Affordable, non-market housing can often get stuck in a loop – non-profit organizations have a development idea and access to land and support, but they don’t have access to financing to move the project forward. And they often can’t get access to financing without project guarantees or backstops… which would require access to financing to complete the projects.
Canada needs more affordable, non-market housing, now more than ever in the throes of a housing and affordability crisis. And while the solution is clear, it’s been difficult to achieve. Non-profit housing providers generally don’t have the necessary financial flexibility or capital to build the non-market housing that’s needed at scale.
There’s an innovative, first-of-its-kind solution on the table – an Affordable Housing Guarantee Pool from Nesting Ground, with $20 million already secured. Alongside other investors, TAF committed $5 million to support this model and to help scale it across Canada, creating the potential for even more sustainable, affordable housing.
What is an Affordable Housing Guarantee Pool?
The Affordable Housing Guarantee Pool (AGHP) is a shared, unfunded guarantee facility that provides a backstop to construction cost overruns. It provides a layer of security for other lenders, helping to move projects forward.
Canada Mortgage and Housing Corporation (CMHC) is the mortgage-insurance gatekeeper for construction project financing, and can provide reduced insurance premiums, longer amortizations, and access to CMHC-insured interest rates that are typically lower than commercial rates. CMHC provides access to these benefits for projects that reach certain goals, including affordability, climate, and accessibility outcomes. Nesting Ground’s AGHP helps projects unlock financing through their affordability and zero-carbon commitments and de-risk the projects for other lenders.
According to Graeme Hussey, President of Nesting Ground, the solution will allow Canada to finally build non-profit housing in a sustainable way. “The Affordable Housing Guarantee Pool gives private capital, banks and government comfort that large, non-profit affordable housing projects will get built.”
Building for the future
While affordable housing is important on its own, it’s also crucial that our housing is built to high standards. Projects underway with Nesting Ground will include Zero Carbon and LEED Platinum certification and will follow the One Planet Living framework. Low carbon housing is healthier for residents, thanks to better ventilation and improved indoor air quality, and more affordable, thanks to energy efficient heating and cooling. Green standards can also improve building resilience, making homes more immune to the impacts of a changing climate, like heat waves and flash floods.
Projects will also use modern methods of construction, including prefabricated mass timber. Some benefits include lower costs thanks to reduced time on site, higher quality products because of factory construction, and improved safety for workers. New and innovative construction methods are also a priority for Build Canada Homes, who have committed to Nesting Ground’s first two projects in Ottawa.
TAF’s $5 million commitment
Our commitment in Nesting Ground was a priority because of the innovative structure and ability to multi-solve. It hits multiple key focus areas – supporting more affordable housing, de-risking low carbon new development, and building green at scale. As a first-of-its-kind funding model, it was important to us to participate and, in turn, help to de-risk the projects for others.
This model has the potential to scale across Canada, exponentially increasing the benefits that we’ll see from the projects in Ontario. The challenge of financing non-market housing is not unique to the GTHA, and the AHGP model has the potential to successfully de-risk low carbon, affordable housing projects across the country.
The first round for the AHGP brought in $20 million in guaranteed capital from investors including TAF, Realize Capital, Ottawa Climate Action Fund, and Northpine Foundation, helping to move the AHGP from concept to market validation. Nesting Ground has 1,800 homes ready to go across Ontario that will benefit from the AHGP. Thanks to new financial tools like this that support the non-profit housing sector, we’re well underway to building more green, affordable housing.
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