co-ops | Corporate Knights

Banks won’t solve the housing crisis, but community bonds just might

Tova Gaster — Fri, 20 Dec 2024 18:05:09 +0000

A new housing co-operative plans to fund 50 units of affordable, green housing in Kamloops, British Columbia, by selling bonds to local investors. It’s part of a movement of co-ops which, priced out of conventional markets, are looking to alternative methods to finance affordable, sustainable housing.

Propolis Housing Cooperative is partnering with Tapestry Community Capital, a non-profit investment organization, to fundraise through community bonds: investments typically bought by, and returning profits to, local residents. “They can be such a great solution for people to know that they’re having an impact with their investment, helping to build the affordable housing that we so desperately need – and they get a financial return on their investment at the same time,” Propolis director Lindsay Harris tells The Energy Mix.

Communities across Interior B.C. brace for a worsening wildfire season each summer. Each disaster displaces new waves of evacuees who turn to surrounding communities for support. B.C.’s 2024 wildfire season affected more than 4,100 properties.

“We’re seeing a lot of evacuees coming to our community during wildfire season,” Harris says, and many have nowhere to go. But Kamloops faces a tight housing market, and a 2020 City of Kamloops report warned that subsidized housing isn’t keeping up with rapid population growth.

Tackling the climate crisis through community land trusts

Harris says that Propolis emerged from a need to tackle the climate crisis on two fronts: expanding housing access and reducing emissions by building green. To acquire land and build a six-storey, mixed-use development, Propolis set a fundraising goal of $1.1 million. Harris says that 80 investors have brought Propolis to 90% of that total. Tapestry helped Propolis develop a formal, secure community bond campaign with planning support and investor engagement, Harris says.

Community bonds allow issuers like Propolis to set investment timelines and terms, giving them flexibility that conventional loans or grants lack, Tapestry co-executive director Ryan Collins-Swartz says. While Propolis is the first community bond campaign in Western Canada, it follows projects in Eastern Canada. The Ottawa Community Land Trust is also partnering with Tapestry on a community bond fundraising campaign to acquire and preserve an affordable building.

Community land trusts (CLTs) are non-profit corporations that hold land in trust for residents, who buy in at rates lower than market rent. The Ottawa CLT has raised almost $3 million in bonds since launching its campaign seven months ago, according to executive director Mike Bulthuis. “I think it is a real demonstration of what the community prioritizes,” he says.

Taking housing out of the commodity market also reduces reliance on banks and speculators, who often contribute to rising inequality and unsustainable industries, a 2023 study published in the Journal of City Climate Policy and Economy found.

“All of this work to support divestment from extractive investments, and investments into community, ultimately has positive implications for climate, as well,” Collins-Swartz says.

Only 19% of CLTs surveyed by the Canadian Network of Community Land Trusts in 2023 were actively planning for climate change. Harris says that Propolis is foregrounding energy efficiency and renewability by building net-zero housing, in partnership with local construction company NexBuild.

Other Canadian land trusts, including the Ottawa CLT and the Kensington Market Land Trust in Toronto, instead preserve existing affordable housing, which Bulthuis says can reduce both emissions and rental costs.

Financial instruments that help fill the housing gap

CLT properties still have to return profits to bond investors and pay for development costs, which can be steep for older buildings. Those costs can set a limit on how affordable CLT housing can be. “We might buy a building where rents are . . . a modest level of affordability or an average level of rent,” Bulthuis says. “I think there’s still a huge value in doing that.” CLTs don’t raise rents like most market landlords would, Bulthuis says – they just have to recoup costs.

To make up the difference, “community bonds fit and stack with other funding sources,” Collins-Swartz says, including Canada Mortgage and Housing Corporation (CMHC) grants, loans and provincial funding.

Tapestry’s work for community bond campaigns recently received a federal boost. In November, the non-profit won $3 million from CMHC as a finalist in its Housing Supply Challenge to scale up community bond campaigns across Canada.

By 2025, Tapestry aims to use the CMHC award to jump-start a $30-million pooled investment fund for community bonds, which could help non-market housing developers attract investors to larger funds rather than individual campaigns. Tapestry is launching partnerships with 19 co-ops in 2025.

The pooled fund could backstop co-ops in Northern and rural areas that don’t have enough people or wealth to support a community bond campaign on their own, according to Tapestry’s media release.

By creating a larger market for community bonds, Collins-Swartz says that Tapestry hopes to broadly shift resources toward local economies. “We’re not going to create change in affordable housing, climate change, wealth inequality, without fundamentally challenging our systems of financing and investment,” he says.

This article was first published by The Energy Mix. It has been edited to conform with Corporate Knights style. Read the original story here.

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Canada needs to catch up on co-op housing: Three lessons from Europe’s success

Jennifer Hutcheon — Tue, 10 Sep 2024 15:01:58 +0000

Housing co-operatives are not a new concept. They have existed in Canada for decades, offering homes that are often much more affordable than market rentals. Not only do they offer lower rents, but residents have a say in how their community is run, creating a strong sense of ownership and collaboration.

And yet, non-market housing – including co-ops, non-profit apartments and any type of housing that is not privately owned – account for just 5% of all homes in Canada.

Creating more rental co-ops would support Canada’s demand for rent-geared-to-income housing. A report from the Co-operative Housing Federation of Canada, which analyzed rent trends in five major cities over 15 years, revealed that co-ops have consistently been more affordable than market-rate apartments; when looking at one- and two-bedroom apartments, co-op rents ranged from being one-third to one-quarter lower than market rents.

However, the development of new co-ops has dwindled since the 1990s, when the federal government ceased funding for non-market housing construction. This shift has left a noticeable gap in the availability of affordable housing, one that could be bridged by reigniting support for co-op developments.

This year, Canada launched the $1.5-billion Co-op Housing Development Program – the largest federal investment in co-op housing in 30 years. But we need to go further if we want to solve Canada’s housing crisis and support the co-op sector, and we can look to Europe for tools to help us get there.

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Although transnational comparisons of housing systems can be complex, it is clear that housing co-ops worldwide benefit from regulatory frameworks that respond to their needs. Across all levels of public administration in Europe, governments are championing co-operative housing.

Here’s a look at three ways European countries are supporting the co-operative economy:

Models for building new housing co-ops

When it comes to supporting co-op construction, a recent study on international policies shows that there are several models across Europe for the sale and lease of public land to establish new co-ops.

In Austria, preference goes to keeping land in public ownership, and a leasehold is offered for co-operative projects. Co-ops can also purchase public land at a lower price to offer deeper affordability.

In Holland, most local governments use an unlimited lease model – with ground rent that is either fixed or adjusted every 50 to 75 years – for non-profit developments. The city of Amsterdam plans to employ this model to create 7,000 co-op units by 2030, aiming to have 10% of its whole housing stock owned by co-ops within 25 years.

Vienna’s unitary housing market

In Vienna, more than 60% of the population lives in non-market homes regardless of their income – and nearly half of the housing market consists of co-op or city-owned apartments.

When there’s an abundance of non-market housing, it creates an integrated or unitary housing market – where private landlords are forced to compete with non-profit housing for the same tenants, keeping rents in the private sector from increasing too quickly.

The affordable housing system in Vienna is supported by a 1% tax on all salaries. This generates $250 million annually, which provides a permanent funding stream for non-market developments.

Access to financing

Government funding for housing co-ops often comes in the form of public loans or guarantees.  In Germany, Berlin provides zero-interest loans to purchase buildings or for the development of new co-ops.   For senior co-housing projects, Holland offers public guarantees of up to 90% of the loan during the development phase of the project – and up to 15% during construction.

But financial institutions also have a critical role to play in helping to increase the affordable housing stock of a city or country.

In Canada, co-ops tend to search for smaller and more flexible loans to help with building upgrades but often struggle to get support from banks, as these loans can be a lot of work for a lender.

Vancity Community Investment Bank (VCIB) has supported co-ops across Canada – like Innisfree, Phoenix, Winkleigh and Union – with financing for building upgrades, mortgages or property purchases.

In Vancouver, Vancity Credit Union financed the redevelopment of Brightside Community Homes Foundation in a way that maintained the affordability of its 57 homes for seniors.

What’s next for Canada?

The success of European co-op housing models highlights a critical gap in Canada’s approach to affordable housing. By learning from Europe’s robust support systems – whether it’s Vienna’s unitary housing market, Amsterdam’s forward-thinking lease models or Berlin’s zero-interest public loans – we can create a sustainable future for co-op housing in Canada.

But this requires bold action. Both the public and private sectors must step up to champion the co-op economy. It’s not just about filling the gap left by the federal government’s retreat in the 1990s; it’s about embracing proven strategies that can reduce housing costs and build stronger, more resilient communities. The path forward is clear: Canada needs to invest in and prioritize co-op housing now, before the crisis deepens further.

Jennifer Hutcheon is vice-president of Vancity Community Investment Bank (VCIB), which focuses on financing organizations and projects that drive positive change.

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The power of cooperation

Tyler Hamilton — Wed, 08 Oct 2014 18:28:34 +0000

When the Colahan family drilled an irrigation well for their cattle ranch in 1980, they discovered a problem commonly found by ranchers in the U.S. west. The water that emerged from the well was over 100 degrees C – too hot for irrigating crops.

To make use of the water, they had to build a two-acre cooling pond, which is a well-known practice in states such as Oregon, Idaho, Nevada and Utah. The Colahans also knew it was a waste of a valuable thermal resource.

But it wasn’t until 2008 that Mark Douglas and his wife Erin (maiden name Colahan) decided to do a feasibility study to find out just how that hot water could be harnessed. They discovered there was a business case for building a geothermal power plant capable of generating several megawatts of emission-free electricity.

It was a promising conclusion, but a vision not so easy to realize. Raising capital for such a project was too risky for the ranchers, and no private sector developer was interested in such a small venture. The risk was too high; the payback too low.

That’s when Surprise Valley Electrification stepped in. The Douglas-Colahan family was already a member of this rural electric cooperative, which saw the community benefits of having a local, renewable project as a stable source of electricity for other co-op members scattered throughout its 20,000-square-kilometre service territory.

As a non-profit co-op, Surprise Valley had more flexibility than a private developer. It could take on more risk and be comfortable with a lower return on investment, as long as its decision served the interests of its rural members. “We did not look at it just as a for-profit project,” said Lynn Culp, manager of member services at Surprise Valley.

The hope is that this small geothermal project, which is expected to be operational this year, will inspire other rural electric cooperatives to pursue similar projects within their service territories.

Electric co-ops are a surprisingly large force in the U.S. power market. There are about 860 rural electric co-ops serving 42 million people across 47 states, according to the National Rural Electric Cooperative Association.

Their combined generation, transmission and distribution assets are worth $140 billion (U.S.) and service about three-quarters of U.S. landmass. And despite their vocal opposition to U.S. carbon regulations – on the grounds that such rules take away their independence and flexibility – they currently own or purchase over 10 per cent of all U.S. renewable power capacity.

While rural electric co-ops have a rich, 80-year history in America, based on the U.S. government’s post-war campaign to bring electricity service to farms and remote communities, this utility model never gained a strong foothold in Canada, where most utility assets are owned by investors or the crown.

However, a new class of consumer cooperative has emerged in recent years to develop grid-connected renewable energy projects within local Canadian communities.

According to a 2012 report prepared for the Financial Services Commission of Ontario, there are more than 70 alternative energy co-ops in Canada. Of them, 26 per cent focus on biofuels, 22 per cent on wind and 13 per cent on solar. SolarShare, which develops community solar projects, and ZooShare, which aims to turn zoo animal manure into biogas for electricity generation, are among some of the co-ops that have emerged.

The greatest activity has been in Ontario, which passed green energy legislation in 2009 that encouraged community power development. The law, for one, assured fair access to the grid. It also led to the creation of a standard long-term purchase agreement, or feed-in tariff, for small developers such as co-ops that wished to sell locally generated renewable power to the province.

Armed with such an agreement, co-ops could begin signing up members and raise capital through the sale of “community bonds” that guarantee a specific return on investment for specific projects.

That kind of ground-levelling public policy is crucial if co-ops are going to play a larger role in a clean energy future, said John-Justin McMurtry, social sciences professor at Toronto’s York University. He said it’s also important that small co-ops developing renewable projects work closely together through federations, such as the Federation of Community Power Co-operatives, which was established in 2012.

Federations allow for knowledge transfer across co-ops and can double as buying consortiums for purchasing equipment, such as wind turbines and solar panels, at a lower cost than if an individual co-op acted alone. “By federating, you increase the efficiency of these organizations while still maintaining their democratic and community-based nature,” McMurtry said.

In the U.S., purchasing and knowledge-sharing consortiums have already emerged to help individual co-ops develop and finance solar projects.

McMurtry said co-ops, by their nature, have advantages over private developers that often face stiff community resistance to their projects. Co-ops are responsive to community concerns and tuned to their needs. They also return value directly to that community and operate in a transparent way.

With this approach, “you get community buy-in,” he said. “That’s the way to scale up.”

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