It’s been a struggle in Canada to create affordable housing since the federal government bailed out of supports for social housing under the Liberals in 1994.
Their withdrawal prompted many provinces to cut back or eliminate their programs.
That’s left cities, with a limited tax base, and non-profits to struggle with this on their own. For cities, the solution has often been to either provide free or discounted land, through a lease, or cover some of the costs through giving extra density to a site or both.
And even under those circumstances, it’s taken some creative thinking. The latest in that creativity is a new investment fund that’s been developed under the leadership of a former Scotia banker, who seems to have devoted considerable thought to how to get private investors to see putting their money into subsidized housing as a good deal.
The trick is to underscore the competitive returns the investment will get, compared to the private market. As Garth Davis explains, that’s possible because subsidized-housing projects get free or discounted leased land and they traditionally have the lowest (i.e. non-existent) vacancy rates, since there is a line-up for those units.
As I wrote in my Globe story last week, this creation, New Market Funds, is putting $11-million into Vancouver’s experiment in creating subsidized housing with no federal and limited provincial help.
There was quite a bit of discussion on Twitter about the risks and the structure of this kind of lending — and a lot of interest.
Funds like this aren’t new. There are many in the U.S. However, those are usually dependent on investors getting a return through the American tax incentives for low-cost housing. So this Canadian fund, which has to rely on other mechanisms, is really breaking new ground.