A non-profit housing developer is desperately seeking $1.5 million in bridge financing to save a partially built affordable housing building in the Downtown Eastside after government-backed loans fell through.
Anhart Community Housing started work on the 69-unit building at 162 Main St. in April, but construction halted the week of Aug. 9. If the non-profit can’t find $1.5 million needed to continue construction while it sorts out alternative financing, the building won’t get built, Keith Wiebe, co-founder of Anhart Community Housing, told The Tyee.
Around 41 of the units at the project, named Main Village, would rent at the welfare shelter rate of $375, while the remaining apartments would rent at around $1,100 a month. The need for housing in the neighbourhood is dire: just over half of all the homeless people in Vancouver live in the Downtown Eastside.
Wiebe said Anhart’s Main Village project would have filled a need for more permanent housing for people who now live in transitional or supportive housing, making room for people who are living in shelters or on the street to move into more stable housing.
“The property is going to be decommissioned, starting next week,” Wiebe said.
“The crane is going to come down, all of the trailers on the property, everything is going to start being dismantled. And, and as soon as that happens, then all of the construction contracts are null and void and the costs are really going to go up.”
Wiebe said Anhart started construction before $14 million in financing from Canada Mortgage and Housing Corp. was finalized.
It was a risk, but Wiebe said Anhart decided to make the move to lock in construction costs: increased housing demand, rising lumber prices and a tight labour market mean that construction costs have risen across Canada during the COVID-19 pandemic.
Anhart expected to get low-cost financing from CMHC’s rental construction financing initiative, a lending program started by the Crown corporation as part of the Trudeau government’s national housing strategy.
But the initiative isn’t designed specifically for non-profit developers, and for-profit real estate developers have more options than non-profits when it comes to getting financing or dealing with a project that runs into trouble.
Anhart had lined up $6.9 million in funding from other partners: a $2.74-million forgivable loan from BC Housing, although that money only comes through when the project is complete; $3 million from Anhart’s own cash reserves; and $1.2 million from the Vancity Community Foundation.
Both non-profit and for-profit housing developers use other properties they own as collateral for development loans. Anhart had previously used the Dodson, a single-room occupancy hotel it owns at 25 E. Hastings St., to guarantee $2 million of a loan for a below-market rental building in Hope. That building is now complete and occupied.
Wiebe said Anhart assumed CMHC would take the same approach to the 162 Main St. project.
But when CMHC took a close look at the Dodson, Wiebe said there were concerns about the high level of operational subsidies Anhart devotes to running the Dodson at very low rents. Since the start of the COVID-19 pandemic, the society had also increased the level of supports for tenants, further increasing costs.
Anhart has also made major renovations to the Dodson in the past few years, including modernizing the elevator and replacing the windows.
“Instead of a $2-million charge against the Dodge, they asked us for a 100-per-cent-guarantee of the $14-million loan that they were proposing,” Wiebe said.
“So we had to then fully guarantee the loan — and we don't have enough equity.”
The Tyee reached out to CMHC for comment, and the agency sent this statement:
“Most National Housing Strategy funding programs are application-based and CMHC works closely with proponents to ensure their applications are complete and ready for prioritization once submitted. To protect the confidentiality of our partners, information regarding applications, potential applications, or potential projects cannot be released publicly until there is a signed agreement with the proponent.”
Without the CMHC loan, the project can’t go ahead, Wiebe said.
Luke Harrison, the CEO of Catalyst Community Developments Society, a Vancouver-based non-profit housing developer, said Anhart’s decision to start construction before financing was finalized was risky.
CMHC’s rental construction financing initiative has been a game-changer when it comes to being able to get truly affordable housing built, Harrison said. Before the initiative was in place, even for-profit real estate developers had difficulty getting financing to build rental projects — banks and other investors preferred the quicker returns a condo project provides.
But non-profits are still hobbled by their missions to provide low-cost housing, meaning they don’t have as much equity to draw on from their property portfolios.
“We aren't able to gather equity investment from shareholders or from REIT holders or people that invest into for-profit real estate companies,” Harrison said.
“As a non-profit, we can’t take that kind of equity. It's a legal construct of being a non-profit. So therefore, we don't really have balance sheets that have equity on them.”
Those limitations also make it harder to acquire land to build on, or to exit a project that runs into problems like Anhart is experiencing with Main Village.
“If a for-profit company ran into that scenario, they could sell the land. build a condo project or a more expensive rental project,” Harrison said.
Catalyst has completed two housing projects using RCFI loans. But a newer co-investment program from CMHC, which offers a combination of a grant plus financing, will allow non-profit developers to build more affordable projects.
Wiebe said CMHC staff have since told him the co-investment program may have been a better fit for the Main Village project. Another CMHC grant program, the rapid housing initiative, is another possibility, because Main Village could be completed within 12 months.
But Wiebe said applying for those programs will take time — something Anhart has run out of.
Wiebe and his staff are now trying to both find $1.5 million in bridge financing and resolve the financial issues at the Dodson to give CMHC more confidence to lend to the Main Village project.
“Right now, we have a deep hole in the ground and it’s going to rain, and then we’re going to really be in trouble,” Wiebe said.