Homelessness Bond$100,000,000

Introduction

Homelessness Bond is a systemic investment instrument that allocates private capital towards a portfolio of permanent homes for families and individuals who are living on the street specifically due to evictions, caused by the unaffordability crisis.

In Canada, the homelessness crisis in cities is evident. It is complex and requires stakeholders from every sector to contribute to and orchestrate long-lasting attainable solutions. Ombrello Solutions is specifically focusing on families and individuals in urban centres who are unable to find housing due to rapidly increasing rents. Despite being employed and often presenting no requirement for any traditional services associated with chronic homelessness, they are  living in shelters. This in turn leads to the worsening of the overall homeless crisis. Due to the shortage of beds, shelters and emergency housing facilities are forced to turn away individuals who could benefit most from  mental health and drug addiction support.

Three Key FeaturesHomelessness is a systemic problem, which necessitates an investment instrument with the following three key features:  

1
Requirement for long-term capital, akin to infrastructure.
2
Need for community type of ownership and governance mechanisms. 
3
Enabling cost sharing by the private sectors.

Providing permanent homes for individuals and families who are on the streets due to evictions requires substantial long-term infrastructure investment. Finland’s Y-Säätiö Foundation quotes the capital commitment to develop permanent homes for their vulnerable populations to be equivalent to €170-million per year. We expect these amounts to be significantly higher across Canada, given the current real estate costs across every major urban hub. Historically, the cost of homeless living units has been included in the budgets allocated to shelters by three levels of Canadian government. However, given the competing priorities for the public funds, it is difficult to expect the government to have an ability to invest into this infrastructure upfront.

Private and institutional investors hold the scale of capital required to enable this real estate solution. Evidently, they require a fair market return to compensate for the level of assumed risk, as they hold a fiduciary duty to their capital providers. Shelters cannot possibly enter into the direct borrowing relationship with these investors as their budgets are subject to annual government allocations that depend on policies and elections. Despite capital markets interest to allocate a portion of their funds towards the homelessness mission (deeply ESG aligned), there is no existing mechanism that enables them to do so.

Considering the challenges described above, Ombrello Solutions and DanSa Capital Innovation are working together to build a new financial mechanism, the Homelessness Bond, with three main innovative components, directly impacting the specific crisis at hand. Namely, providing permanent homes to individuals and families who are in shelters due to evictions.

Ombrello Solutions Innovative Components

Financing Permanent Homes

Using upfront capital from the proceeds of the Homelessness Bond to acquire or perpetually lease the permanent housing units in older residential rental and condo properties throughout a city.

Community Ownership and Governance

Transferring the acquired permanent housing units into a local Community Real Estate Investment Trust, where emergency housing providers and shelters play a key decision making role.

Private Value Creation

Through a Smart Civic Covenant, establishing an agreement with the commercial property owners and small business associations to assure a reduction to their annual operating costs.

Proposed Solution

We are in the process of structuring a Homelessness Bond whose proceeds would directly finance the acquisition and maintenance of a portfolio of permanent homes for individuals and families living on the streets due to evictions, ultimately contributing to Healthier Cities.  These assets will be owned and governed by shelters, emergency housing providers and other not-for-profit organizations through a Community Real Estate Investment Trust.

The permanent homes would be assembled across a city by purchasing or perpetually leasing condos or apartments in older properties. The locations of the homes will be determined by the shelters and community housing providers based on the needs of the individuals and families who have been evicted.

The first tranche of the Homelessness Bond is in the amount of $100,000,000 that will be deployed to acquire or lease (long-term, minimum 30 years) 400 permanent homes.

Structure of the Bond

  • $100,000,000 Homelessness Bond targeted to impact investors (6% interest, 15 year term)

  • The proceeds of the Homelessness Bond will be used to acquire or lease long-term (min. 30 years) 400 permanent housing units. The units are part of the existing market housing pool, spread across multiple locations in older condo and apartment buildings

  • The permanent homes are to be owned and managed by a Community REIT, governed by local shelters, emergency housing providers and other not-for-profit organizations

  • The interest payments are paid through a Smart Civic Covenant with Small Business Associations and commercial property owners, from the savings in their operating budgets due to decreased levels of homelessness within the immediate area. The interest cost translates to $14 per month/ small business owner or $14 per month/ apartment unit

  • The Homelessness Bond is repaid from Community REIT refinancing after the 30 year-term

  • The 400 units are maintained through the minimum rent contributions from the tenants, which at no time exceed 30% of their monthly net income or an allocated rent subsidy

  • The Homelessness Bond is managed by an established institutional grade asset manager

Systemic Outcomes

1

Contribution to Healthier Cities by providing 400 permanent homes to individuals and families currently in overnight shelter beds or short-term emergency housing, nearly doubling these organization’s capacity. Liberating the space for chronically homeless individuals who require mental health and addiction support. Ultimately, offering shelter to Canada’s most vulnerable populations once more.

2

Provision for a permanent housing solution based on Finland’s Y-Säätiö Foundation’s proven approach, where the permanent homes are located throughout a city so they can be close to the individuals’ and families’ community, places of work, schools, daycares as well as access to public transport

3

Reduction of the private costs of homelessness currently at the expense of commercial property owners and small business associations

4

Empowerment of the community ownership and not-for-profit governance for the portfolio permanent homes through a national Community REIT

5

Professional management of the properties’ maintenance and repairs, access to the economies of scale at the procurement level

Human Outcomes

Often, homeless individuals and homeless families who are on the streets due to evictions become a statistic,  a blank profile in a political or economic discussion. We wanted to offer few real life examples of individuals whose lives would be positively impacted by having access to permanent homes within a proximal radius of their original home and community.

By focusing on Healthier Cities, Ombrello Solutions is accountable to these humans and an opportunity to rebuild their lives with dignity.

Guylaine Faust, 64 yrs

How we got here
Ms. Faust lost her job in March 2020 due to the Covid-19. She then shared an apartment with friends until she had to move out. Since Nov. 2023, she has been living first in a borrowed car and then in shelters, with access to an overnight bed, when space is still available.

Reason for a need for permanent home
Ms. Faust works at a cafeteria for a public high school in Laval, QC. She works 30 hours a week at $16/ hour. She does not earn enough to rent an apartment on her own and she is not comfortable sharing an apartment with strangers.
She does not require any special services but needs a permanent home next to her work with access to public transport.

Ferhat Aberkan, 60 yrs

How we got here
Mr. Aberkan lost his job working at a restaurant due to an injury sustained at work. He was evicted from his apartment as the owner reclaimed the property for personal use.Without successfully securing an alternative affordable home, since Dec. 2023 Mr. Aberkan finds himself homeless and reliant on shelters, with no guarantee of securing an overnight bed.

Reason for a need for permanent home
Mr. Aberkan is eligible for welfare of $500/ month due to his injury. With this income, he simply cannot pay for a permanent one.
He equally does not require any special services, therefore no need to be utilizing a shelter bed that could offer needed services to the chronically homeless population.

Mario Chartrand, 62 yrs

How we got here
Mr. Chartrand has been living in shelters since February 01, 2023. He has chronic arthritis and osteoporosis, and needs to see a nurse for his condition. While he requires medical services, he once again does not require any special services.

Reason for a need for permanent home
Mr. Chartrand will likely never work, as such he requires access to a permanent home strategically located near his current shelter – where he has found both a community and where he receives medical supervision.

Data source: public document and public document # 2 published in Montreal, QC, CA.