A New Administrator for Co-operative Housing …agence-public.coop/wp-content/uploads/2015/03/agency_businesscas… · Who we are CHF Canada: the national voice of co-op housing since

Co-operative Housing Federation of Canada

A New Administratorfor Co-operative

Housing Programs

© CHF Canada, March 2004

The Business Case for theAgency

OutlineThe evolution of the proposal

Can program outcomes be improved?

Why try to improve program performance?

Why give the job to the agency?

What is the required investment?

What are the risks and can they be managed?

Will the government recover its investment?

The Business Case for the Agency

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Who we areCHF Canada: the national voice of co-ophousing since 1968

A voluntary association of nearly 1,000housing co-operatives and otherstakeholders

Members in each province and territory

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The agency proposal at a glanceThe agency is

A non-governmental, not-for-profitorganization that will administer federalco-op housing programs outside Quebec,under an agreement with CMHC

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The agency proposal at a glanceThe mandate of the agency

To ensure that public funds directed to theco-op programs are used as intended andproperly accounted for

To protect the public investment in theprograms by enhancing programperformance and mitigating risks to CMHC

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The agency proposal at a glanceServices to CMHC

Subsidy administration

Compliance monitoring

Risk management

Default management

New service of benchmarking and bestpractices

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The agency proposal at a glanceThe agency will not

Determine federal housing policy

Change program policies or projectoperating agreements

Hold and disburse subsidy monies

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The agency proposal at a glanceThe agency will not

Administer loans

Approve new CMHC loans for troubledco-ops

Handle loan insurance claims

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The evolution of the proposal1995

CHF Canada first proposes agency as analternative to transfer of administration ofCMHC’s programs to provinces andterritories.

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Federal budget offers programs toprovinces and territories.

CHF Canada tables detailed agencyproposal.

Housing co-ops support agency conceptover announced transfer.

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Co-op members meet with their MPs, signpetitions and write thousands of letters andpostcards in support of the agency.

CMHC signs first four transfer agreements.

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Ontario federal Liberals ask the minister notto transfer co-ops to the province.

BC government asks CMHC to removeco-ops from transfer discussions.

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Federal minister announces co-ops off thetable in Ontario, BC, Alberta and PEI.

Manitoba offers to transfer co-ops back.Upload will leave 90% of federal co-ops inCMHC’s hands.

CMHC and Ontario sign a transferagreement that does not include federalco-ops.

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Federal minister strikes CMHC/provincial/sector working group to study CHFCanada’s proposal.

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Working group meets through winter andspring. Bilateral talks take place oversummer between CMHC and CHF Canada.

Minister affirms support for agency idea,pending working group’s report.

CHF Canada tables proposal revisions.

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Detailed talks with CMHC follow finalworking group meeting.

For the sixth time, CHF Canada’s memberco-ops vote their overwhelming support forthe agency.

Minister David Collenette asks CMHC tonegotiate an agency agreement and toresolve outstanding issues in the process.

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CHF Canada and CMHC reachagreement on agency’s proposed scope ofwork and authority, and governance andaccountability framework.

Cost issues remain unsettled.

Minister refers issue to CMHC board ofdirectors for consideration.

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The federal co-operative housingprograms: a history ofachievement

The CMHC Co-op Housing Programs1973-1991: an affordable housing successstory. Three programs create 56,000affordable, resident-controlled homes in1,800 co-ops.

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The federal co-operative housingprograms: a history ofachievement

Today these programs, designed anddelivered by CMHC in partnership with theco-operative housing sector, provide goodquality, affordable housing to 155,000Canadians.

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A positive program evaluation

In September 2003, CMHC released itsCo-operative Housing ProgramsEvaluation. Findings are positive.

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The evaluation found that

“the … co-op housing projects financedunder federal programs since 1973 areproviding adequate, affordable housing forlow- and moderate-income households”

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“Co-operative housing costs were about14% lower than costs in non-profit rentalhousing.”

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“the government expenditures areenabling households…to achieve benefitsnot available in rental housing such asgreater security of tenure and residentcontrol of their housing”

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What the evaluation tells us

The programs are meeting their statedobjectives and are performing satisfactorily.

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Can program outcomes beimproved?

The 2003 evaluation pointed tochallenges

45 per cent of co-ops do not have sufficientreserve funds to cover repair costs.

The total reserves deficiency was nearly$53 million in 2001/2002.

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The 2003 evaluation pointed tochallenges

Housing co-ops out perform on costs, butare more likely to run into financial difficulty.

Difficulties are due to unforeseen repairs,vacancies, member arrears and deferredmaintenance.26



The challenges arise from

Market risk in mixed-income programs

Lack of project-level business planning

Project management weaknesses

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The challenges arise from

Lack of risk-based portfolio monitoring

Insufficient attention to project and markettrends

Lack of information and skills transfer toand among co-ops

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A new business model

Data-driven

Risk-based

Customer-focused

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Data-driven services

The agency will take full advantage ofup-to-date information technology to store,share, analyse and report backperformance data to co-ops.

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The agency will identify project-specific andportfolio-wide trends and share its analysiswith the co-ops to assist them in managingtheir businesses.

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The agency will gather and distributehousing market data and other informationon relevant regional economic trends toimprove co-ops’ understanding of theirbusiness operating environment.

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Data co-ops are already reporting will drivea new benchmarking and best practicesservice to enhance project performanceand optimize operating costs.

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The agency will harness the power of theWorld Wide Web to offer on-line filing ofannual co-op returns, and access toprogram and project data and bestpractices information on line to co-ops,agency staff and CMHC.

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A risk-based approach

An enhanced risk-based approach willfocus co-op reviews on outcomes, notprocesses, while pointing to reasons foroutcomes.

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Nature and degree of supervision of eachproject will be based on its risk profile.

Approach will enable agency to spot quicklyprojects that need attention and tointervene before problems become costlyto address.

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The agency will act quickly with troubledprojects to mitigate losses while developinglong-term solutions.

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Where indicated, the agency will promptlydevelop workout proposals for CMHC’sconsideration.

The agency will encourage co-ops tounderstand and better manage theirbusiness risks.

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Customer-focused service

The agency will adopt a client-centredservice culture. Clients include co-ops andCMHC.

The agency will be transparent, offeringco-ops Web access to plain-languageprogram policies and guidelines.

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Agency staff will offer courteous, customer-friendly service, while rigorously enforcingproject operating agreements and taking abusiness-like approach to redressingproject difficulties.

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All portfolio inquiries and requests will bepromptly attended to.

The agency will invite feedback fromco-ops and CMHC on its services.

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Why try to improve programperformance?

Improvements will benefit

� government

� Canadian taxpayers and citizens

� lenders

� housing co-ops and their members

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Benefits to government and the public

Effective use of data and sharing ofinformation will lead to more efficient stockutilization, through more cost-effective useof subsidy dollars.

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Early intervention in troubled projects willreduce costs arising from project failuresand workouts.

The risk of loss of existing affordablehousing will fall.

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The useful life of the stock will be extendedbeyond the end of the project operatingagreements, enhancing the return on thepublic investment in the programs.

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Benefits to project occupants

Achievement of a citizen-focused publicservice will produce greater programsatisfaction among co-op residents.

Prompt resolution of project difficulties willenhance the quality of life for occupants.

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Benefits to project occupants

Benchmarking and best practices willreduce costs and add to the skills ofmember-volunteers.

Improved project management will increasethe satisfaction of all occupants.

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A fresh start

Outsourcing portfolio management to anagency equipped with a new businessmodel and specialized staff will provide afocus for change and facilitateimprovement, now and into the future.

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A “right-size” solution

The agency offers an expert, small-shopapproach tailored to the needs of aspecialized portfolio. A simplified decisionframework, together with a customer focus,will bring new efficiencies to programadministration and improve client service.

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Capturing the sector’s knowledge anddrawing in private-sector expertise

No one understands better what makeshousing co-ops tick than the co-op housingsector itself. The agency will tap into awealth of experience and skills and,through its board, draw on private-sectorexpertise.

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Harnessing co-ops’ self-interest inachieving better results

With its links to the co-op sector, theagency will enjoy the trust and confidenceof housing co-ops. Benchmarking and bestpractices will inspire co-ops to improvedperformance.

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The creation and operation of the agencywill occasion certain one-time andcontinuing costs to CMHC.

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Non-recurring costs

Proposal development and review costs

Set-up expenses

Cost of development and deployment ofnew business model

Transfer and phase-in costs

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Non-recurring costs

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Non-recurring costs

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Transfer and phase-in costs

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Departure package costs

26.8 CMHC staff years affected (1.5% oftotal workforce)

Some staff can be redeployed.

Long-term secondments to agencyproposed in order to eliminate remainingcost.

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New recurring cost

Total agency budget (including amortizationof capital expenditures) comparesfavourably with current CMHC all-in cost.

$4.47 versus $4.51 million (2003 dollars)

But some costs left behind at CMHC.

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New recurring costs (2003 dollars)

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Low estimate

Agency staff will do some programadministration work now done by CMHC atnational office, including supporting fieldstaff.

Some costs incurred in regional businesscentres can be laid off.

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Low estimate

Less time will be spent on co-ops introuble.

National Office overhead will be reassignedto CMHC’s other business activities.

That overhead will not leave with the co-opprograms but did not come with them.

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What are the risks and can they bemanaged?

CMHC has identified these risks

Benefits do not materialize.

Program performance worsens.

Costs exceed expectations.

Agency adopts advocacy role.

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CMHC has identified these risks

Conflicts arise between agency and CMHCor between CMHC and CHF Canada.

Agency is poorly governed or managed.

The initiative fails.

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The risks can be mitigated

Through the many years spent to dateresearching and planning the agency’sbusiness model and operations

Through CHF Canada providing itsexpertise and carrying the financial riskduring the systems development and start-up phase64




Through the proposed agency governancestructure and accountability framework

Through CMHC/government representationon the agency board

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Through a comprehensive legal agreementbetween the agency and CMHC and anagreement with CHF Canada

Through CMHC’s right to take control in theevent of a serious breach or administrativefailure66


Will the government recover itsinvestment?

Lifetime (24-year) agency cost

Net present value of lifetime recurring andnon-recurring costs is between $6.13 and$27.6 million. CMHC overhead makes up$15.3 million of the gap.

Offsetting returns are tangible andintangible.67



Tangible returns

Lifetime N.P.V. financial benefit to federalgovernment estimated at $33.1 million,broken down as follows.

Savings of subsidy dollars: $9.88 million

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Above does not include savings co-opsdirect to helping more low-incomehouseholds or taking better care of theirbuildings: $4.93 million

Reduced cost of workouts for troubledprojects: $5.41 million

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Protection of public investment in co-ophousing stock: $17.8 million (the cost ofreplacing 200 lost units)

Not included are lower assistance costs toFederal Co-operative Housing StabilizationFund from better risk management

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Intangible returns

Detailed in document on agency benefits

Enhanced program compliance

Strengthened program accountability

Improved service to co-ops

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Intangible returns

Continued presence of affordable housingin local communities to planned end ofprograms and beyond

Opportunity to test a new business modelwith possible wider application

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Intangible returns

Effective partnering with the co-op housingsector

Secure, stable arrangement foradministration of the programs

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Documents

A New Administrator for Co-operative Housing …agence-public.coop/wp-content/uploads/2015/03/agency_businesscas… · Who we are CHF Canada: the national voice of co-op housing since