By Donna Mayer
Special to Ontario Construction News
A new sector-based lending institution received its first investment of $20 million from the federal government, creating a $400 million pool of funding for affordable housing construction and redevelopment.
The Honourable Jonathan Wilkinson, Minister of Fisheries, Oceans and the Canadian Coast Guard, made the funding announcement on behalf of the federal government in Vancouver in late August.
“This will undoubtedly open up new growth opportunities in the housing sector, and facilitate the development of more affordable housing stock,” said Wilkinson.
HPC Housing Investment Corporation (HI-C) creates and offers bonds in capital markets to investors at long-term fixed interest rates, generating funding for affordable housing providers and their projects.
Wilkinson said the funding contribution is a strategic investment in affordable housing.
It is intended to showcase how a relatively small investment can be maximized to increase its impact on the housing sector.
It is expected the $400 million pool will finance the building more than 2,000 residential units over the next two years in communities hit hardest by housing affordability.
HI-C is the creation of Housing Partnership Canada (HPC), a peer exchange network of CEOs and executives of Canada’s larger social/affordable housing operators and developers.
Based on a 2015 feasibility study commissioned by HPC, the total capital requirement to create new affordable housing and replace aging, existing social housing stock in Canada is expected to be from $77 billion to $121 billion over the next 10 years.
HI-C aggregates the borrowing needs of eligible Canadian affordable housing providers, and provides access to capital through the Canadian debt capital market. The corporation offers 30-to-40 year fixed-rate financing.
“HPC Housing Investment Corporation’s innovative approach offers more financing options for affordable housing providers,” said Shayne Ramsay, chair and president, HPC Housing Investment Corporation and CEO, BC Housing.
The feasibility study was undertaken by the investment bank Morrison Park Advisors. It confirmed that demand for capital is significant and outstrips government funding capacity by billions each year. It recommended the creation of the HI-C to address the large and growing capital funding gap.
The study also found there is large unmet demand from debt investors in Canada for creditworthy infrastructure investments.
“HI-C provides the financial expertise and underwriting required to bridge the gap between housing providers and debt investors,” said Ramsay.
In February, HPC HI-C announced that it closed its inaugural offering a $33.1 million private placement of Senior Unsecured Series Notes. The Canada Life Assurance Company is the sole investor in the Notes. The proceeds will be advanced for takeout financing for two projects in BC and Alberta.
The federal funding is being made available through the government’s Affordable Housing Innovation Fund, a key component of the National Housing Strategy.
“This forward thinking solution is exactly what the National Housing Strategy’s Affordable Housing Innovation Fund is all about,” said Wilkinson.
The Affordable Housing Innovation Fund is a $200 million fund to be disbursed over five years for projects that showcase new funding models and innovative building techniques, lowering the costs and risks of financing affordable housing projects.