Housing as a Business (HaaB) By Ken Jacobs Senior Issues Management Advisor Aboriginal Affairs and Northern Development Canada E-mail: Ken.Jacobs@aandc-aadnc.gc.ca
God teaches the birds to make nests, yet the nests of all birds are not alike. Source: Native American Quotes- Duwamish 2
Five objectives of this presentation 1. Explain Housing as a Business (Haab); 2. Overview on-reserve housing needs; 3. Review a plan to build more houses on a First Nation; 4. Identify the major components of a 4 phase approach to HaaB, and; 5. Outline the components of a strategic business plan for a First Nation Community to build, renovate and sell more houses. 3
What is Housing as a Business (Haab)? 4
Housing as a Business (HaaB) principles Community decision making and control will be maintained; Quality and fair price (including a reasonable profit) are required; and, Needs-based and affordability-based housing are both required, ie: larger, more expensive homes should be available to members that qualify for large mortgages. 5
Housing as a Business (HaaB) principles continued The legal title to land and home ownership must be clear, i.e. Certificate of Possession, First Nation Allocation, etc.; and, Traditional housing construction and financing methods will be practiced and modified where appropriate; however, new and innovative practices will be promoted. 6
What are the characteristics of Housing as a Business (HaaB)? Profitable; Self sustaining; Supports job creation; Promotes skills development; Part of a growing market; Identified revenue sources, and Practical debt to equity ratios. 7
What is Housing as a Business (HaaB)? Very simply stated: The production of goods or services for profit. Seller: Honest Established Reputable Product: Quality Demand Fair price Buyer: Ready Willing Able 8
What are the revenue opportunities for Housing as a Business (HaaB)? Money generated from the construction of a house Based on a $200,000 house $ per house X 10 houses Finance and interest (25 year amortization 4% interest spread - $180,000) Labour Component (labour ratio is 50% of the house cost) $104,050 $1,040,500 $100,000 $1,000,000 Materials (37 % - 45%) $74,000 $740,000 Developer Profit (10% of cost - Stats Canada - performance plus) $20,000 $200,000 Professional (3%) $ 6,000 $ 60,000 TOTAL $304,050 $3,040,500 9
Secondary revenue sources from Housing as a Business (HaaB) Financing, mortgages; Materials, infrastructure, construction; Maintenance, housing inspections; Furnishings, repairs, and a host of other opportunities. 10
More secondary revenue opportunities from Housing as a Business (HaaB) Landscaping Snow removal Deck building Additions Renovations Furniture Interior Decorating Appliances Insurance Maintenance Repair Bulk purchases Refinancing Foreclosure Commissions Utilities (fuel) Other 11
Housing as a Business (HaaB) potential to meet on-reserve housing needs 12
Housing as a Business (HaaB) potential to meet on-reserve housing needs Currently, there are 615 First Nation communities, which represent more than 50 nations. Source: (2012, August). First Nations. Retrieved from: http://www.aadnc-aandc.gc.ca/eng/1100100013791 13
Housing as a Business (HaaB) potential to meet on-reserve housing needs The Assembly of First Nations estimates a current housing shortage of 85,000 units nationally and about 44,000 requiring major repairs. Source: (August 10, 2012). CMHC reductions concerning, Assembly of First Nations National Chief. Retrieved from: http://www.afn.ca/index.php/en/newsmedia/latest-news/cmhc-reductions-concerning-assembly-of-first-nationsnational-chief1 14
Housing as a Business (HaaB) potential to meet on-reserve housing needs The shortfall is growing by an estimated 2,200 units a year. The limited supply of housing not only leads to unhealthy, overcrowded conditions but it also accelerates the depreciation of the housing stock. It affects the health and well-being of Aboriginal people living on-reserve. Source: (October, 2006. Modified September 15, 2010). Aboriginal Housing. Retrieved from: http://www.aadnc-aandc.gc.ca/eng/1100100016239 15
Housing as a Business (HaaB) potential to meet on-reserve housing needs National market 60,000 units in backlog $200,000 cost per house $12 billion housing market Ontario First Nation 20% Ontario backlog market $2.4 billion housing market $19 million per community The housing market examples above are provided for discussion purposes only. They are not accurate and users should verify information before acting on it. 16
Housing as a Business (HaaB) as a plan to build more houses on-reserve 17
Housing as a Business (HaaB) as a plan to build more houses on-reserve Assumptions and realities First Nation members knowledge of housing concepts and mortgage concepts is limited; Housing on-reserve is sometimes viewed as a social and political right; The climate to access financing for housing on-reserve is improving; The market for residential on-reserve housing is vast and increasing. 18
Housing as a Business (HaaB) as a plan to build more houses on-reserve Assumptions and realities The young population and members returning from off-reserve add to this market; and, Brain drain (bringing the talent home to stay). 19
Housing as a Business (HaaB) as a plan to build more houses on-reserve Assumptions and realities There is an untapped market of gainfully employed middle to upper class that require suitable housing; Existing housing policies favour high-need and low-income community members; and, Existing policies have restrictive limits on loan ceilings and conditions. 20
Determining community readiness for Housing as a Business (HaaB) First Nation characteristics Reasonable employment levels; Willingness to take on debt; Lands Department; Land base (Infrastructure); Serviced land; Security of Land Tenure; and, Willingness to separate politics from business. 21
The Four Phase Approach to establishing Housing as a Business (HaaB) 22
Research & Training Business Model 1 2 The Four Phases 4 3 Implementation Delivery of Housing Resource Establishment 23
Phase One Research & Training Collect data on the housing needs, types of homes required, client profiles and existing housing programs; Arrange and deliver a series of information sessions to familiarize stakeholders with the concept of mortgages and the economic opportunities with housing; and, Develop policies, best practices, procedures, and other agreement documentation. 24
Phase Two Business Model A five-year business projection and business plan will be developed; and, Mandate will be required from Chief and Council to establish the structure of a separate entity to operate housing as a business. 25
Phase Three Establishing Housing as a Business (HaaB) Resource Establishment The entity will be resourced with proper staff, equipment and facilities needed to deliver on the five-year business plan; and, Agreements will be negotiated with various agencies, such as: contractors, suppliers, financial institutions, government agencies, technical service groups etc. 26
Phase Four Implementation delivery of housing Delivery of housing construction; Selling of the houses; and, Management of the business. 27
Housing as a Business (HaaB) strategic business plan 28
Contracting and Purchasing HaaB Policy/Program Management 7 1 Quality Control Inspection Unit 6 Housing Business Entity 2 Government Relations 5 3 Land Issues 4 Applicant Inventory Data Base Financial Management (Sources & Uses of Funding) 29
Policy and Program Management Client criteria for eligibility; Selection process methodology and criteria; Special subsidy eligibility, incentives and bonuses; Housing options; Landlord Tenant Act equivalent (guarantee, warranties and appeal rights); and, Enforcement and collections. 30
Government relations Between First Nation communities; Federal government: AANDC, CMHC, Environment Canada, Revenue Canada, etc.; Provincial government; and, Neighboring municipalities. 31
Financial management CMHC section 10 and section 95 housing, direct lending programs; Community mortgage funds (revolving loan); First Nation guarantees with banks; Client equity; Provincial subsidies; Federal government capital funds; Major Capital Plan; AANDC First Nation Market Housing Fund; and, Other sources. 32
Applicant Inventory and Database Detailed community profiles of existing housing; Developed client profiles and applicant inventory for new housing requirements; and, Linking client purchasing power with existing housing resources. 33
Land Issues Community property (band owned); Certificate of Possession (private); Other First Nation Land Management Systems; Environmental Management; and, Zoning or bylaw considerations. 34
Quality Control Inspections Building Code Standards; Health and Safety Standards; and, Inspection Services. 35
Contracting and purchasing Issuing tender documents; Negotiating purchase agreements; Contracting documents; and, Mortgage documents. 36
Why Housing as a Business (HaaB) today? 37
Why Housing as a Business (HaaB) today? Large and growing market; Low interest rates; Proven profitable business; Proof of low-loan delinquency of housing in First Nation communities; Bank and other institutions are eager to finance housing deals; and, Profitable venture based on non-social housing concepts. 38
Why Housing as a Business (HaaB) today? Proven best practice business models e.g., First Nation Revolving Loan Funds: Six Nations: $17 million portfolio MBQ: $13 million Wendake: $22.8 million Kahnawake: $15 million Piikani: New Nipissing: $421.6 K Namgis: $3.5 million Plus others ** Data Source Michael Rice. 39
Why Housing as a Business (HaaB) today? Profits can be allocated to social housing or other community needs; Step towards having control of our own housing; Government housing initiatives; First Nation readiness; Many factors are finally in place to support on-reserve housing; Housing Opportunity Management Expertise (HOME)Team. 40
Need more information on Housing as a Business (HaaB) The Housing as a Business (HaaB) initiative is guided by a volunteer advisory board of professionals from the private and public sector. For more information: Housing Opportunity Management Expertise (HOME) Team Web site: www.haab.ca 41