Housing as a Business (HaaB) By Ken Jacobs
Senior Issues Management Advisor Aboriginal Affairs and Northern Development Canada
E-mail: [email protected]
2
God teaches the birds to make nests, yet the nests of all birds are not alike.
Source: Native American Quotes- Duwamish
3
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.
4
What is Housing as a Business (Haab)?
5
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.
6
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.
7
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.
8
What is Housing as a Business (HaaB)?
Seller: Honest Established Reputable
Buyer: Ready Willing Able
Product: Quality Demand Fair price
Very simply stated: • The production of goods or services
for profit.
9
• 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)
$104,050 $1,040,500
Labour Component (labour ratio is 50% of the house cost)
$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
What are the revenue opportunities for Housing as a Business (HaaB)?
10
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.
11
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
12
Housing as a Business (HaaB) potential to meet on-reserve
housing needs
13
• 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
Housing as a Business (HaaB) potential to meet on-reserve housing needs
14
• 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/news-media/latest-news/cmhc-reductions-concerning-assembly-of-first-nations-national-chief1
Housing as a Business (HaaB) potential to meet on-reserve housing needs
15
• 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
Housing as a Business (HaaB) potential to meet on-reserve housing needs
16
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.
Housing as a Business (HaaB) potential to meet on-reserve housing needs
17
Housing as a Business (HaaB) as a plan to build more houses on-reserve
18
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.
Housing as a Business (HaaB) as a plan to build more houses on-reserve
19
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).
Housing as a Business (HaaB) as a plan to build more houses on-reserve
20
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.
Housing as a Business (HaaB) as a plan to build more houses on-reserve
21
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.
Determining community readiness for Housing as a Business (HaaB)
22
The Four Phase Approach to establishing
Housing as a Business (HaaB)
23
Research & Training
Resource Establishment
Business Model
Implementation Delivery of Housing
1 2
3 4
The Four Phases
24
• 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.
Phase One – Research & Training
25
• 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.
Phase Two – Business Model
26
• 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.
Phase Three – Establishing Housing as a Business (HaaB) Resource Establishment
27
• Delivery of housing construction; • Selling of the houses; and, • Management of the business.
Phase Four – Implementation delivery of housing
28
Housing as a Business (HaaB) strategic business plan
29
Contracting and Purchasing
Land Issues
Applicant Inventory Data Base
Quality Control
Inspection Unit
Financial Management
(Sources & Uses of Funding)
Policy/Program Management
Government Relations
7
2
1
6
5
4
3
Housing Business
Entity
HaaBHaaB
30
• 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.
Policy and Program Management
31
• Between First Nation communities; • Federal government: AANDC, CMHC,
Environment Canada, Revenue Canada, etc.; • Provincial government; and, • Neighboring municipalities.
Government relations
32
• 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.
Financial management
33
• 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.
Applicant Inventory and Database
34
• Community property (band owned); • Certificate of Possession (private); • Other First Nation Land Management Systems; • Environmental Management; and, • Zoning or bylaw considerations.
Land Issues
35
• Building Code Standards; • Health and Safety Standards; and, • Inspection Services.
Quality Control Inspections
36
• Issuing tender documents; • Negotiating purchase agreements; • Contracting documents; and, • Mortgage documents.
Contracting and purchasing
37
Why Housing as a Business (HaaB) today?
38
• 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.
Why Housing as a Business (HaaB) today?
39
• 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.
Why Housing as a Business (HaaB) today?
40
• 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.
Why Housing as a Business (HaaB) today?
41
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
Need more information on Housing as a Business (HaaB)
http://www.haab.ca/
Slide Number 1Slide Number 2Slide Number 3Slide Number 4Slide Number 5Slide Number 6Slide Number 7Slide Number 8Slide Number 9Slide Number 10Slide Number 11Slide Number 12Slide Number 13Slide Number 14Slide Number 15Slide Number 16Slide Number 17Slide Number 18Slide Number 19Slide Number 20Slide Number 21Slide Number 22Slide Number 23Slide Number 24Slide Number 25Slide Number 26Slide Number 27Slide Number 28Slide Number 29Slide Number 30Slide Number 31Slide Number 32Slide Number 33Slide Number 34Slide Number 35Slide Number 36Slide Number 37Slide Number 38Slide Number 39Slide Number 40Slide Number 41