planning and housing development approvals.
Recent data from BMO suggests that pre-pandemic, Canadians were spending an average of 35% of their pre-tax income on housing (the Canadian affordability standard is 30%). Post-pandemic, that figure has increased to 55% of income, leaving a whopping 20% less income to be spent in local businesses as families redirect spending to shelter costs. The Bank of Canada pegs housing affordability at the worst levels in forty-one years and the impact on rural small business will be dramatic.
These figures create new challenges for rural municipalities as approved commercial market developments stall due to rising interest rates and development costs. The term nonmarket housing refers to housing created with a low or no profit motive to fill the housing gap between unaffordable commercial and government subsidized housing.
In urban communities, nonprofit sector organizations such as churches, co-ops and nonprofit housing corporations play an important role in filling this lower rental housing gap. However, in rural communities, nonprofit sector organizations work with less than 8% of the financial capacity of their urban sector counterparts. Nonprofits are not the only holders of “community wealth” or wealth held in the commons of community that might be leveraged to support affordable housing. Our municipalities are the largest holders of community wealth in our rural landscapes. This creates the impetus for new municipal financial and development engagement to forestall affordable housing related economic development challenges.
At the same time, while rural dwellers are often engaged in “buy local” strategies, there are few opportunities to invest locally, hindering private wealth investments.
Seven municipalities were represented in the Deeper Dive Workshop that followed presentations at the forum. In November, participants held discussions on a range of ideas that could be individually or collaboratively implemented to ease the developing situation. Several collaborative initiatives have emerged including:
- regional data planning to support housing planning at the municipal level;
- discussions on the development of a nonprofit land trust to hold municipal and county lands for affordable non-market development and
- a range of suggestions on municipal collaboration on social finance mechanisms, in addition to the list of municipal development strategies previously published.
Four financial strategies are proposed.
What is required now is the financial modeling to support the implementation of these mechanisms and attract investment.
- Municipal underwriting of community bonds held by local affordable housing developers or by the municipality itself. This strategy provides a vehicle for local investment in affordable real estate and is starting to be widely used in Canadian communities.
- The development of a collaborative revolving fund across several municipalities that cohere as an informal region. This recognizes that affordable development – or the lack of – in one community affects those other communities at reasonable commuting distance. A collaborative approach shares risk, creates financial scale, and allows for collaborative decision-making on the best development opportunities.
- Municipal affordable housing funds were a third mechanism proposed. These funds, earmarked to support capacity building of the nonmarket sector, allow municipalities to build development capacity and operational ownership outside of municipal operations, through organizations such as co-ops, nonprofits, and social enterprises. Several municipalities have these funds now or have them under discussion. Fund raising strategies such as developer goodwill contributions or higher fees levied against very large single-family units were proposed. Municipalities are considered “non-qualified donees” under Canadian tax legislation. This often unexploited status creates the ability to provide tax receipts in return for community/stakeholder donations and then grant these funds or use them to offset development fees for nonprofit developments.
- Beyond-community level scale, tax exemption or deferral policies by federal and provincial governments would support small municipalities in attracting local investment in local housing solutions and help strengthen the bonds of community, particularly where there has been a substantial in-migration of urban dwellers due to the pandemic or retirement.