Tried-and-true financing model preserves and protects Toronto’s affordable housing

PNLT board and community members

To Parkdale’s lack of affordable housing options, a neighborhood land trust offers an inspiring response: community ownership and stewardship of land.

Parkdale Neighbourhood Land Trust (PNLT) is Ontario’s first-ever community land trust, created to preserve land for affordable housing as well as affordable working spaces for nonprofits, social enterprises, and businesses run by new immigrants.

In 2017, the organization began monitoring at-risk affordable housing properties to purchase them when they came up for sale. However, this proved to be a difficult task.

Unlike private developers who can swiftly react to a hot real estate market, land trusts and non-profits usually need to secure government funding, raise money from investors, and put all the pieces in place before they’re able to place an offer on a property.

“Our biggest challenge [was] mobilizing financing to compete on the market. In some cases, we were successful in getting offers in, but then couldn’t get the funding together quickly enough,” said Joshua Barndt, PNLT Executive Director.

Innovative financing fills the gap needed to scale affordability

Against all odds, PNLT was able to purchase a 15-unit rooming house in 2019 with support from the City of Toronto, residents, and Vancity Community Investment Bank (VCIB).

“This exciting and impactful accomplishment got us thinking about what role the Bank could play in enabling more affordable housing acquisitions, and what other players we needed around the table. We began engaging with PNLT around ideas to leverage impact investments to streamline the fundraising and financing process so that they could respond faster to market opportunities,” said Trish Nixon, Managing Director of Commercial Impact Banking, VCIB.

In October 2020, VCIB and PNLT partnered to launch the Preserve and Protect Guarantee Program – a first-of-its-kind impact investment program that would help the Neighbourhood Land Trust rapidly acquire at-risk affordable rental buildings in Parkdale.

Through the program, VCIB accepts and holds funds from values-aligned investing organizations in Impact GICs, which are used to guarantee a portion of the financing facility made available for PNLT to purchase at-risk affordable rental properties as they are put up for sale.

The goal of the program was achieved in April 2021 when VCIB provided PNLT with an $8.5 million loan, supported by over $2.6M in guarantees from investors, to finance 100% of the purchase price of an at-risk 36-unit apartment building in Parkdale.

Photo by Adam Krawesky, 36-unit affordable housing building at 22 Maynard Avenue.

First-of-its-kind program becomes a tried-and-true financing model

“The innovation here was leveraging VCIB’s capabilities as a financial institution to reduce costs, timelines and other barriers for PNLT to access capital, including the amount that would typically be required as equity to secure bank financing. Ultimately though, participating impact investors were betting on PNLT’s ability to secure the necessary grants and long-term financing that would ensure the property remained permanently affordable and that they received their expected return on investment,” said Eric Visser, VCIB’s Senior Manager of Business Development, Commercial Real Estate.

“And it worked!”

A year after the property was purchased, PNLT was able to buy out their investors’ 30% equity through a grant from the City of Toronto’s Multi-Unit Rental Acquisition (MURA) program. The land trust refinanced the $8M+ Preserve & Protect Guarantee Program acquisition loan and replace it with a $2.79M conventional first mortgage with VCIB.

For Joshua, Executive Director of PNLT who led the charge to make it all happen, having a supportive financing partner made all the difference.

“Even before we had a project, VCIB was there,” said Joshua. “The team was always available to problem solve and help us understand the challenges and opportunities, and when Maynard came up for sale, we were ready.”

Looking towards the future, VCIB is working to replicate and scale this financing model to support other land trusts across Ontario.

Interested in joining the VCIB community? Sign up to our newsletter

Sign Up

More from News and SOCIAL PURPOSE REAL ESTATE

Vancity Community Investment Bank is a member of CDIC and is a Certified B CorpTM