Nonprofits keen to build affordable housing face a big problem: getting the bank involved


Even when things are going well, creating new affordable housing involves a lot of expectation and hope.

Four lots in northern Dartmouth, Nova Scotia, remained empty – with the exception of birch groves and brushwood – more than a year after the Halifax Regional Municipality sold them for $ 4 to a non-profit housing organization that wants to build 44 units suitable for families.

The Affordable Housing Association of Nova Scotia, or AHANS, hopes to offer a variety of prices for townhouses on True North Crescent, including four- and five-bedroom units, which are hard to find for rent.

“The goal, really, is to have it very independent, financially viable to start with, and to have a blended, family-oriented income,” said Jim Graham, executive director of the organization.

But the $ 12 million project was stalled because the association faced the same problem as many other nonprofits. Despite the land and government money, AHANS struggled to convince a financial institution to provide the millions of loans needed to dig the ground.

That changed last week when the association finally learned that its application for the Canada Mortgage and Housing Corporation’s Quick Housing program had been accepted, which will allow it to finalize the plans and move on. before with construction.

A new home is being built in a housing development in Ottawa in 2020. The federal government has committed $ 1.5 billion to build at least 4,500 new units across the country as part of the Rapid Housing Program. CMHC, which aims to create permanent housing for vulnerable people. (Sean Kilpatrick / The Canadian Press)

Although federal funding is available to build housing, there is no guarantee that a project will be eligible and accepted. Nonprofits, co-ops and private developers face a sometimes arduous process to seek funding, at a time when many cities, including Halifax, face a crisis of low rental housing.

Despite the huge demand for housing, building new housing can be a daunting and difficult process for many groups trying to do it for the first time.

Unlike private developers who can leverage equity from other properties, nonprofits often struggle to do the same. Even so, they still have to go through the same process for getting loans as any other business looking to build residential units.

“I would say for everyone it’s tough. Even when you have the experience, knowledge and support it’s very difficult,” said Jody Comeau, assistant vice president of trade finance at First National Financial, a private lending institution. which specializes in mortgage loans for multi-unit residential properties in Canada.

Jody Comeau of First National Financial says it can often be difficult for developers who have built more than a dozen buildings to get approval for new projects, and even more difficult for groups who have never previously built multi-family units. (Dave Laughlin / CBC)

Traditionally, lenders cover up to 75 percent of the cost of a project, with the developer or nonprofit doing the rest. Some CMHC programs require even less equity from the developer, sometimes as little as five percent.

But ensuring the necessary fairness can be a problem for some. Comeau said the value of land can matter, but it’s rarely worth it to get a project approved, so more funding – and often help from multiple levels of government – is needed.

Will future rents cover loan repayments?

Lenders are also looking at whether a business or nonprofit has experience managing housing and collecting rent, Comeau said, to make sure they will be able to generate the necessary income. to repay a loan.

Ultimately, revenues must balance the costs of finishing and maintaining a building. And he said rising prices for building materials and labor are adding to the challenge of providing affordable units.

“The formula is really no secret. It’s easy. As costs continue to rise, that means the only way to get value good enough to bear the cost for the lending institution to be d ‘agreement to be part of a project like that, it just means that the rents have to go up with it, ”he said.

The construction industry has been extremely busy with the booming Halifax housing market, but this has also pushed up labor costs. (Paul Palmer / CBC)

When nonprofit groups don’t have people with construction or building management experience on their team, he said some of the risk can be offset by hiring third parties, but this can also increase costs.

“In some cases it can take years. It depends on the ability of the nonprofit to find funding. Since it has less capacity or funding, you just have to be more creative and work harder and try. to make the numbers work. But in an environment where costs continue to rise, tariffs continue to rise, it certainly becomes more difficult, “said Comeau.

‘Just crush you’

AHANS has experience in housing, overseeing the creation of approximately 100 new units over the past two years. He is in the process of converting a former Travelodge hotel on Yorkshine Avenue in Dartmouth into 65 units in the hope of providing supportive housing for homeless people.

Graham said the organization was also fortunate enough to find money for a down payment for True North Crescent townhouses and made money doing consulting work.

“It gave us a bit. And we apply [for government funding]. But that’s how you put things back together, “he said.” It’s extremely difficult and it can … just crush you. “

Jim Graham is the Executive Director of the Affordable Housing Association of Nova Scotia. (SRC)

AHANS learned last week that it would get about $ 3.8 million under CMHC’s Quick Housing Initiative, a program to create affordable housing quickly. This was the second time the organization had applied for funding.

So far, construction of the nearly $ 12 million townhouse project has been in limbo. Despite a provincial contribution of $ 1.7 million, AHANS still lacked about $ 1.8 million of what its bank needed to secure the mortgage.

The challenge of accessing funding and funding was echoed by people across Nova Scotia over the course of consultations earlier this year on the community housing sectorsaid Pauline MacIntosh, professor in the extension department at St. Francis Xavier University.

Over the past nine months, she has garnered feedback across the Building together project, a partnership with a national non-profit organization based in Montreal, the Community Housing Transformation Center.

Pauline MacIntosh works in the Extension Department at St. Francis Xavier University. (Submitted by Pauline MacIntosh)

MacIntosh said many organizations wishing to provide more housing are run by volunteers and could benefit from the support and expertise of a provincial association that could provide advice with funding requests and working with government.

“It takes a lot of energy,” she said. “We cannot rely solely on the efforts of volunteers to carry the work of this sector. We have to look at it in a more sustainable way over the long term.

An association, which some provinces like British Columbia already have, could help people facing similar barriers compare their experiences, share resources and learn from each other, MacIntosh said.

“At the end of the day, all of this work exists to create more housing options for people who need them. So the sooner we can do it, the better it will be for everyone in the province, ”she said.

Calling on the province to lend money

Graham said it would “fundamentally change the ability of nonprofits to deliver” new housing if they could get debt financing through the provincial government instead of a bank, but that option doesn’t is not currently available.

“If we looked at this type of mortgage financing, where you got a slightly lower fixed rate for 15 years, from a nonprofit perspective, that’s huge,” he said.

Krista Higdon, spokesperson for the Nova Scotia Department of Municipal Affairs and Housing, said in an email that such a program is being considered by the province.

The Affordable Housing Association of Nova Scotia is planning a nearly $ 12 million project to build 44 new units on True North Crescent, off Highfield Park Drive in Dartmouth. (Steve Lawrence / CBC)

While the exact rents for the True North Crescent townhouses will not be set until they are completed, Graham said some units would be viewed as “deeply, very affordable,” meaning people with pensions fixed or dependent on income assistance will be able to live there.

More than half would be available for 80% of the market rent. A one-bedroom unit could cost $ 680, a four-bedroom unit could cost around $ 1,360 per month, including heat and hot water.

The income from the higher rents will cover the costs and ensure that the complex does not operate at a loss.

“Sustainable housing based on its own rents without having to go back to government and say we need more subsidies,” Graham said.


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