:
Good afternoon. My name is Sunil Johal and I am the policy director at the Mowat Centre in the School of Public Policy and Governance at the University of Toronto. Jamie Van Ymeren, a policy associate with Mowat's not-for-profit research hub, is with me. We'll be sharing our speaking allocation. We'd like to thank the committee for the opportunity to participate in today's meeting.
The Mowat Centre has conducted research on the challenges governments face in extending the use of outcomes-based funding and programming to complex delivery areas as well as social impact bonds and the experiences of the first wave of not-for-profit service providers who have been involved in them. Our remarks today will focus primarily on the enabling environment and supportive infrastructure that governments can have a key role in establishing to increase the likelihood of success for these initiatives.
As you’ve previously heard, the range of activities that fall under the umbrella of social finance is large and is often linked to the broader trend of outcomes-based funding and evaluation. While social finance initiatives seek to generate both social and financial returns, outcomes-based funding refers to contracting arrangements in which governments financially reward service providers or private investors for having a positive and sustained impact on the lives of service users.
Outcomes-based funding models can take a variety of forms, including payment by results contracts, social impact bonds, performance-based contracting, and performance incentive contracting, amongst others.
Interest in these models can be seen as part of a broader public sector reform agenda. Governments today are using a range of new tools to transform the delivery of front-line services. The result has been increased focus on directing resources to those programs and services that deliver the most positive social impacts.
You have already heard testimony on changes that could be made to enable investment from private foundations and to allow greater engagement from not-for-profits on the social enterprise and impact investment front. We would echo many of the previous recommendations made by foundations, not-for-profit witnesses, and impact investors drawing from the G-8 task force on social finance reports.
We would like to highlight some of the non-regulatory groundwork that governments must consider as they look at these new models. Social finance and outcomes-based funding models have enormous potential, but there are also risks of failure if they are implemented improperly. There must be a strong commitment to put in place the conditions for success. Three key areas require focus: better evidence, enhanced capacity, and finding the right mix of incentives.
First, governments should invest in better evidence and measurement to support promising opportunities for program innovation and support the long-term development of evidence-based policies. While social finance is often celebrated as a vehicle for promoting innovation and having positive social impact, the reality is that investment hinges on assurances of the achievability of outcomes targets.
To date, the evidence base available to governments, investors, and not-for-profits is patchwork at best. Evidence is stronger in some areas with traditions of rigorous evaluation, such as health, but remains weak in most other areas. A 2010 federal survey found that on average, departments devote just 0.08% of direct program expenditures to evaluation. Clarifying program objectives and gathering baseline data on program performance, communities, and populations is a necessary precondition to introducing these types of models.
This work must be done upfront. Too often, governments introduce impact evaluation at the same time they roll out outcomes-based funding approaches. Even in program areas where rigorous evaluation has taken place, it is not always readily available to all stakeholders who are involved in the process. Without this information, service providers can’t make informed decisions about successful interventions, and investors can’t make prudent financial choices.
Early experiences with social impact bonds and other investment models demonstrate that these new models require significant time and investment upfront, especially in the areas of data-matching, cost-calculations, and outcome metrics. Mining existing administrative systems and working with service providers to collect any additional data required will not only help governments evaluate the potential costs and effectiveness of their work but will also help streamline future negotiations.
I'll now turn it over to Jamie, who will speak to the other two areas we would like to highlight for you.
Our second recommendation is that governments must invest in the supportive infrastructure needed to build capacity among both public servants and service delivery organizations.
For not-for-profit organizations involved in complex arrangements, like social impact bonds, there is a need to further develop both financial and evaluation literacy and supports to ensure they're able to participate effectively in these processes. Service providers who have been involved in social impact bonds note that they represent a significant capacity challenge in financial and evaluation skills, but also on organizational resources. Consequently, smaller but more innovative partners in the not-for-profit sector may well have been excluded.
The committee has already heard examples of funds established elsewhere to make organizations impact ready. As well, independent “what works” institutes can play a valuable role in synthesizing and disseminating advice on proven interventions, and similarly, technical assistance labs can offer training, advice, or analytics to support impact evaluation. For example, the U.K. government is currently establishing a network of “what works” centres to offer advice in areas including education, crime reduction, early years intervention, and aging populations.
Governments will also need to examine their internal organizational capacities to enter into and implement outcomes-based funding schemes, developing supports where needed. Shortages of in-house evaluation specialists and lack of independent organizations that can offer advice on evidence-based interventions are challenges that many governments face.
Finally, there is a need to ensure that stakeholder and system incentives are aligned to ensure that models work for the public benefit. These new financing mechanisms involve many moving parts and are attempting to tackle complex, entrenched social issues. New funding models based on outcomes can only be effective if the incentives for all stakeholder groups, government, not-for-profit service delivery partners, investors, and clients are aligned.
For government, these models often engage multiple areas and orders of government and success depends on effective coordination. As a response to this issue, some jurisdictions are developing central outcome funds or joint investment agreements based on particular cases.
Failure to properly negotiate agreements is a significant risk that can lead to over- and underpayment, system-gaming, and non-cooperation among partners. These risks are particularly acute when outcomes models are introduced into poorly coordinated social support systems, where provider capacity is low, trust is lacking, roles poorly defined, and risk is unevenly distributed.
Creating the right conditions for negotiation and having all partners at the table is critical. There is a need to ensure that outcomes' metrics chosen reward real impact. Indicators that incentivize gaming and short-term outputs that do not serve as long-term proxies for impact are detrimental to the community, investors, providers, and policy-makers.
In conclusion, government has a key role to play in supporting social finance by promoting a strong, enabling environment. This includes establishing quality baseline information, strengthening internal and external stakeholder capacity, and establishing the right mix of incentives. These models are complex and to benefit the public, they must be accompanied by an equally strong commitment to making the changes needed for them to succeed.
Thank you.
:
Thank you very much. I'm at a slight disadvantage in that I'm not fully aware of what you've covered in past hearings, but I will try to build on what I've heard.
My interest is in social impact bonds and their rationale. I think the appeal of social impact bonds is fairly straightforward for service delivery agencies, which if they're fortunate enough to participate, could have fairly guaranteed funding for the length of time of the so-called bond. There's also an appeal to the financing agencies because, if deliverables are met, then there is a rate of return to those financing agencies, whether they be social or private.
The key to government interest, I think, comes from a number of directions. One is that with fiscal austerity, governments are looking for alternative sources of funding. In the longer term, however, if social impact bonds are successful, the government will be on the hook to pay for five or seven years of services, so there are fiscal implications in providing that upfront. These have not yet been worked out in any great detail, to my knowledge, so there may be fiscal constraints in even entering into these agreements.
The real question to me is why government would not require performance of all the services it delivers, and why we need to enter into these fairly complicated arrangements, as we've heard, to achieve those savings and improvements in efficiency. My own approach is somewhat skeptical. I can see the attraction, especially to social service agencies. In terms of charitable foundations that are simply moving money from one approach to service delivery to another approach to service delivery, I don't believe there's any net increase in resources from doing that.
I think there are serious questions, as we've heard earlier today, about how you lay out the requirements for performance and get that right in terms of the incentive. I think that's probably the most important and difficult area, because savings can take many forms. They can take the form of additional revenue or they can take the form of reduced costs, and costs could be operating or overhead costs. These can be quite difficult to deal with.
I think the people who are skeptical of social impact bonds often argue that they could be used to undermine public sector employment and public sector wages, and they're quite cautious about that.
There's been a fairly slow start to the launch of the bonds. There may be between 30 and 60 globally; it is difficult to know how many. The last data I had put them at about 30 at the end of last year, with 30 in the works. That slow start, I think, points to a number of difficulties in terms of risks of financing and in terms of governments being able to successfully negotiate performance indicators.
So my conclusion would be that they make promises that are very attractive, especially to social service agencies, if they do deliver. They could be attractive to government. Many of those claims are made anyway by regular government spending. If you put money into early childhood intervention and you're successful, you save many times the money you've invested, whether or not you've used social impact bonds.
I would argue that the first priority should be improving the funding and delivery of services in and by the public sector, and that should be a priority over pursuing and creating enabling environments for social impact bonds.
Thank you.
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I think first and foremost we have to recognize that we're talking about very difficult, entrenched social problems here. These aren't things that are easy to fix. If they were, we have a lot of smart people working in governments across the country and they would have fixed them already. So I think the appeal of these instruments is that they offer the opportunity to harness more innovative approaches.
I would agree that, generally speaking, governments in Canada and around the world aren't necessarily the best at piloting things, seeing if they work, and if they don't work, discarding them and trying something else. That's much more of a private sector mindset.
Governments tend to want to develop something that's going to go across the entire country or entire province. We have a lot of political capital and financial investment in the success of that initiative, and it's very difficult for us to then pull back from that and say that it didn't work, let's cut it. Our instinct in government tends to be let's keep investing in something, but we don't really have the data about whether it works or not. We've written reports about that at Mowat.
The culture of government certainly tends to be more risk adverse. It tends not to be quite as innovative. I think that's the appeal of these instruments, and that's the reason they offer an opportunity for governments.
But I think it's very important to recognize that governments still play the primus inter pares, the first among equals, role in terms of setting direction and deciding what those difficult social problems are. Governments should still be very heavily involved in this. I don't think this is an area we want to outsource, solving difficult problems, to the private sector.
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I'd like to stress that many services are already provided by social service agencies. Government provides the money. Government does provide direction.
In some of these areas there's quite a bit of creativity. If you look at the main areas where social impact bonds have been established, there's recidivism among offenders, and homelessness, children, and the employed. These are the main ones. We'll look at two of them.
With children, there's an awful lot going on looking at best practice for reducing the number of children in care. It's a huge issue in Manitoba. We have 10,400 kids in care, and most of them are aboriginal. That number's just gone up from 10,000 to 10,400. We're looking at what has worked elsewhere in reducing the number of children in care and at what has worked in Manitoba, because in some parts of Manitoba the rates are going down. There is a willingness to experiment and to look at these programs. These are sometimes arms of government, but often they're social service agencies.
The same thing happens with offenders. The John Howard and Elizabeth Fry societies have all kinds of programs to try to reduce recidivism. My own feeling is that before we change to something radically different and experimental and very hard to implement, look at what's happening already in these agencies and try to adapt to best practices.
That pretty much brings us to the end of this round of questions.
I have a couple.
When we first began the study, we had government officials as our witnesses, and later we had others from the supply side, the Royal Bank and others. You can look at our witness list to understand this. I think it was pretty clear from the start the way many of those individuals from the supply side, not the demand side, viewed this as another option for financing in addition to what governments already do.
I come from a business background, in which you look at the need for working capital to do certain projects. Where does that money come from? I know many organizations in my riding are frustrated because they have no access to working capital from the government. They have a certain allotment to carry out programming. Year after year they find out far too late whether these funds are locked down for them, so they're always scrambling at the end.
In some ways, social financing augments those existing programs, which I think most of our witnesses envisage not stopping, not changing, and not being taken away, because the government is always trying to reduce the cost of delivery, but it is another vehicle.
I'm intricately involved in some organizations in my community that are totally frustrated in trying to get projects, such as housing for intellectually disabled individuals, off the ground.
In that context, can I have your comments on whether you think, going forward, that social financing is a useful vehicle to add to or augment what governments already do?
If the three of you would like to comment on that, we'll wrap up after that.
:
Thank you very much, Mr. Chair, for the opportunity to be here today.
I will be speaking today on behalf of Co-operatives and Mutuals Canada, or CMC. CMC is the national body for co-ops and mutuals from across Canada. Our members are located in every province and serve urban and rural communities.
I wish to share with you today a few social financing models that co-ops are using and have been using for some time. As well, I want to highlight why we believe that cooperative businesses are the ideal model to promote and encourage social financing across the country. I also hope to build on what has already been discussed during your study on social financing.
Two financing models that I will be focusing on are social investment funds and pay-for-performance contracts.
Let me begin by saying that we believe that cooperatives have been providing social financing in one way or another since they began operating in Canada over a hundred years ago. The cooperative business model naturally lends itself to this sort of approach on a socially responsible level.
As many of you around the table already know, cooperatives are guided by seven internationally accepted principles that help shape their business decisions and governance, therefore setting them apart from other enterprises.
Out of these principles, the principle of member economic participation, is probably the one most closely related to social finance. People come together to form a co-op to fill a need, and they invest into it. It is not from government support or through donations. This is precisely the difference between not-for-profits and cooperatives. Cooperatives are about mutual self-help, unleashing the power of ownership to enable people to help themselves.
Let me give you an example to demonstrate how these principles help foster an environment that promotes social financing.
Let's begin by looking at social investment funds. Currently, we have several funds operating across the country. These funds are designed to serve a particular geographical region or a particular sector in the co-op movement.
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Let me share with you an example of one of these funds. The Arctic Co-operative Development Fund was established in 1986 to provide financial services to cooperatives across Canada's Arctic. This is a self-managed fund of pooled financial resources, owned and controlled by the cooperative businesses accessing the capital. It started with an investment of $10 million and has grown to over $45 million today, and this almost exclusively in Inuit and Dene communities across the north.
Another example is the smaller Tenacity Works worker co-op fund. This is an investment fund whose purpose is to create new, and to expand existing, worker-owned cooperatives in all regions of Canada. The fund is owned and operated by the Canadian Worker Co-op Federation. Funds are used to invest in worker co-ops across Canada.
Both of these funds received financial assistance from the federal government in the beginning, and both have been important to meet the significant needs for financing in their respective sectors. However, these funds are too small and targeted too specifically to come close to meeting all of the needs for social financing in the co-operative movement in Canada. There is an enormous potential in the co-op sector to meet a wide variety of needs facing Canadians today, such as home care; housing, especially for seniors; business succession; renewable energy, and other areas. However, additional co-op-friendly capital is needed for this potential to be realized.
So with this in mind, the cooperative sector made the decision to launch a national cooperative development fund. Financed by the cooperatives and mutual sector, the Canadian Cooperative Investment Fund is designed to help cooperatives access capital they might not find elsewhere. It will be a fund that is knowledgeable about cooperatives and mandated to structure investments appropriate to cooperative principles and the role of capital in cooperatives.
The fund is a loan fund that will provide financing consistent with the co-ops' needs to leverage other financial institutions and government programs to provide the main portion of the capital. The fund will operate in a financially responsible manner that will generate adequate levels of savings and increase member equity over time.
The goal of the fund is not to replace or replicate any of the current financing sources within the co-op sector, or accessible to it. A group of investors made up of Vancity, The Co-operators, Assiniboine Credit Union, Affinity Credit Union, Connect First, Arctic Co-operatives Limited, the Canadian Worker Co-operative Federation, and Desjardins have already pledged $20 million.
The fact that our investors are ready to accept a very low rate of return on their investment to stimulate economic development is a clear indication of its social financing impact. So here we have an example of co-ops coming together to develop a fund to promote cooperative development in Canada that is also promoting social enterprises through a social financing model. These co-ops don't need to do this. And more importantly, these co-ops are not doing this to make a profit, but rather they are doing this guided by their co-operative principles.
I'm sure that many of you around the table will think that the idea of an investment fund that is funded by the co-op sector is a good idea. You are also probably thinking, if this fund is funded by the co-op sector, why should the federal government be involved? We think that the federal government has a role to play in putting capital to work alongside this investment, that neither side should be doing this alone but, rather, partnering to encourage this sort of investment.
The two previous funds are examples of where a modest investment by the government alongside the sector's contribution has established viable, long-lasting investment funds to help the members. We see the same promise with a national fund for all co-op sectors.
This is also the advantage of using the co-op model when leveraging social financing. Co-ops are driven by their members and serve their needs. The members have an invested stake in the co-op whether it is not-for-profit or for-profit. Remember, people coming together for a common reason form co-ops. Often it is because they are looking for a particular service that is not being offered by the private or public sector. That is why co-ops are often talked about as being part of the third sector. The members of the co-op drive the agenda and drive the innovation that creates the environments for social financing. Without your members, there is no need for social financing.
ln our view, the best matrix you could ever have to evaluate the success of a co-op is the members that have become involved and believe in the services provided.
Another social financing model that is currently being used is that of the pay-for-performance contracts. A wonderful example of this sort of model is le coop de services à domicile, or home care co-op model in Quebec. This is a very successful model, and the Quebec provincial government is very pleased with the results. These co-ops offer many services to seniors and people with disabilities, such as home care, house cleaning, personal assistance, aid with medication, and so on.
ln Quebec, the government established in 1997 the financial assistance program for domestic help. The goal of this program is to support the poorest clients. For example, a person with an income of $15,000 or less per year will have the right to assistance of $13 per hour for services rendered, while a person with an income of over $40,000 per year would receive a maximum of $4 per hour for services rendered. The goal is to allow people with less income to have access to quality services.
The home care co-ops are non-profit, multi-stakeholder co-ops. The client, the partners in the community, and the employees are all members, which means they are also shareholders. This approach helps keep the costs much lower than could be provided by the public or private sector.
This particular model benefits the provincial government because it provides cost-effective services across the province, but also because it can collect taxes through jobs that are otherwise often paid under the table.
Because of the flexibility of the cooperative model and the empowerment of the members, this cooperative model has become a leader in social services in Quebec. Here we see another example of how people are coming together to meet their common economic, social, and even cultural needs through a jointly owned and democratically controlled enterprise.
ln closing, I hope and trust that the committee will see the benefits of the cooperative model when considering its report. I have been able to touch only on a few examples today, but there are so many more great stories out there. As I have already said, social financing is not a new idea. Co-ops have been doing it all along. It is in our DNA.
Thank you, Mr. Chair.
:
Thank you, Mr. Chairman, and good afternoon. Thank you for this opportunity. I apologize that I couldn't join you in person.
I come to this conversation from the housing and homelessness arena and as someone who has been an affordable housing developer that has housed over 4,000 people in a range of housing first programs. I have experience in the private sector and a public company.
I'm a big supporter of both social finance and social enterprise, but would caution that neither are silver bullets. For the purposes of my testimony today, I'm going to focus on social finance and specifically on social impact bonds and social finance opportunities for affordable housing, in a similar vein to what Mr. Murphy just referred to.
I will start with the potential for social impact bonds in reducing homelessness, because these instruments have been the focus of a lot of talk and research in social finance circles. The Government of Canada recently shifted the homelessness partnering strategy to housing first, which I wholeheartedly and enthusiastically support. Housing first is a revolutionary and highly effective response to homelessness and is at the heart of province-wide homelessness reduction here in Alberta.
At first blush, housing first lends itself to social impact bonds. For these bonds to work or to make any financial sense for government, there has to be a cost savings or cost avoidance to share with investors. ln a recent national evaluation of housing first, the Mental Health Commission of Canada concluded that for every $10 invested in housing first, an average of $21.72 was saved. Results in Alberta have demonstrated that housing first participants have 85% fewer days in jail, 67% fewer days in hospital, and 61% fewer interactions with emergency medical services.
I would love social impact bonds to work at scale in Canada, but I am honestly sceptical about their application to homelessness for three reasons.
First, to generate a return, governments have to be prepared to monetize the savings and pay investors back their principal plus a modest return. For the most part, the savings generated in homelessness in most social services, especially in housing first, accrue to the provinces, which doesn't help the federal government, and getting provincial governments to monetize savings will be a challenge.
Second, there have to be capable intermediaries that can monitor performance, that have rigorous data systems in place, that can hold a portfolio of programs to manage risk and be capable of engaging with market investors, and there are very few of these in Canada today. The federal government could develop powerful intermediaries through various homelessness partnering strategies in the community entity structure, but they would have to completely transform and reinforce the role of those bodies and change how the HPS is administered.
Third, you must have skilled and capable agency partners that can deliver the outcome. Achieving the performance needed to achieve the returns is more easily said than done, and the level of accountability for outcome required is fairly new to the non-profit sector. I think it will come, perhaps in the next five years, but I don't think we are at a place where housing first is sufficiently mature to support social impact bonds.
SIBs, in my view, may be best employed for newer or emerging interventions or when an intervention is applied to a government system for the first time and where risk can be transferred to the investor. When it comes to proven interventions like housing first, the government would be better to focus on performance-based contracting, as the other gentleman referred to, where vou can create incentives for exceeding performance targets or penalties for falling short. That way you can drive improved performance and achieve cost savings without private equity at the same price.
To me social impact bonds can be a great tool for sparking innovation, but they aren't as valuable as scalable tools for resolving social issues. So in my mind, the key question for this committee is where can the federal government have the greatest impact? ln the housing and homelessness arena, my view is that you are best to focus on bricks and mortar.
Each year 235,000 Canadians experience homelessness, 35,000 on any given night. An estimated 1.5 million low-income Canadian households live in core housing need, and over 730,000 renter households in extreme housing need.
The rise of modern mass homelessness in Canada traces back to federal withdrawal from housing investment, including a 46% reduction in federal affordable housing investment over the last 25 years, despite a 30% growth in Canada's population. We have a very, very serious housing shortage in Canada. Markets do not create affordable housing, because there's little profit to be had. Further, there's limited market rental construction because there's much greater and faster profitability in home ownership.
There's an important opportunity for the federal government, at limited cost, to draw private equity into non-market and rental housing. This is an area of clear federal jurisdiction where I'd recommend focusing social finance efforts. Social finance opportunities in this space are really only limited to our creativity. Mr. Murphy gave a couple of good examples, but I'm going to give you three ideas.
First, make donations of land and buildings to non-profit or charitable organizations for the purpose of affordable housing tax deductible. We already do this for environmental conservation; we should apply these incentives to affordable housing.
Two, introduce a low-income housing tax credit. Essentially, a low-income housing tax credit is designed to give private equity investors reductions in federal income tax for dollars invested in qualifying affordable housing projects. Unlike most other incentives, the government would set a maximum amount of affordable housing tax credits awarded each year so you know in advance the cost because you've set the amount. The credits would be allocated to the provinces and territories based on CMHC's assessment of core housing need, and a provincial or territorial body would take applications and award them according to set criteria. The low-income housing tax credit has been in place in the United States for three decades and has created thousands of units of housing. We estimate that, with $150 million annual investment in these tax credits, over 4,800 units of housing per year could be created.
Third, I'd consider loan guarantees for non-profit housing bond issues. Today large private rental housing developers can go to market for financing. Large companies can get favourable financing because they're deemed good credit risks. Non-profits don't typically have the cash flow or asset depth to get low-cost financing in the same way that the private sector does. With a guarantee, non-profits could issue bonds and use their existing asset base as equity. This would actually be an excellent tool for redevelopment of old CMHC-funded social housing that is now largely mortgage-free on prime real estate in much of the country. You would also protect that social housing coming out of their federal agreements from being lost to private developers. With this approach to finance and federal guarantees on about $500 million in debt, likely through CMHC, you could create over $1.5 billion in housing investment, equating to about 8,000 units of new affordable housing at no cost to government.
There's a lot of really creative housing finance happening today in the United Kingdom. I'd encourage you, if you get a chance, to have a look at Orbit housing as one very good example. Similarly, the Regent Park redevelopment in Toronto was backed by the City of Toronto, allowing for much lower cost borrowing.
In conclusion, I'm a big fan of social finance and social enterprise, and I'd encourage the committee, when it comes to the housing and homelessness space, to act where the federal government can have the greatest impact in areas of clear federal jurisdiction, and that's in the creation of affordable rental housing.
At the end of the day, social finance alone will not be sufficient to alleviate Canada's housing crisis. Direct federal investment will eventually be required. We're estimating that for about $46 per Canadian, or about $1.7 billion a year in combined and direct investment in social finance strategies, we could virtually eliminate homelessness in Canada in 10 years.
Thank you.
Where we're seeing the difficulty with the data is across the board at the federal level especially. As you're well aware, most cooperatives are incorporated at the provincial level. There are only about 80 or 90 co-ops that fall under the federal act; everything else is at the provincial level.
Some of the provincial governments—Quebec being one of the leaders—have gone to a great amount time and energy to encourage the sector within the province to be collecting this data and to basically to be developing the needs assessment on the ground to figure out where the holes are. Then they go to the co-op sector and say, “With your help we've identified these holes. Can we develop co-ops to fill them?”
Quebec is actually working on a pilot project right now with mining companies in the north, trying to see if they could possibly bring co-ops in to work with the mines to provide the exterior services to the mines—the housecleaning and transportation needs, and stuff—as a way to reduce costs. That is more revenue into the coffers in the province.
Other provinces are slowly coming on board as well. I know that Manitoba is in the process of looking at the development of a provincial co-op development strategy, which, from my indication, is supposed to be signed shortly. So some provinces are much more avant-garde, let's say.
However, at the federal level we're still trying to play catch-up, so it's hard to get a national picture of where the needs and the holes are. But we're hoping that with these federations, such as the health care one that we saw yesterday, and other federations, we can start to work with them and encourage them to get this data so that we can make informed decisions.
:
Thank you to our guests today.
First, I'd like to ask Mr. Richter about one of the issues I've been thinking about. You mentioned that we've dug a hole here as far as homelessness and affordable housing are concerned. I guess the question is, why is there the demand? Then, how can we provide that and yet take forward some of the market-based housing that I think are outcomes, such as pride of ownership, responsibility, financial stake, and that type of thing?
At a construction group we talked about how, as you said, governments could throw in the land, and maybe local governments could come up with the DCC costs and some of the...because 45% of the cost of a house is basically taxes and charges by government, believe it or not. As well, the other thing is interest charges, where government can come along and maybe say that they will have the capital available at no interest, and encourage that.
But ultimately, in my experience as a person who has been in the housing market, what I have found is that people who have a sense of ownership, who take pride in it and have a stake in taking care of it...because what kills you is the O and M after it's built and in place.
I guess what I'm saying is this. Can you see some sort of structure where you can provide that affordable housing to the homeless and yet still have some of those outcomes, so that you would be assured that the investment will be protected and that you will see a sunset on the need?
:
There are a few points in there, with the first question being, how did we get here? We can trace the rise of modern mass homelessness in Canada to the withdrawal of the federal government. Over the course of probably 25 to 30 years, there's been about a 46% reduction in federal investment in affordable housing. There's a direct correlation between the withdrawal of that funding and the rise of modern mass homelessness. A 46% reduction in housing investment over the last 25 years is, I think, a significant piece of it. There are all kinds of other large factors, but that is probably the biggest one.
With the second point you've made about the operating and maintenance costs, how do we make sure that these buildings are well taken care of? I'll tell you from experience that nobody is happier to be in an apartment than somebody's who been in a cardboard box. There will be pride in ownership and pride in possession. The vast majority of those who get in do not want to lose that housing that they've gained and will tend to take care of it.
The third point is that it's important that we figure out.... One of the primary challenges in non-profit housing development is that you need to have non-profit operators that are good at their job. We need to make sure that they can maintain the buildings well and cost effectively.
You must have developers that are prepared to take the financial risk. Most charities and non-profits are scared to death of taking on debt. We need to find a way to make it easier for them to do so or to be be comfortable doing so, or find among the non-profits those that are willing to do it. Others are not prepared to take the operating risk of having people in that need.
Mr. Butt referred to the housing first program. One of the important things we learned from housing people through the housing first programs in Alberta and from at home/chez soi project is how important those supports to that housing are, especially for those with the most complex needs. This is not just about the capital infrastructure and the financial mechanism.
There's absolutely no rocket science to building apartments or houses and financing them. There's no mystery in it; it's how we bring the money together in a creative way. The important part in dealing with people, especially those with complex needs, is the supports that can be provided. That's where the HPS program has been quite valuable and their provincial support as well.
:
One of the benefits of social impact bonds is that they can create a discipline, as you say, around the expected outcome. You're exactly right.
Today, we can track every cow from birth to burger in Alberta but we can't tell you how many people experience homelessness in Canada, what happens to them when they're in the system, and what happens to them when they leave. We can do that in every other field; there is no reason why we can't do it for homelessness. We've begun to use systems here in Alberta called homeless management information systems. We should be able to track everybody. We know who they are and what they need. We have to move them into the system, track what happens to them, and understand what happens to them when they leave the system. But in social services, that data and those data systems are very poor.
A good example of a decent system that's not functioning as best as it could is the federal homeless individuals and families information system. That system collects data on people who are in federally funded programs, but it's very difficult on the ground, in agencies, to have knowledge of who those people are and how they move through the system. Information goes up but it doesn't flow across, so we can't actually track people through the system of care.
Until you're able to track that data and know for a fact.... For example, to prove success on a social impact bond for homelessness, you have to prove that a person is housed and has stayed housed for a year, and define how their use of the public system has been reduced. But today, without a homeless management information system, we can't track whether or not that person falls back into homelessness. In my view, you have to have a system-wide coordinated data system.
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There's a question on how you deliver and who you target. If you imagine the homeless population in Canada, you take a population and think about it like a pie chart. Think about an inverted triangle. At the bottom of that inverted triangle is about 15% of the overall homeless population—85% to 90% of all homeless people get themselves out of it. It's purely an economic issue. They get themselves out with little help from anybody else.
The vast majority of affordable housing investment, whether from the Government of Canada or through the provinces, is spent a mile wide and an inch deep on a range of projects. There's no defined strategy and there's no sufficiently effective targeting of that limited resource. If you prioritized the chronic and episodically homeless individuals for public investment, the 15% who take up over 50% to 60% of the emergency shelter spaces, who represent the highest costs in the public system, you would dramatically reduce the homeless population.
As for the market, with some incentives, we've recommended, for example, in our state of homelessness report a housing benefit for people who are living in rental housing to maintain housing affordability for them and keep them stably housed. That would be more than enough. You don't need to invest a lot of extra capital infrastructure in the short term. But again, there's a range of different opportunities. I would start with whom you're targeting.
Second, I've noticed that the cost per unit in the public delivery of housing is quite high. We tend to end up with, for example, $300,000 a door. Here in Calgary, in one of the more expensive markets, I was able to create new housing—stick built, with four floors—at $170,000 a door. It really depends on your built form. As one of the other speakers mentioned, it depends on all the other stuff that comes with it. If you're going to build a concrete high-rise in downtown Calgary with a fire station at the bottom, it's going to be $300,000 or $350,000 a door.
The federal government has to be a bit more explicit about prioritization and a bit more explicit about what you're prepared to pay and who you want to pay.