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Posted by on Sep 2021 in All Stories, Sector leadership, Sector voices, Slider, Uncategorized | 0 comments

Community housing development: Financial basics

An image of a modern apartment building set against the sky.

ONPHA recently gathered together community housing leaders to discuss the dos and don’ts of housing development in our Developing community housing – lessons from the frontline workshopOur panel included Graeme Hussey, Director of Housing Development, Centretown Citizens Ottawa Corporation (CCOC) and President, Cahdco (CCOC’s development corporation). Read on to get Graeme’s breakdown of the financial basics of developing community housing. 

Financial viability 

As a non-profit, there are three key aspects to consider when thinking about the financial viability of affordable housing development:  

  1. Organizational mission. The development must help your organization meet its mission/mandate.  
  1. Government support. In meeting funding goals, your organization will require funding from multiple levels of government. Government funding will likely come with requirements such as meeting a certain level of affordability, energy efficiency, accessibility, and/or the need to serve certain demographics. 
  1. The market. Land, building, and consulting costs all have a profound impact on your project, particularly for non-profits with budget limitations. 


The feasibility cycle.
A cycle with four stages represented:
Housing provider and site criteria, Concept, Costing the concept, Identifying Financial sources

Graeme says that “determining the financial viability of a project is an on-going process. It begins during the earliest feasibility phase and helps determine the balance between government requirements, mission goals, and the site and market conditions”. The key components of the feasibility cycle are: 

Defining the criteria. This involves identifying the client’s goals, including the type of housing they will provide, the demographic they plan to serve, services they will offer, etc. 

Developing the concept. With the criteria in place, the next step is to determine the size of the building, number of units, special facilities needed, etc., to meet the goals of the development. 

Costing the concept. This begins by making assumptions about various costs including per square foot construction, contingencies, consultants, and potential rebates such as HST, etc.  

Identifying financing sources. As a non-profit, it’s important to figure out if you are able to cover your capital costs with grants, financing and other sources, and if you’ll have enough revenues derived from rent, parking, laundry, etc. to cover your operating costs. Graeme says that “the more affordable the rents, the more grant and equity will be required to cover costs”.  

Graeme tells us that this cycle “is an iterative process. Anecdotally, every time we go around the circle and update the major assumptions of a project, we’ll save the file to a different name, and at the end of the project, we may have 100 different versions of the project budget”.  

Capital budget 

In determining whether a project is financially viable, it’s useful to develop a pro forma – a series of interlinked budgets based on assumptions. In developing affordable rental housing, this usually consists of a capital and an operating budget, but Graeme says that “there might be a number of other interlinked spreadsheets that feed the assumptions of your project”. 

Costs can be met through a variety of funding sources, including government grants from all levels, low-interest loans, social financing, equity, and partnerships with community service providers, among other organizations. 

Operating budget 

How much mortgage financing you receive relates to your operating budget. The projected revenue depends upon the income that the building will generate once it’s complete. “It’s theoretical” Graeme says, “but you want to base it on your best guesses – other projects that you operate, or what you think will happen once the project is completed (if you don’t already operate housing)”. 

Once you subtract expenses from the revenue, you’ll see either a surplus or deficit – your net operating income. These funds can be put towards your debt financing and mortgage. The higher your net operating income is, the larger the mortgage you can get and the less equity you need. Non-profit organizations find that this is a delicate balance as increasing revenues derived from rent, laundry, etc., can go against your mission of providing affordable housing, but non-profits have a limited amount of equity to contribute. 

Decreasing costs 

To find the balance needed to create a healthy net operating income, many non-profits will look at decreasing costs rather than increasing revenue. Ideas to help your organization decrease costs include: 

  • using free land (government, church property) 
  • making use of non-profit & charity rebates, HST, property tax 
  • finding ways to get city fees/charges waived 
  • looking at alternate building technology (e.g.: wood versus concrete) 
  • using environmental efficiency and durable materials to reduce long term operating costs 
  • focusing on acquisition versus new construction 

CMHC National Housing Strategy 

Many non-profits will look at accessing funding from the National Housing Strategy (NHS), which as Graeme tells us, “is largely financing, rather than grants-based”. 

If you’re looking for an NHS grant or low-interest loans for your development, there are four key targets you must meet to have a good chance at securing funding: 

Affordability. The greater level of affordability you can provide to tenants, the more likely you will receive funding. 

Energy efficiency. Your organization will have a better chance of securing funding if energy efficiency is a large part of your planned development. 

Accessibility. Build with the idea that every unit can be adapted for use by someone with limited mobility. 

Financial viability. If you’re applying for a loan, CMHC will want to know that your organization can pay them back. If you’re applying for a grant, they want to know that you can manage the risk inherent in developing housing. 

Have questions about housing development? Visit Cahdco’s website to find out more about the services they offer and to reach out for more information. 

Want to learn more about ONPHA’s upcoming professional development opportunities? Visit us online!  


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