For some time now, there’s been a real need in Canada for funding for affordable housing. Both to build new units and preserve or repair existing units. Because of this need, a number of innovative financing approaches have emerged. Some are completely new. Others are creative alternative uses of traditional approaches.

CMHC has released a new report that describes ten of these innovative approaches. In addition to presenting the approaches, the report gives examples of how they’ve been used, mainly in a Canadian context.

Here’s a quick look at three of the approaches covered:

Social finance initiatives

These include the issuing of bonds for affordable housing (like social impact bonds). For non-profit organizations, raising money by issuing bonds, instead of by getting loans from banks or governments, can give them more independence.

Issuing bonds does, however, require a certain level of expertise. It also involves initial costs linked to establishing a good credit rating, attracting investors, and other activities. For these reasons, issuing bonds is more suitable for coalitions of non-profit organizations.

Soliciting donations

The innovation here isn’t so much in the types of donors, who can still be faith groups and wealthy philanthropists, among others. Rather, it’s in the way donations are solicited. Crowdfunding has grown quickly in recent years. Internet-based crowdfunding platforms make it easier for organizations to reach a wide pool of potential donors.

Community land trusts

Land trusts remove land from the speculative market and preserve it for purposes the community considers worthwhile. The trusts will lease land instead of selling it. Owners, therefore, own the physical buildings built on the land, but not the land itself. The goal: that the land remain available for affordable housing for modest- or low-income people.

Innovative financing approaches like these can work on two levels:

  • the “individual-project” level (to get a specific project off the ground)
  • the “multiple-project” level (to create a source of funding for more than one project)

This new report shows that innovative financing approaches can be useful in three contexts:

  • improving access to affordable housing
  • building new social housing units
  • maintaining or repairing existing units.

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Date Published: January 17, 2019