VICTORIA – Essential workers in British Columbia who are struggling to afford a home in the community where they work may soon have access to a new mortgage financing solution for buying a first home. A mortgage investment company (MIC) launched by the non-profit organization British Columbia Construction Association (BCCA) aims to make it easier for skilled tradespeople, medical providers, educators and emergency responders in British Columbia to get a mortgage, while providing the growing investment market with impact a tax-free vehicle that promotes housing affordability.
Despite their in-demand skills, stable employment and above-average wages, thousands of essential workers in British Columbia cannot afford to own a family home close to where they work. Often they have to travel long distances to get to work, live in unreliable rental housing or move elsewhere. This can leave employers with reduced access to skilled labour, create instability in families and deprive communities of vital professional services.
Lisa Stevens (Director of Strategy, BCCA) and Peter Elkins (Co-founder of Capital Investment Network) had previously considered a MIC as a possible solution for the southern Gulf Islands, whose communities struggle to find service providers who can afford to live there. When Stevens joined the BC Construction Association, a non-profit organization serving a burgeoning multi-billion dollar industry where availability of skilled labor is the #1 challenge, she found that the need for affordable housing was just as pressing, but on a much larger scale. climb.
Stevens and Elkins set course to prove the Impact MIC’s potential to address mortgage qualification challenges for first-time home buyers faced by tradespeople across BC Unlike banks and co-ops credit, MICs are not subject to the federal mortgage stress tests that thousands of BC workers struggle to meet. In addition, MIC shares are eligible for government deferred and tax-sheltered savings plans such as RRSPs, RESPs, RRIFs, TFSAs and RDSPs. While MICs typically generate revenue by attracting high-risk customers willing to purchase higher-rate mortgages, this MIC sought to be an impact investment that would thrive by providing traders and other essential workers with paid mortgages. at competitive rates that they couldn’t get. from a bank or credit union.
“Our goal is to create a social impact investing vehicle that delivers value for investors while helping traders and other professionals get a foothold in BC communities,” Stevens said. “Our approach is guided by the belief that these highly skilled and hardworking employees should be able to afford housing, and the organizations that employ and represent them are willing to invest in a financial vehicle that helps them succeed.”
Tax-Free Impact Investment Vehicle Supports Housing Affordability for BC Tradespeople, Teachers and Firefighters
Elkins knew that creating a MIC that would attract impact investors and others beyond the construction industry would require rethinking the typical MIC business model, as well as extensive research into the structure, financing, regulation, management and marketing of MICs in Canada and similar investments. vehicles abroad. To help meet this complex challenge, the BCCA team has partnered with the Gustavson School Business at UVic to create a capstone project for the school’s 2019 MBA program. As an applied project that involved exploring multiple disciplines and courses – such as strategy, management, law, collaboration, finance, and HR – to solve a real-world problem, the project fits well with the mission of Gustavson to champion research that makes a difference and transforms lives.
Over the course of five months, faculty faculty and 23 students spent thousands of hours conducting gap analysis, financial research and surveys of MIC, potential investors, HNWI, financial advisors, foundations, traders and construction companies. This work became the foundation of the business case for Impact MIC, Canada’s first impact investing mortgage fund.
While MICs generally offer higher mortgage interest rates, shorter terms for fixed rates and lower loan-to-value (housing) ratios than banks, as a fund dedicated to helping essential workers, the Impact MIC will offer more favorable terms by roughly matching bank mortgage interest. rates and terms for fixed rates, while offering longer amortization periods (25 to 40 years) and a higher loan-to-value ratio (up to 90%).
Elkins expects competitive dividends for shareholders, along with the deferred/sheltered tax benefits of the Impact MIC and the significant community benefit, will attract $500 million in capital over the next 10 years from the growing number of banks, pension funds, wealth managers, family offices, entrepreneurs, developers and individual investors for whom impact investing is a growing priority.
“The BCCA Board of Directors has approved funding to advance the Impact MIC”, confirms Chris Atchinson, President, BCCA. “We are proud to be pioneering an affordable housing solution with the potential to improve the quality of life for thousands of skilled tradespeople and other essential workers across the province, benefiting all communities. of British Columbia.
“The Impact MIC is a commercial solution with potential application to other industry sectors,” Elkins added. “We look forward to exploring partnering with organizations that support highly skilled essential workers and connecting with people and organizations interested in a competitive, tax-exempt or deferred return with the potential to create social impacts. significant positives.”
BCCA plans to make Impact MIC mortgages available from April 2020. For more information, potential partners and investors are encouraged to contact Impact MIC Acting CEO Peter Elkins at [email protected] or visit https://www.bccassn.com/resources/mortgage-investment-corp/