financing social housing expenditures

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Financing social housing expenditures Derek Ballantyne

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Speaker: Derek Ballantyne, Toronto Community Housing

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Page 1: Financing social housing expenditures

Financing social housing expenditures

Derek Ballantyne

Page 2: Financing social housing expenditures

Toronto Community Housing• 60,000 units of housing

– Average unit age 39 years– High need for re-capitalization (avg. FCI 23%)– Long waiting list for access

• $600 M operating turn over– Debt 21% of revenues– Utilities (gas. electricity. water) 18% revenues

• $650M capital investment 2002-08– $900 M investment requirement 2009-19

• High levels of GHG production– Target to reduce 40% from 2002 levels by 2020

Page 3: Financing social housing expenditures

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Net Annual Housing Expenditures (after removing integovernment transfers)

Federal (gross) * Derived Prov/Terr Local Net after FPT transfers)

Page 4: Financing social housing expenditures

Growing capital investment need

Program Deficit per unit % with deficits Total deficit

Other $9,504 46,170 52.5% 24,241 $230,383,858

Provincial Reform $8,718 88,632 61.6% 54,636 $476,344,476Public Housing $5,912 99,172 79.9% 79,267 $468,621,186All $7,684 233,974 67.6% 158,145 $1,215,161,766

Units in Population

Number with deficits

The estimate of the total shortfall for the sector is $1,2 billion by 2012 (0.676 x 233,974 x $7,684).

• Per unit deficits are $7,684 and % of population in deficit by 2012 is estimated at 67.6%

Page 5: Financing social housing expenditures

Impact of Capital Investment on Deferred Capital2006 Deferred Capital (Opening) = $300 million

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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Total Need After Investment Total Capital Investment

Page 6: Financing social housing expenditures

Financial outcomes

• Access to low cost capital– Reinvestment– New / replacement housing

• Stabilize investment capacity at 2% asset replacement value

• Internal ROR (ex basic building components) BCI + 3%

Page 7: Financing social housing expenditures

Toronto Community Housing

• Three part strategy– Invest to reduce operating costs– Leverage asset base / cash flows– Use corporate debt instruments

• 2004 – 2008 investment– $ 65 M energy efficiency (savings leverage)– $ 150M redevelopment financing (50%

increased operating cash flow, 50% revenue driven)

– $100 M repairs and re-capitalization

Page 8: Financing social housing expenditures

Financing approach

• Move from real-estate backed financing– Variable risk over time– Constrained obligations

• Placement of corporate debt– Bond placement for $250 M

• Based on overall financial performance• Management discipline • Encourages enterprise behaviours

• Enterprise scale limits accessibility

Page 9: Financing social housing expenditures

Creating a sector (social) solution• Key issues

– How to access asset base of housing organizations

– How to attract low-cost financing– How to manage risk (lenders and borrowers)– How to reduce cost of administration

Page 10: Financing social housing expenditures

Housing provider

A: Cash flow / need access to capital

B: No cash flow / Capital investment can yield positive return (e.g. energy)

C: No cash flow / No positive return on investment

Capital / debt

Funders

Page 11: Financing social housing expenditures

Proposed Ontario financial facility

Page 12: Financing social housing expenditures

torontohousing.ca