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 A New Administrator for Co‑operative Housing Programs May, 1998 This document presents, in brief, a clear vision of a different way to deliver a valued government service. It condenses a full-scale proposal for third-party administration of co‑operative housing programs through an independent regionally based non-profit agency. The proposed agency will provide value for money through cutting-edge information technology, a risk-based approach to monitoring projects, and a lean staffing structure, among other features. It will operate as a joint venture with a parallel organization serving Quebec. Housing co‑ops in every region support the proposal. Background A housing co‑operative consists of homes owned and operated on a not-for-profit basis by a co‑operative corporation governed jointly by the residents. In the 1970s, following the lead of the Hellyer Report, government turned to co‑ops and other community-based housing, in place of public housing. Resident ownership and control gave much better results, as Canada Mortgage and Housing Corporation ( CMHC) confirmed in its 1992 Evaluation of the Federal Co‑operative Housing Programs. These programs were popular, as well as successful. By 1997 about one quarter of a million Canadians were making their homes in more than 2,100 co‑ops. At least two-thirds of these homes have received federal assistance, most of them under unilateral federal programs. A voluntary association of nearly 900 housing co‑ops and other stakeholder organizations, the Co‑operative Housing Federation of Canada (CHF Canada) has served for thirty years as the national voice and advocate of co‑operative housing. Together CHF Canada and its regional partners worked with the federal government and, later, with a few provinces, to create co‑op housing programs. These programs made co‑op development possible and enabled co‑ops to shelter people of modest income. A thorough evaluation of federal co‑op programs undertaken in 1990 confirmed their value. Nevertheless, in 1992 new co‑operative housing development ceased at the national level. Then in the 1996 Federal Budget the government annnounced that "CMHC would phase out its remaining role in social housing". The budget also promised to discuss . . . “a role for third parties in the administration of the social housing stock . . . with provinces and territories”. At the same time, the federal Treasury Board was calling on government to find new ways of delivering programs through partnerships with the private and voluntary sectors. In response, CHF Canada is advocating a new kind of partnership that extends co‑operative housing's success in self-management. Our plan is specifically designed to ensure that co‑ops operate as well as possible within the terms of their agreements with government. The co‑operative housing sector knows the co‑op programs and agreements. CHF Canada and our regional federation members have decades of experience working with both healthy and struggling co‑ops. Through our well-developed network of regional organizations and the nation-wide role played by CHF Canada, we understand the differences in co‑op operations from province to province, and within provinces. Our pooled experience gives us confidence that we have designed the agency as a good and cost-effective administrator for these unique housing programs. Description of Business The agency will offer the federal government a different and affordable way:
It will do so by providing three essential services now delivered by government: the administration of CMHC's mortgage loans to co‑ops, management of project subsidies, and monitoring of co‑ops’ compliance with project operating agreements. The agency will add value with a new benchmarking and best-practices service made possible as a byproduct of its monitoring role and financed through the administrative savings achieved. CHF Canada proposes that a multi-year contribution agreement be executed with CMHC setting out the agency's terms of operation. The agency, and a parallel non-profit serving Quebec, will offer similar services as a joint venture. Once established, the agency will market its services to provinces and territories, other than Quebec, that have their own portfolio of co‑ops, or are now administering federal co‑op programs. The agency will not: give out new public monies; determine housing policy; manage individual co‑ops; administer their rent supplement programs (except where a province contracts for this service); fund the co‑op housing programs; or provide services that overlap with those now furnished by provinces or territories, CHF Canada or regional co‑op housing federations. As a specialist organization with a new approach to co‑operative housing administration, the agency has been designed to offer superior performance through these key features:
A key element in the agency’s operations will be its use of up-to-date telecommunications and information technology. New ways of analysing co‑ops’ financial results will produce information never before available to CMHC or to co‑operative boards and staff. The agency will receive annual project reports delivered electronically in a standard form by co‑op auditors, but will also scan paper reports, as required. The reports will include the co‑op’s audited financial statement, an annual information return and an auditor's compliance review. Through its computerized systems the agency will monitor co‑ops' compliance with agreements; analyse the clues that show how they are performing; and share information among team members and with co‑ops themselves. Services
The agency will administer CMHC's portfolio of direct mortgage loans to housing co‑ops, collecting payments and remitting them the same day to CMHC, and following up any arrears.
The agency will calculate, account for and transfer subsidy payments to co‑ops and recover unused subsidy funds, as operating agreements require.
The agency will be alert to any breaches of co‑op operating agreements, and will ensure that they are corrected. It also will provide approvals to co‑ops, where project operating agreements require.
From co‑ops’ standardized annual reports, the agency will conduct tests to pinpoint any co‑ops that may have trouble servicing their mortgage debt in the future. It will focus on early identification and fast action.
The agency will prevent mortgage foreclosure by taking quick action when co‑ops fall behind in their payments. Its goal will be to minimize lost revenue and see building problems corrected quickly, before they grow worse. It will co‑operate with organizations such as CMHC’s Mortgage Insurance Fund, program lenders, and the Federal Co‑operative Housing Stabilization Fund, as appropriate.
Using a sophisticated database, the agency will develop performance benchmarks for co‑op health. Since it must collect and combine data from each co‑op to monitor compliance and manage risk, it will add value by giving co‑ops access to their own financial histories and their relationship to the benchmarks. Communicated in a form that shows up any trends, this information will encourage operational planning and inspire co‑ops to work for better results. Those that perform well will be asked to share the story of their success. Relevant, readable best-practices reports, produced in a form that protects individual members' privacy, will be available to all co‑ops electronically and in print. Benefits Government and the general public stand to benefit from the agency's sophisticated systems for ensuring that public funds are spent as intended. Core monitoring activities can largely be automated, freeing agency staff to direct their skills towards ensuring that co‑operatives operate well and are good stewards of the public's investment. The agency has been designed to incorporate features that will provide value for money through savings in overhead for example, by operating with a small core staff supplemented, when necessary, by local contractors or out-partners. Savings in administrative costs and program subsidies will accrue to the agency's government clients. By ensuring the continued success of these popular federal programs, the proposal promotes national unity. Local communities also stand to gain from the availability of affordable, well-run housing. The co‑op housing proposal supports the current direction in public policy towards delegating responsibility to the private and voluntary sector for the delivery of key services. For example, since 1990 British Columbia has followed the successful example of the caisses populaires movement in Quebec by empowering a central credit union body with regulatory authority to monitor and stabilize credit unions at risk, and to expend public funds in doing so. Co‑ops will benefit from prompt identification of their financial, management or building problems, combined with the agency's service culture and attention to regional differences. Best-practice case studies and trend data will help them to improve operations. On the most practical level, better performance will save money for the more than 50% of co‑op members who pay market rates. All residents will enjoy the improved community life and superior housing available in well-managed co‑ops. Markets for the Agency’s Services Housing co‑ops, wherever they are, have more in common with one another than with other forms of not-for-profit housing, even within the same neighbourhood. For example, all co‑ops are socially mixed, self-managed communities owned by their residents. They share historic principles, special governing legislation and distinctive operating agreements. They offer opportunities for skills development and personal growth, along with cost-effective shelter, as CMHC observed in its Evaluation of Co‑op Programs. Co‑ops have enjoyed significant autonomy because federal programs recognized the incentive to control costs inherent in their ownership structure. Similarly, we expect better outcomes from a specialized agency designed to make the most of housing co‑ops’ unique character. In Canada, only about 9% of federally assisted dwellings are in housing co‑ops, according to information from CMHC. In most provinces and territories, co‑op numbers are too small to justify separate administration by each province’s civil service. However, when pooled across the country, economies of scale justify the creation of a specialized agency. The transfer to date of responsibility for less than 7% of unilaterally funded federal co‑op units to the provinces and territories does not affect the business case for the agency, but it is not unreasonable to think that, over time, provincial governments will also see advantages in contracting with the agency for its specialized services. Location of Business Three regional service centres based in British Columbia, the Prairies and Ontario will administer the agreements of co‑ops in these regions. These centres will monitor compliance, manage risk, conduct research into best practices, manage project workouts, and perform routine loan and subsidy administration tasks. A fourth centre will open in Atlantic Canada as soon as contracts with provincial governments justify the expansion. Out-partners, supervised by regional staff and chosen for their expert knowledge, will deliver local services. Computing and telecommunications systems will link out-partners with service centres, and service centres with one another and with a support centre. A support centre will be responsible for default management services, back-up for all the service centres, information systems and services, management of loan and subsidy administration activities, agency management, and reporting to CMHC. Organizational and Management Structure In this “flat” organization, middle management will be minimized and all managers will also deliver services. Experienced local contractors will work with core staff to monitor compliance and help co‑ops in difficulty. Corporate Direction Accountability and Reporting The agency will be accountable through cancellable contracts with its government clients. Optional board representation would give these clients a window on the agency’s workings. They will also receive annual reports on portfolio performance and compliance with agreements. At more frequent intervals the agency proposes to provide analyses of compliance and risk levels, and reports on projects in arrears and upcoming loan renewals. Every year an independent public accountant will supply government clients with its audit of the agency's financial statements and of its administration of loans and subsidies. Funding and Compensation The agency would recover both its start-up costs and its continuing operating costs through contributions from its government clients. Start-up costs are estimated at $1,014,500, assuming cost-sharing with a Quebec partner, or $1,234,000 for a unilateral start-up. The fee to government for the agency's first full year of work is estimated at $3,532,200, plus the cost of amortizing the agency's start-up costs if these are not funded at the outset. (This fee has been calculated using data taken from information provided by CMHC to the provinces and CHF Canada in 1996. Before an agreement can be executed, the data will be reviewed again. If it changes, the fee will change.) The co‑operative housing movement believes that the proposed agency offers a remarkable opportunity for both the public and those who benefit directly from these popular housing programs. It is also a good expression of the modern trend towards alternative service delivery. CHF Canada invites those who want more information to contact us for a copy of the full proposal. Co‑operative Housing Federation of Canada |