Leveraging innovative finance tools to create affordable housing: The case of PNLT
By: Vancity Community Investment Bank
The team at the Parkdale Neighborhood Land Trust (PNLT) hustles hard.
Over the last several years, the organization has mapped their rapidly gentrifying west Toronto neighborhood, identifying each and every rooming house and predicting when it might come onto the market. They’ve done this with one goal in mind: to buy and preserve these properties as community-owned affordable housing.
Yet, even with this hustle, planning and foresight, the team has been blocked in their efforts multiple times.
“Our biggest challenge has been mobilizing financing to compete on the real estate market,” explains Joshua Barndt, Executive Director of PNLT. “In some cases, we were successful in getting offers in, but then couldn’t get the funding together quickly enough. In other cases, we had the money but couldn’t reach a deal with the vendor.”
Breaking down barriers: Co-developing a new financing tool
Things started looking up in April 2019. With a grant from the City of Toronto through the Rooming House Acquisition Pilot Project, community donations, and financing from Vancity Community Investment Bank, the Neighbourhood Land Trust, (PNLT’s charitable arm), made its first acquisition: a 15-unit rooming house on Maynard Avenue.
Since then, VCIB and PNLT have collaborated on a new finance tool to help the land trust replicate that success on an ongoing basis.
This October, the two organizations co-launched Preserve & Protect, an impact investment and financing program that will support the NLT in rapidly acquiring at-risk properties, helping fill a gap in existing funding for the preservation of affordable housing.
“This financing tool allows the NLT to be nimble, acquire and preserve the housing stock, while transitioning it to more permanent affordable operation in the long term,” said Lars Boggild, a VCIB investment product manager.
The aim of the program is not to provide long-term financing, but rather to serve as a bridge, providing NLT with cash needed to move at the speed of the market. Should an offer be accepted, the organization will then have the time needed to apply for government funding programs.
Today, PNLT is currently monitoring 59 ‘at-risk’ rental properties. And when the right one comes on the market, they’ll be ready.
What can be learned from this innovative partnership?
In reflecting on this successful partnership, Boggild shared three ingredients that made PNLT a great partner to work with on this project.
The first? A clear thesis.
“PNLT has done the community-based research. They monitor an active pipeline. And they know which buildings are right for them,” Bogglid said. “This depth of knowledge offered credibility, as we sought impact investors for the Preserve and Protect program.”
To date, the Atkinson, Metcalf, ECHO and Fairmount foundations have committed $4 million, providing the anchor investments needed to kickstart the program.
The second? An orientation toward long-term partnerships with their investors and financial institutions.
“It’s all about trust and relationships,” Boggild says. “After the acquisition on Maynard Avenue, they kept us in the loop as they worked to acquire new properties and ran into roadblocks. Regular communication created the conditions for our team to get creative in co-designing a program that met their needs,” he said.
The final piece of advice? Plan, plan, plan.
“Unfortunately, a lot of these projects take longer than you’d like,” Bogglid says, encouraging organizations to be up front with their bank about their planning processes and timelines, including if the financier is an organization’s “plan b.”
“This kind of transparency allows lenders like us to plan, helping to ensure that we’re able to deploy as much capital as possible across the country to support affordable housing.”
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