Essential workers in British Columbia who are struggling to afford a home in the community where they work may soon have access to a new first-time homebuyer mortgage financing solution.
A mortgage investment corporation (MIC) launched by the non-profit BC Construction Association (BCCA) aims to make securing a mortgage easier for B.C.’s skilled tradespeople, medical care providers, educators, and emergency responders, while at the same time provide the growing impact investment market with a tax-free vehicle that supports housing affordability.
Lisa Stevens, chief strategy officer for BCCA and Peter Elkins, co-founder of Capital Investment Network had previously identified a MIC as a possible solution for the southern Gulf Islands, whose communities have trouble finding service providers who can afford to own a home nearby despite having in-demand skills, steady employment, and higher than average wages. When Stevens joined the BBCA, she saw the need for affordable housing was equally pressing, but on a much larger scale.
Stevens and Elkins set out to prove the potential of the Impact MIC to address first-time homebuyer mortgage qualification challenges faced by tradespeople across B.C.
“Our goal is to create a social impact investment vehicle that offers value for investors while also helping tradespeople and other professionals to establish roots in B.C. communities,” said Stevens. “Guiding our approach is the belief that these highly skilled and hard-working earners should be able to afford housing, and organizations that employ and represent them are willing to invest in a financial vehicle that helps them succeed.”
Unlike banks and credit unions, MICs are not subject to the federal mortgage stress tests. Additionally, shares in MICs are eligible for government deferred and tax-sheltered savings plans such as RRSPs, RESPs, RRIFs, TFSAs and RDSPs. While MICs typically generate revenue by attracting higher-risk customers willing to purchase higher-rate mortgages, this MIC sought to be an impact-investment that would offer tradespeople and other gainfully employed essential workers the competitive-rate mortgages they couldn’t get from a bank or credit union.
The BCCA team partnered with the Gustavson School of Business at UVic to create a project for the school’s 2019 MBA program. Professors and students conducted surveys, research, and analysis that became the foundation of the business case for the Impact MIC, Canada’s first impact-investment mortgage fund.
Elkins expects competitive shareholder dividends, along with the Impact MIC’s tax-deferred/sheltered benefits and the important community benefit, will attract $500 million in capital over the next 10 years.
“The BCCA Board has approved funding to move the Impact MIC forward,” confirms BCAA President Chris Atchison. “We’re proud to pioneer an affordable housing solution with the potential to improve the quality of life for thousands of skilled tradespeople and other essential workers across the province, benefitting every B.C. community.”
Whereas MICs typically offer higher mortgage interest rates, shorter terms for fixed rates and lower LTVs compared to banks, as a fund dedicated to helping essential workers, the Impact MIC will offer more favourable terms by roughly matching bank mortgage interest rates and term lengths for fixed rates, while also offering longer amortization periods (25-40 years) and higher LTVs.
“The Impact MIC is a business solution with potential application to other industry sectors,” added Elkins. “We look forward to exploring partnership with organizations that support highly-skilled essential workers, and to connecting with individuals and organizations interested in a competitive and tax-free or deferred return with the potential to create significant positive social impacts.”
BCCA is planning to make mortgages from the Impact MIC available as of April 2020.