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HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

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Page 1: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS

September 23, 2013

Carling Heights Optimist Community Centre

London, ON

Page 2: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Agenda

TIME ITEM

8:30 – 9:30 a.m. Registration and Networking

9:00 – 9:15 a.m. Greetings and Opening Remarks: City of London, CMHC

9:15 – 9:30 a.m. Overview and Context: SHS Consulting, City of London

9:30 – 10:15 a.m. Setting the Stage

10:15 – 10:30 a.m. BREAK

10:30 – 11:15 a.m. Presentation: Wood Buffalo HDC, Bryan Lutes, President

11:15 – 12:00 p.m. Presentation: Other Canadian and US Experiences, John Fox, Robins

Appleby & Taub

12:00 – 12:30 p.m. Panel Discussion, Questions and Answers

12:30 – 1:00 p.m. LUNCH

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Agenda

TIME ITEM

12:30 – 1:00 p.m. LUNCH

1:00 – 2:00 p.m. Guided Stakeholder Roundtable Discussions

2:00 – 2:15 p.m. Report Back

2:15 – 2:30 p.m. Wrap-Up and Next Steps

Page 4: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

OVERVIEW AND CONTEXT SHS CONSULTING

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Today’s Session: Purpose

To introduce and discuss with the London community the potential of establishing a municipal

(“HDC”) in the City.

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Today’s Session: Objectives

• To from HDC models from other jurisdictions

• To potential opportunities and challenges

for the HDC

• To the community on the progress and

next steps of the project

Page 7: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Exploring the Establishment of a Housing

Development Corporation: Background

• City of London’s interest: “

” (The Housing Market and Canada’s Economic Recovery, FCM

Report, 2012)

– To help achieve social, community development, and

environmental goals

• The HDC has the potential to: give the City a vehicle

to directly achieve key local goals and objectives

– Greater potential capacity than the municipality itself for using a variety of financial instruments and operational

approaches

Page 8: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Exploring the Establishment of a Housing

Development Corporation: The Team

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• To into best practices

• To related local environment

• To the business case and implementable

work plan supporting a new HDC in London

– Consolidating the necessary tools and services to advance

housing development within Council’s policies and

interests

– Inclusive of affordable housing

Exploring the Establishment of a Housing

Development Corporation: Project Goals

Page 10: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Exploring the Establishment of a Housing

Development Corporation: Work Plan

Conduct foundational research

Conduct in-depth research of MVP 1

Revise MVP (to construct MVP 2)

Formalize the business plan

Page 11: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Engagement: How to get involved!

11

Webinar Series

National Housing Day

Interviews and Stakeholder Meetings

TODAY!

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SETTING THE STAGE: OVERVIEW OF APPROACH TO DESIGNING A POSSIBLE

HDC FOR THE CITY OF LONDON NORM TASEVSKI

Page 13: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Our Goal for Today…

To start a discussion with the London

community on the potential for establishing

a housing development corporation

(“HDC”) in the City of London

13

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Not Our Goal for Today…

To “pitch” the idea of an HDC

14

Page 15: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

To begin...

15

Page 16: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

What is a Municipal Housing

Development Corporation?

An independent incorporated entity,

typically positioned to work with the private

sector and with the government sector to

advance housing development strategies

and actions within a geographical region.

16

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What Can/Can’t HDCs Do?

Short Answer: it depends

17

Page 18: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HDC Mandates

• Range in scope: narrow to broad

18

Narrow

Mandates

Broad

Mandates

Role of HDC is restricted to 1-2 very specific policy objectives

Role of HDC expanded to encompass multiple policy objectives

Page 19: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HDC Mandates: Some Examples

19

• Main “customer”: nonprofit property managers,

private developers

• Primary “value proposition”: real estate sale,

financing/fund management, mortgages

“The goals of the Nova Scotia Housing

Development Corporation are to foster healthy

communities through innovative housing solutions,

and ensure access to a supply of safe,

appropriate, affordable and sustainable housing”

Page 20: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HDC Mandates – Some Examples

20

• Main “customer”: low income home buyers/renters,

property developers/managers)

• Primary “value proposition”: financial products

(mortgages, mortgage insurance, bonds/debt)

“The HDC seeks to increase the supply of multi-

family housing, stimulate economic growth and

revitalize neighborhoods by financing the creation

and preservation of affordable housing for low,

moderate and middle income New Yorkers”

Page 21: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HDC Mandates – Some Examples

21

• Main “customer”: first time home buyers,

nonprofit/for-profit property owners, BIAs,

government departments

• Primary “value proposition”: rental housing, real

estate management and sales, policy

development, neighborhood development

“To make Boston the most livable city in the

nation by working with communities to build

strong neighborhoods through the strategic

investment of public resources” Department of

Neighborhood

Development

Page 22: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

HDC Mandates – Some Examples

22

“To provide affordable quality housing,

management and maintenance and other

housing related services to meet the needs

of low income families in a proactive and

caring manner”

• Main “customer”: individuals/families that can’t

afford private rental housing

• Primary “value proposition”: subsidized rental

housing

Page 23: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

How do we set the Mandate of an

HDC?

Well…

23

Page 24: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Core Principles Informing an HDC

Feasibility Assessment

• Housing development in isolation of broader

community and economic development is not

desirable

• An HDC for London must balance competing aims -

advancement of social/cultural priorities alongside

financial priorities

• For an HDC to be successful in London, it MUST be

designed from scratch and accommodate

London’s unique social, geographical and

economic strengths, gaps, and interests

Page 25: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Why an HDC (why not the status quo?)

• Renewed Focus on City Building – An HDC can be a

conduit for many local and regional development

initiatives

• A Healthy New Dynamic – HDC becomes a partner

to government and to community/economic

groups and can engage all stakeholders in a new

way

• Increased Opportunity for Creativity – new financial

instruments and operational approaches can be

deployed that may not be open to government

directly

Page 26: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

The MVP Development Process

26

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What is a “Minimum Viable Product”

(MVP)?

• A technique for market testing a new product or

business before the product/business is fully built

• Popularized by Eric Ries (“Lean Startup”)

27

Lean Startup Approach (micro strategies, big launch, rapid iterations)

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What is a “Minimum Viable Product”

(MVP)?

• An MVP…

– Has only those elements that allow a product/service to be tested, and nothing else

– Is tested with the “early adopters” (i.e. potential first

customers, stakeholders, partners)

– Is utilitarian (i.e. collect the most amount of customer/stakeholder/partner feedback with the least

amount of time/monetary investment)

28

Page 29: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

An Example

29

Page 30: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Why use MVP to design a Housing

Development Corp?

30

• Reduces risk and complexity (especially important when there are many potential moving parts)

• Maximizes stakeholder feedback and buy-in (stakeholders are engaged from day one)

• Increases likelihood of success (as the HDC’s “offer” is tested, the market becomes primed for it)

Page 31: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Hearing From the London Community

31

Page 32: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

How do we plan to engage the London

Community?

32

The Process

1. Conduct foundational research (initial consultation, best

practice data, data on social finance, impact investment, private/public sector opportunities and constraints)

2. Construct “Minimum Viable Product”(MVP) (customer segments, value proposition, key channels and relationships, key resources and activities, key partners)

3. Conduct in-depth research on MVP (potential revenue sources and cost drivers, primary/secondary research to validate customer segments, value proposition, key channels/relationships/resources/activities, review by advisory panel)

4. Revise MVP (i.e. Construct MVP 2) (consultation with London

staff, consultation with advisory panel members, revise MVP details, construct detailed financial model, integrate legal considerations)

5. Formalize Business Plan (background materials, business description,

cost/benefit analysis, mandate/strategic objectives, bylaw recommendations, sole shareholder agreement, financial requirements, sustainability model, funding sources, governance and organizational model, legal/risk management considerations, preliminary service delivery approach, 3 year cash flow projections)

Page 33: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

Our Tool

33

Business Model Generation Canvas

Page 34: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

MVP: Key Questions for Today…

Community input is sought to inform the following

components of the model:

• Customers

• Value Proposition

• Key Partners

Page 35: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

BREAK

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WOOD BUFFALO HOUSING DEVELOPMENT CORPORATION

BRYAN LUTES

Page 37: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

AFFORDABLE HOUSING IN A BOOMING ECONOMY

City of London

September, 2013

Page 38: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

AFFORDABLE HOUSING IN A BOOMING ECONOMY

City of London

September, 2013

Page 39: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

AT WOOD BUFFALO HOUSING & DEVELOPMENT CORPORATION

WE BUILD COMMUNITIES

Page 40: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

THE REGIONAL MUNICIPALITY OF WOOD BUFFALO

Page 41: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

FACTS AND FIGURES

• The Regional Municipality of Wood Buffalo is big in every way – from a physical expanse of natural beauty that covers 66,361 km2 (making it the second largest municipality in Canada), to a thriving industry that sees $2.2 billion in investments annually from the third largest proven oil reserve on earth.

• Fort McMurray is surrounded by Crown land.

Page 42: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

FACTS AND FIGURES

• RMWB is larger than two Canadian provinces and over 100 countries.

• Wood Buffalo has had an average annual population growth rate of 7.1 per cent for the past decade – the total population growth of 125% has made it one of the fastest growing communities in Canada.

• The Regional population has increased by 10 per cent, just since 2012.

Page 43: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

FACTS AND FIGURES

• Average annual household income is over $210,000

• Wood Buffalo residents enjoy incomes 103% higher than the national average

• Residents, on average, have a $30,000 annual discretionary income

Page 44: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

FACTS AND FIGURES

• Nearly 86 per cent of households in Wood Buffalo have an income over $100,000

• The average age in RMWB, at 32.2 years old is 7 years younger than the national average

• The 3.5 per cent unemployment rate in the Wood Buffalo region continues to be the lowest in Canada

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CANADA’S MOST EXPENSIVE CITY

Over the last decade, the average price of a single-family dwelling in Wood Buffalo experienced an average annual growth rate of 12.24 per cent.

Fort McMurray’s housing prices are the highest in the country, passing Toronto in 2006.

Page 46: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

ACCORDING TO THE 2012 MUNICIPAL CENSUS

• 25% of families could use assistance with housing

• 55% of the Region’s population earns less than the average income

• 25% or approximately 6,000 households in the RMWB are able to qualify for gap housing

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AVERAGE HOUSE SELLING PRICE

*as per 2013 Fort McMurray Labour Market Information

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ABILITY TO PURCHASE

0

100000

200000

300000

400000

500000

600000

700000

800000

$40,000$50,000

$60,000$70,000

$80,000$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

$150,000

Detached @$784,961 Modular w. Lot @ $478,250 Multi-family @ $385,639

*as per 2013 Fort McMurray Labour Market Information

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RENTAL RATES & VACANCIES

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

Bachelor 1 Bedroom 2 Bedroom 3 Bedroom +

0

500

1000

1500

2000

2500

3000

Private Market Rents ($) Private Apartment Vacancy Rate (%)

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ABILITY TO AFFORD RENTS

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

$130,000

$140,000

$150,000

Rent @ 30% Monthly

$100,840 for 3 BR @ $2,521/mo $89,160 for 2 BR @ $2,229/mo $69,440 for 1 BR @ $1,736/mo

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MEDIAN INCOMES – 2012

Couple Families

Lone-Parent Families

Non-Family Persons

Canada $76,950 $37,050 $24,680

Alberta $93,820 $40,150 $32,650

Fort McMurray $190,470

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WOOD BUFFALO HOUSING & DEVELOPMENT CORPORATION

VISION STATEMENT

A region where all citizens have access to affordable housing

MISSION STATEMENT

• WBHDC Purposes • Shareholder Value • Funding Sustainability • Land Availability • Community Infrastructure • Competitive Market Positioning • Staff Engagement

We will provide affordable housing alternatives to citizens within the

Regional Municipality of Wood Buffalo

STRATEGIC GOALS

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WOOD BUFFALO HOUSING & DEVELOPMENT CORPORATION

• WBHDC is a Part IX not-for-profit housing developer and property manager created in 2001 by the Regional Municipality of Wood Buffalo Council to address the Region’s affordable housing needs.

• WBHDC is able to offer a continuum of housing options from Homeless Shelter transitioning through several levels of Rental (including Seniors) into Affordable Home Ownership.

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AVAILABLE OWNERSHIP PROGRAMS

• Second Mortgage Program

• Second Mortgage with Employer Assistance

• Lot sales to Small Business Employers

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AFFORDABLE HOME OWNERSHIP PROGRAM

• Program began in 2004

• 275 families and individuals have realized their dreams of owning a home

QUALIFYING CRITERIA

• Applicants must:

• Be a resident of Fort McMurray for at least one year

• Have a gross family income less than maximum

• Be a first time homeowner in Municipality;

• Be able to qualify for the first mortgage amount from a lender.

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AFFORDABLE HOME OWNERSHIP PROGRAM

• Financing – Purchase price is based on appraised market value;

– Purchase price divided into two parts:

• First Mortgage

– This amount is provided by a conventional lender and effectively recovers WBHDC’s costs to construct.

• Second Mortgage – Used to assist in the purchase

– Held by WBHDC and further divided into the Equity Loan and Affordability Loan;

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AFFORDABLE RENTAL PROGRAM

• In partnership with essential services – Nurses, Teacher, RCMP and Municipal Employees.

• Partners put up $20,000 per door for access to affordable rents.

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AFFORDABLE

• 1060 Units, apartments and townhouses

CURRENT WAIT LIST

• Affordable Housing 520

PARTNERS

• Canada Mortgage & Housing (Grants)

PUBLIC SECTOR PARTNERS

• Fort McMurray Catholic School Board

• Fort McMurray Public School Board

• Northern Lights Health Region

• Province of Alberta (Grants)

• R.C.M.P

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• Although WBHDC receives grant funding from the Province for its GAP rental developments, the Corporation continually strives to become self-sustaining.

• Prospect Pointe

• 100 acre parcel which was divided into 330 +/- lots

• Profits on sales were used to build The Shores and Cascades – a total of 78 new affordable rental units

• WBHDC developed an eco-industrial park just north of Fort McMurray. Monies gained from the sale of the serviced lots is being used to create additional affordable housing units for residents of the RMWB.

SUSTAINABILITY

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SUSTAINABILITY

• TaigaNova Eco-Industrial Park

• 65-acre parcel subdivided into 27 commercial and industrial lots, ranging in size from1 to 5 acres, incorporating green initiatives.

• Profit from sales will be used to build a Maintenance Shop for the Corporation and for future affordable housing.

• WBHDC looks for future viable sustainability opportunities.

Page 61: HOUSING DEVELOPMENT IN LONDON EXPLORING NEW … · HOUSING DEVELOPMENT IN LONDON EXPLORING NEW FRONTIERS September 23, 2013 Carling Heights Optimist Community Centre London, ON

THE REVITALIZATION EQUATION AND OTHER LESSONS FROM AN

INNOVATIVE JOURNEY… JOHN FOX

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Bumps on the Road…

Nobody’s Journey is seamless or smooth.

We all stumble, we all have set backs. Its

just life’s way of saying: “Time to Change

Course”

- Oprah

62

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Agenda

1. The Revitalization Equation

2. Layering Resources for economic development

3. Considerations when Partnering with the Private

Sector

• Getting the Vocabulary Right

4. Public Builders and Accountability

5. Corporate Models

• Some Pros and Cons

6. Some Key Questions for Deliberation

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Profile: John Fox

• Partner, with expertise in:

– Housing

– Financing

– Construction

– Procurement

– Brownfield development

• Former VP Development and General Counsel

(Development), Toronto Community Housing

• Former CEO, Batawa Development Corporation,

industrial revitalization in the Belleville-Trenton Area

• Chair, Laidlaw Foundation

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The Revitalization Equation

project revenues ≥ project costs

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The Revitalization Equation: Regent Park

The Vision

• Revitalize 2,000 units of housing on 70 acres of land

– Using excess density as a source of revenue

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Other Objectives

• Stimulate economic activity

• Reduce energy consumption in TCH buildings

• Maintain good relations with stakeholders

• Diversity of Architecture

• Build partnerships – Developer

– Commercial tenants

– Arts and culture

• Similar to London’s “strong economy, sustainable infrastructure, and vibrant and diverse communities”

The Revitalization Equation: Regent Park

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The Revitalization Equation

project revenues ≥ project costs

subsidy + (market units * profit per unit) ≥

rental units * cost per unit

or

subsidy + land sale ≥ rental units * cost per unit

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The Revitalization Equation: The Variables

• What influences these variables?

• Over which variables does the builder have

control?

Market units = Density (Planning Policy objective)

Profit per unit = Land value (location, location, location)

Rental units = What you need to replace (Housing Policy objective)

Cost per unit = Construction cost per unit

Subsidy = Other revenues (e.g. AHP subsidy, borrowing against energy savings, cancelled or deferred taxes, etc.)

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• Rental units * cost per unit = money you need to do

what you want

• Different policy objectives have different costs:

– Replacement of existing social housing

• $200,000 per unit

– Affordable rental (defined as a function of CMHC average

market rent for the area)

• $120,000 per unit

– Affordable ownership

• $50,000 per unit, depending on depth of ownership

The Revitalization Equation: Policy Objective

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• Profit per market unit = fair market value

• Determined by local factors and local market

• Needs an analysis of comparable buildings or land

sales in the area

• Limited control: a well-articulated program can, in

theory, increase market value

• Equally critical for private builders

The Revitalization Equation: Land Value

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• Market units = density

• Whether staying “in” or doing a land sale, the

amount of buildable area impacts the revenue

• Often the last variable determined because the

others are set, resulting in the question:

– How high is my building?

• A natural tension between planners and housing

officials

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The Revitalization Equation: Density

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• Objective: replace 40 social housing units using only

density

• Assumptions:

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The Revitalization Equation: Application

Profit per market unit = $25,000 (to public partner)

Rental units = 40

Cost per unit = $200,000

Subsidy = $0

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subsidy + (market units * profit per unit) ≥

rental units * cost per unit

$0 + (market units * $25,000) ≥ 40 * $200,000

market units ≥ 40 * $200,000/$25,000

market units ≥ $8,000,000/$25,000

market units ≥ 320

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The Revitalization Equation: Application

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Community Economic Development: Layering

Resources

Multiple Partnership and development opportunities

brought together and focussed…

- City: Employment Counselling

- Post Secondary Institutions: Continuing learning

- Commercial Tenants: Local Employment

- Construction Partners: Local Employment

- Province: Affordable Housing grants

- Restaurants: Many possibilities (Example: Paintbox –

a B- Corporation Restaurant)

- Developers: Expanding the pie

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Partnering

• Financial reasons – Create value you could not create on your own

– Increase profit per unit

• Pool talents – To be able to leverage combined assets, skills, and

knowledge to achieve your goal

• Mutual respect – Each partner sees value in the contributions of the other

• Risk management – Spread the risk

• Values – A shared purpose at the partnership level

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Partnering: Agreement

The Partnership Agreement Establishes…

• Land value: transfer if required

• Proportionate share of ownership

• Equity investments: get credit for advance work

• Responsibilities of partners:

– May differ according to expertise

– May include fees

• Management of the partnership:

– Typically a committee with set responsibilities

• Distribution of proceeds

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Partnering: Agreement

Key Items to Remember

• Understand the role you are playing in the

partnership

• Understand how the money flows

– Value of land

– Fees

– Distribution of proceeds

• It’s all negotiable!

– Proceeds, for example, can “waterfall”

– Partners may retain some unilateral rights

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Public-Private Partnerships in Housing

“A cooperative venture between the public and private sectors, built on the expertise of each partner which best meets clearly defined public needs through the appropriate allocation of resources, risks, and rewards.” (CCPPP)

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The Case For…

• Private sector innovation and expertise

• On time

• On budget

• Alignment of interests

But…

• Cost • Finance cost: not cheaper in the private sector

– Brampton Hospital cost $200M more per AG

• Profit: adds a private cost

• Complexity: partnering and sharing risk is always complex – This is a multi-party negotiation

• Failure: what happens really if the private sector fails? – The service must still be delivered

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Public-Private Partnerships in Housing

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The I/O Value for Money Approach

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Public-Private Partnerships in Housing

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Key Points To Remember

• For the private sector partner, it’s about the return

• There is a cost to transferring risk

– This is where “value for money” calculations come in

• Most 3P in Canada relate to:

– Health care (Brampton Civic Hospital)

– Recreation (arenas)

– Transportation (Confederation Bridge)

– …Not a lot of housing!

• The legal structure is a means to an end, not an end

in and of itself

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Public-Private Partnerships in Housing

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Partnering: A Brief Roadmap

What you Should Consider Before Partnering

• Know your objectives – E.g. replace units, economic development, etc.

• Assemble your team – Financial, legal, etc.

• Consider existing community – How will they benefit?

• What risks will you take? – Environmental, construction costs, market risk, etc.

• Decide on the role the public wants to take – E.g. will the public stake ride to the end of the development process?

• Know the internal approvals you will need and when

• Design the RFP competition for a partner carefully – Once it’s done, it’s done!

• Consider including the full contract in the RFP

• Consider whether a “Fairness Advisor” is warranted

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Housing Development: Procurement

Development has unique procurement issues…

1. Contracting for Construction

• The lowest price should not be the law

– “If you pay peanuts, you might get monkeys.”

• General contracting vs. construction management

– “One procurement moment vs. countless procurement

moments

• The dangers of due diligence

– The “haircut”

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Housing Development: Procurement

2. The Holy Trinity of Public Procurement

Accountability, Transparency, and Value for Money

• Do they walk together?

• If not, how are these to be balanced?

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Housing Development: Legal Structures

Many possible legal structures for carrying out development… 1. Housing Development Corporation

2. Local Housing Corporation

3. Not For Profit Development

4. Co-Ops

5. Community Land Trust

6. Municipal Contract Out and Turnkey

7. “Build” Model

8. Others?

• Caution: legal form follows function; it is premature to settle on organizational models

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Housing Development: Legal Structures

Housing Development Corporation

• A subsidiary of the municipality

• Governed by a knowledgeable board of directors

• Restricted by the shareholder through a direction or unanimous shareholder agreement

• Attracts specialized development talent

• Creates some liability barrier

Issues • Is it a commercial enterprise under the Municipal Act?

• Is there enough work to keep a full development complement occupied?

• If disconnected from the provider, will units delivered meet housing specs?

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Housing Development: Legal Structures

Local Housing Corporation

• Established in accordance with the Housing Services Act

• Not a commercial activity for Municipal Act purposes

• Business Corporations Act Company

• Minister may intervene in setting by-laws, etc.

• Creates some liability barrier

Issues

• Is there enough work within the Local Housing

Corporation?

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Questions that Caused Debate

1. Are you willing to be a partner in a real estate development, or do you want to get land value out of excess land immediately?

1. Risk/return evaluation

2. How much accountability is appropriate in the tendering process

3. Are we keeping construction risk?

4. Are we keeping subsurface risk?

5. Are you willing to provide an HDC with cash or land as an equity

infusion?

6. How much latitude is afforded for non-housing investments, such as an arts and cultural centre for example?

7. Are you willing to create a pay structure that reflects private development firms?

8. Are you willing to put a municipal guarantee in place to assist the HDC?

9. If the HDC is owned by the City, is there an impact on the City’s ability to borrow?

10. How much political control?

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PANEL DISCUSSION QUESTION AND ANSWER PERIOD

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LUNCH

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GUIDED STAKEHOLDER ROUNDTABLE DISCUSSIONS

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Discussion Questions

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REPORT BACK

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WRAP UP NEXT STEPS

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Upcoming Webinars

1. Housing Development Corporation Model 1 – Friday, September 27th – Primer to housing development corporations and case studies

from the US and Canada

2. Housing Development Corporation Model Two – October – Overview of available tools, include brief overview of social

finance, plus a summary of some of the other tools

3. Project Update and Draft Model Presentation - November – This webinar will take place after the November 25th CPS

meeting

4. Implementation of HDC - January – This webinar will focus on HDC implementation

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Evaluation Form

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THANK YOU!