New Fund Attracts Private Capital to Ease Affordable Housing Crisis

When you do good things, good things happen. That’s certainly true for New Market Funds, an investment firm focused on creating community benefit and market based returns for its investors. As the founding board chair, I’m pleased to share this recent Vancouver Sun story that talks about how New Market Funds is attracting private capital to help address Canada’s affordable housing crisis. For more information visit newmarketfunds.ca

Investment fund targets affordable housing

Vancouver-based New Market Funds is investing $11 million to launch Canada’s first market based affordable housing investment fund.

The company announced Monday that the NMF Rental Housing Fund is investing the money in four new housing developments in Vancouver to attract private capital to help address Canada’s affordable housing crisis.

“The whole goal is that everything we do is to try to create both a social return and a market-based return for our investors,” said New Market Funds board chair Sarah Goodman in an interview.

“So we wouldn’t enter any investment that doesn’t have those two criteria.

“We’ve initialled for $11 million,” Goodman said. New Market Funds is a for-profit investment firm owned by a registered Canadian charity formed by Tides Canada Foundation, Trico Foundation, Bealight Foundation, Vancity Community Foundation and Le Réseau d’investissement social du Québec.

“Our goal is to try to get the fund to $30 million so we can help create about 1,000 affordable housing units,” Goodman said.

The initial investments from the fund will help create 358 co-op and non-profit rental homes for families, the elderly and those with mental illness.

“This is the first investment fund in Canada to bring marketbased investors to the table to partner with non-profit and cooperative housing operators to help create new affordable housing units,” said the fund’s managing director Garth Davis. He said the $30 million would be used for affordable rental housing units in Vancouver, Toronto and other Canadian cities.

According to a news release, the fund provides about nine per cent of the $120 million combined value of its first four initial projects in the form of post-construction equity. The equity will stay in each project for an estimated eight years, to allow time for the co-op and non-profit owners to build their equity stake, at which point the projects will buy out New Market Funds.

For co-ops and non-profits, having access to sufficient equity is often the most significant barrier to building new affordable housing, the release said.

“The targeted annual return for fund investors is six per cent, net of fees, including a four per cent quarterly distribution. The fund caps its upside returns to protect affordability of rents and in exchange receives significant downside protection.”

Goodman said their goal is to deliver market-based returns for investors while also creating significant social value.

“When it comes to big challenges like affordable housing, governments and the non-profit sector can’t do it all,” she said. “We need new market-based approaches that can work at scale. Our fund is one of those new approaches.”

The fund is seeking additional investors, with its final closing in June 2016.

bmorton@vancouversun.com

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