APPENDIX B: CRD Land Banking and Housing Land Acquisition Financing

ISSUE SUMMARY

To report on options to fund land acquisitions for affordable housing.

BACKGROUND

On September 21, 2022, the Capital Regional District (CRD) Board passed a motion directing staff to report back on options for increasing funding for land acquisition for housing.

On July 13, 2022, the Board directed staff to proceed on priorities identified in the Future Housing Priorities and Partnerships report, which included land acquisition for affordable housing.

Land values in the capital region continue to appreciate annually, increasing economic barriers to develop affordable housing. Front loading land acquisition can mitigate downstream costs by leveraging the time value of land, enabling greater flexibility to deliver more affordable housing.

Since receiving Board direction, staff have begun exploring the possibility of establishing an acquisition fund with the intention of working collaboratively with other levels of government to preserve existing Naturally Occurring Affordable Housing (NOAH). Staff are also seeking to acquire land that provide “shovel ready” development opportunities or could be held for future residential development.

Through the remainder of 2023, staff will continue to advance a range of activities including the exploration of funding alternatives, business cases, eligibility criteria, roles and responsibilities of potential funding partners and plans for monitoring and reporting as well as other related activities. Once complete, staff will report back to the Hospital and Housing Committee for direction.

This information report focuses on options to fund land acquisition for housing purposes and is intended to support continued exploration of a potential acquisition fund that is still under development.

IMPLICATIONS

Analysis

Authority

Under Bylaw No. 3712, the Land Banking and Housing (LBH) Service (Service No. 1.310) has authority to acquire and assemble land for the purpose of housing. The existing service establishment bylaw currently has a maximum requisition limit (based on property assessment values) and has an existing loan authorization bylaw. The borrowing limit currently authorized is $35 million and is entirely committed to the existing program approved in the service and financial plans. Incremental commitments would require service establishment amendments and a new loan authorization bylaw. Regional cost apportionment for this service is based on property assessments.

Under Bylaw No. 3266, the Regional Housing and Trust (RHTF) Service (Service No. 1.311) has authority to raise up to $1 million and contribute those funds to projects that include funds from other partners. The existing cost apportionment is 50% property assessments and 50% population. Additionally, there is an option for a participant to voluntarily increase their contribution. The service currently has sub-regional participation consisting of 11 municipalities and two electoral areas. The available capacity within this service is limited to the maximum requisition of $1 million, has no borrowing authority and is not authorized to directly acquire or hold property. Its purpose is to act in the limited capacity as a contributor, assisting with the acquisition and pursuit of affordable housing projects.

The Capital Regional Housing Corporation (CRHC) is a wholly owned not-for-profit organization of the CRD providing affordable housing in the region. The CRHC is also able to finance land purchases for the purpose of developing and operating affordable housing, however, the CRHC has limited borrowing and revenue capacity based on the inherent operating model.

Economic Indicators

While interest rates and the cost of borrowing are increasing and subsequently translating to higher costs, there has been an offsetting impact on real estate valuation in the region. Additionally, domestic interest rate forecasts are signaling stabilization in the coming year. With local demand continuing to show year-over-year increases in real estate values, analysis supports asset value growth net of financing costs.

Capacity

The LBH service can increase requisition regionally to increase funding for land acquisition. Requisition funding can be used to pay cash or to service debt borrowed for acquisitions. Borrowing can increase the amount of purchases through leverage and is advantageous when appreciation exceeds the cost of debt.

Two alternatives (listed below) simulate scenarios to increase funding for acquisition where each is incremental to existing program commitments.

Alternative 1 considers requisition to fund acquisitions directly. Paying cash provides immediate funding for acquisitions or to be set aside in an acquisition fund. Table 1 below provides estimated impact of increasing requisition by $0.5 million, $1 million and $5 million:

Table 1: Revenue Implications – Cash for Acquisitions

Alternative 2 considers requisition to fund acquisitions by repaying debt over time. Table 2 shows total principal available with the same increased requisition funding as considered in Table 1.

Table 2: Revenue Implications – Borrowing for Acquisitions

Revenue implications in Table 1 and Table 2 indicate a general impact on revenue and borrowing capacity only, they do not represent acquisition cost estimates and do not reflect size and scale of an acquisition program. These estimates can be used by Committee in considering appropriate affordable housing strategies. A report addressing program development will be brought back to a future Committee meeting.

CONCLUSION

On September 21, 2022, the CRD Board passed a motion directing staff to report back on options for increasing funding for land acquisition for affordable housing. On July 13, 2022, the Board directed staff to proceed on priorities as identified in the Future Housing Priorities and Partnerships report, which included land acquisition for affordable housing. This information report focuses on options to fund land acquisition for housing purposes and is intended to support the acquisition fund currently under development. An increase to funding for land acquisition, beyond the existing revenue and authorized capacity already committed, would require a service establishment bylaw amendment and potentially the approval of a new loan authorization.

RECOMMENDATION

There is no recommendation. This report is for information only.