impact investing and affordable housing€¦ · our mission_ we are a community development tool....
TRANSCRIPT
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D
C H R A C O N G R E S S | 2 0 1 9
I M P A C T I N V E S T I N G A N D A F F O R D A B L E H O U S I N G
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our mission_
We are a community development tool. In cities, we offer an ethical housing choice for the middle class in urban neighborhoods. In rural settings, we are an attraction tool to combat demographic decline.
We help low to moderate income households become homeowners without a down payment while ensuring the perpetual affordability of our homes.
our main partners
Non for profit social enterprise created in 2012.
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why we chose this model ?_
HOMELESS-NESS
EMERGENCYSHELTER
SUPPORTIVE HOUSING
SOCIAL HOUSING
AFFORDABLERENTAL
MARKET RENTAL
MARKET HOMEOWN-
ERSHIP
AFFORDABLE HOMEOWNER-
SHIP
1. Carve a more sustainable alternative to homeownership in the housing continuum
2. Adress the unmet housing needs of an increasingly large portion of middle class families and households .
Credits : CMHC
22 676 $ 31 942 $ 39 200 $ 81 000 $59 822 $Household AMIQuebec AMI
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VIVACITÉ_ FOR HOMEOWNERS
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SHARED EQUITY : HOW IT WORKS _ Accessing homeownership
Property value : 200 000 $
Vivacité invests a 20% down payment : 40 000 $
Future owner pays a 1250$ transaction fee and takes out a mortgage representing 80% of the property value : 160 000$
Both parties sign a deed of covenant to ensure perpetual affordability (equivalent of a ground lease). Vivacité holds a second mortgage.
Monthly payments are 839 $/month (3,5% mortgage rate, including 40$/month membership fee)
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SHARED EQUITY : how it works _ Resale
Resale after 5 years, with a 2 % annual market appreciation
Market appreciation : 20 000 $New property value : 220 000 $
Vivacité finds new owners who meets meet the qualification requirements.• Households around AMI• Owner-occupant• Property features
« Market appreciation : you didn’t build that. »
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SHARED EQUITY : how it works _ Sharing the market appreciation
Amount disbursed for the initial purchase
25% of the market appreciation
Added value linked to renovations
160 000 $
5 000 $
0 $
Total paid 165 000 $
- Balance of the mortgage - 137 711 $
Owner’s net gain at resale 27 532 $Savings made on monthly payments (5% down payment - CMHM prime) 8 378 $
Gains 35 667 $
When there is a resale, the household keeps...
25%
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SHARED EQUITY : how it works _ Sharing the market appreciation
Amount disbursed for the initial purchase
- Depreciation
Added value linked to renovations
160 000 $
- 10 000 $
0 $
Total paid 150 000 $
- Balance of the mortgage - 137 711 $
Owner’s net gain at resale 12 289 $Savings made on monthly payments (5% down payment - CMHM prime) 8 378 $
Gains 20 667 $
When there is a resale, the household keeps...
25%
10 000$ DEPRECIATION (190 000$)
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SHARED EQUITY : how it works _ Perperual affordability
With 75% of the market appreciation (15 000 $), Vivacité...
Reinvests 4000 $ to maintain a 20% downpayment for the next owner.
(44 000 $ for a 220 000 $ property)
+Uses 11 000 $ to make new developments
and remunerate its investors.
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VIVACITÉ_ for investors
Julien Durocher8 years old
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getting started_
intital cycle of development : 240 units within five years
7 projects spread accross Quebec
Need in investment : 5 M$
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rural markets_
10 % 40 % 50 %
• Rural areas
• Low market values
• Low median incomes
• Suburban areas
• Average market values
• Median incomes close to national average
• Central neighborhoods
• High market values
• Incomes slightly above national average.
MeTROPOLITAN markets_
URBAN markets_
portfolio approach _ Building territorial solidarity
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73,5%
2,5 %
24 %
owner’s transaction fee
PRIVATE investment
vivacite’s developers’ margin
funding the down payment_ Social economy at work
« The difference between the project costs and the market value : you didn’t build that. »
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55 M$ 84 M$asset : 11 M$
asset : 17 M$
portfolio value _ 240 initial units after 25 years
240 households 850 households
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INVESTMENT PARTNERSHIP _
EQUITY NEED_
5 M 15 yrs
patient capital_
6%+
RATE OF RETURN_
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THE PROCESS_ lessons learned
Kent Monkman The Daddies
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LESSON #1 _
Money produces reality
“ Power produces; it produces reality; it produces domains of objects and rituals of truth. ”
- Michel Foucault
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LESSON #2 _
Impact investing is not about innovation
“ And when we dream it, Let’s dream it, we’ll dream it for free, Free money, free money, free money. ”
- Patti Smith
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LESSON #3 _
There are no rules
“ As long as the structure of the group is informal, the rules of how decisions are made are known only to a few and awareness of power is limited to those who know the rules. Those who do not know the rules and are not chosen for initiation must remain in confusion, or suffer from paranoid delusions that something is happening of which they are not quite aware. ”
- Jo Freeman
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LESSON #4 _
Housing should not be about innovation
“ The idea of progress views time as constructive. Time is our ally. It makes things grow. Whereas the rhetoric of innovation views time as corruptive. It deteriorates things. Innovation presents itself as what needs to be done so that the world does not undo itself. It is an imperative to repair the corruptive passing of time. ”
- Étienne Klein
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