Human Resources Committee on March 26th, 2015

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

My first question is for Mr. Murphy.

Cooperatives play a very important philanthropic role in Canada. A number of your members, including the Mouvement des casisses Desjardins, give millions of dollars in donations and sponsorships every year.

Last week, Carole Gagnon from United Way Ottawa stressed to the committee that it was important that these donations and sponsorships continue to be made and that social finance remain a complementary option, not a replacement.

What do you think about that?

[Shawn Murphy]

Thank you for your question.

I fully agree. We don't think that social finance is the only option. You had some government witnesses at the start of your meetings. They said they had a number of tools they wanted to use for social finance to provide services to Canadians.

The cooperatives see social finance as one piece of the puzzle. Now we are finding that there are many pieces of the puzzle. They need to be put together because everything is mixed up right now. Several tools are already in place, but there isn't enough awareness about social finance. That's a big problem right now.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

I find it interesting that you spoke about insufficient public awareness. Is there a way to address that?

[Shawn Murphy]

Yes.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

I found what you said about that interesting.

[Shawn Murphy]

Officials within government don't understand the cooperative model. Increasingly, we are seeing examples of cooperatives that require government assistance. The government tries to lump cooperatives together with traditional business or non-profit organizations. We are in the middle. We do both.

A cooperative's structure is very different, given that the members are elected. There's a board of directors, and decisions take time. Capital is difficult to obtain, as it is for any business. Sources of capital need to be found. The members of a cooperative aren't always willing to offer their homes as security.

That's what I mean when I talk about a lack of awareness and information. At the same time, in certain areas of Canada, public servants know the system and help cooperatives more because they understand that model.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

I don't want to mis-speak, but we can see that cooperatives are engaged in a sort of social finance.

[Shawn Murphy]

Yes, certainly.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

As you said before, it's sort of what has been done for 100 years, for as long as cooperatives have been around.

[Shawn Murphy]

That's the case. What's very good about the cooperative model is that each cooperative can be managed this way. It's the members who decide how they want to manage things.

If there is a surplus, it's up to the cooperative to decide how the surplus will be used. The priority is keeping the heating and lighting on. Then, the members must decide whether they want to reinvest in their cooperative or in the community. They must ask themselves how they will use this surplus. Community members are the ones who have put the money in. That's why we say that it's a social finance model.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Thank you.

Do I still have some time, Mr. Chair?

[The Chair, Conservative, Phil McColeman]

Thirty seconds.

[Marie-Claude Morin, NDP, Saint-Hyacinthe—Bagot, QC]

Okay. I'm done.

[The Chair, Conservative, Phil McColeman]

You had your time. Okay.

Then we move on to Mr. Butt.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Thank you very much.

Thank you to both gentlemen for being here today. I'm fairly passionate about two areas, housing and cooperatives, so it's a great panel for me this afternoon for sure.

I want to start with you, Mr. Richter. You alluded to the fact that there could be a role for social enterprise in creating affordable housing. What exactly would that model look at? Who would be the partners, and how would you see it financed, first in terms of what we're doing now, which is really what I would call block funding, where the federal government sends a bunch of money to the provinces, who make decisions on whether they're going to build new social housing or subsidize rents, or whatever else? Second, how would the social enterprise model be different in creating new affordable housing in communities across the country?

[Tim Richter]

There are two important distinctions. Now you're getting a fairly traditional investment model, where you say you put in block money, you put in this much and you get this many units. I think the opportunity here is first to take advantage of the existing investment. A lot of the funding the federal government's put in over 30 or 40 years in social housing across Canada is in older assets that could be redeveloped.

So first you get to capture the equity you've already invested and you can redevelop those properties and lever up off of rental investment, or other things.

Second, you will bring forward the more skilled and more sophisticated non-profit housing operators, which I think would allow you to further lever or bring in extra money from the market, as opposed to a dollar in being a dollar worth of value for you. I think you can lever your investment much more significantly here.

There is a lot of money waiting in Canada that is eager to be invested in the system, whether it is a low-income housing tax credit or some kind of loan guarantee structure.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Are you familiar with the homelessness partnering strategy, and if so, are you aware of the work the Mental Health Commission of Canada did? We've now got back the results of its study and its recommendation that we use this housing first model going forward.

I'm very familiar with this program from my days in the private sector prior to being elected to Parliament, because I was very actively involved in the program in Toronto. I actually considered that kind of a social enterprise model, because you brought in landlords, you brought in the Mental Health Commission of Canada, you brought in housing supports, and you brought in St. Michael's Hospital, which was doing the research and providing the support to the individuals who were housed.

Is that kind of a model what you would envision for the hardest-to-house individuals, people who typically are mentally ill or have mental health-related issues, the very hard to house people because of what's going on in their lives and the support they need? Is that the kind of model you'd see that maybe social enterprise would lend itself more to supporting?

[Tim Richter]

That's where I was concerned about the application of the social impact bond and private equity. To me the definition of social enterprise and social finance is a lot like what you heard from the representative from the Royal Bank, where you bring private equity in.

The private sector involvement in housing first.... And just for reference, here in Calgary I ran the Calgary Homeless Foundation, which housed about 4,000 people in housing first programs here. Across the province of Alberta over 9,000 people have been housed in the last five years, most of them in market rental housing. But that is much more a straight commercial transaction with the private sector. So we're paying landlords to put these people into housing. Some landlords offer discounts, so I don't see it necessarily as a social enterprise model, but I do see it as an extraordinarily effective and cost-saving intervention.

[Brad Butt, Conservative, Mississauga—Streetsville, ON]

Okay. I don't know how much time I have, but I'm going to ask a question or two about cooperatives now.

Thank you for that, Mr. Richter. I appreciate your thoughts.

I think Ms. Morin referred to this as well. Co-ops are almost our social enterprises, if you think about it. The models may be a little bit different. Do you see any real differences between social enterprise and how the cooperative and mutual sector has evolved over time? Are there any other things you would recommend that would perhaps lead to more communities and organizations developing these kinds of models to do a lot of the work that you're doing? We all know why co-ops first came to the forefront. It's because the traditional methods weren't doing it and people came together and said that we've got to do something.

Do you see much of a difference between the two models, and where would you see a social enterprise working better than a traditional cooperative model?

[Shawn Murphy]

Co-ops are definitely an interesting beast because you have very socially minded cooperatives, such as health care cooperatives. The name itself tells you what it's doing in focusing on health care needs for a particular community or region. Then on the other side, you have extremely large for-profit cooperatives. A great example in Saskatchewan is Federated Co-operatives, the largest non-financial co-op in Canada, in the top 50 businesses in Canada. You have quite the spectrum.

But the model blends itself well into enterprises. As you rightly pointed out, when there is a need and people can't find the solution to that need, that's when they come together. In most cases they don't want a ton of government intervention either. They need that startup capital, they need that kick-start to get going, and then in a perfect world they don't mind if the government backs out and they just go about providing the services to the people in their community. That also makes it a challenge in the co-op world because you have all these communities with these individual co-ops. Sometimes we're not talking with one another, so it's a little tricky to coordinate. As a sector, we're starting to do that. But we see the benefit in assisting governments in getting out those services, especially in underserviced areas across the country.

[The Chair, Conservative, Phil McColeman]

Thank you very much.

Mr. Cuzner.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Thanks very much.

I'll start with Mr. Richter, and then go to Shawn.

Mr. Richter, you're only about 15 minutes away from a provincial budget, so maybe all your headaches will be gone in 15 minutes. I appreciate your comments that there's no silver bullet here, but it certainly affords us an opportunity to pursue other options, and I think that's very worthwhile.

I want you to speak a little more about the low-income tax credit you mentioned. This would be with an investment in low-cost social housing.

[Tim Richter]

In our low-income housing tax credit, high-net-worth individuals or groups or corporations, whoever, have some money and they pay a significant amount of federal income tax. They could contribute or invest some portion of that income into affordable housing. The government at the beginning of a year would say they wanted to issue $300-million worth of affordable housing tax credits. A fixed amount would go into the incentive and would be divided around the country. For example, Ontario might get $75 million worth of affordable housing tax credits.

Typically what happens in the States is that there aren't enough individuals to use all the tax credits, so an intermediary—Royal Bank would be an example—would pool them in a mutual fund structure, and then that pool of money could be invested in low-income housing, however it's defined. In the United States, that low-income housing has taken a range of different forms, everything from a really deep subsidy, permanent supportive housing to near-market affordable housing.

If an investor wants to reduce the amount of federal tax they're paying and they can contribute some money as an investment, they make at least part of their return on that tax credit.

[Rodger Cuzner, Liberal, Cape Breton—Canso, NS]

Mr. Butt had indicated that one of the problems is it's usually the feds get to pay and the province gets the say. But you see a great opportunity in social financing for some of the current assets on the ground that need a significant investment and refurbishment.

[Tim Richter]

I think there's a huge opportunity. In Calgary, for example, they are in prime real estate. They are low density, so there's lots of space where you could redevelop. You can extract a lot of financial value out of property and redevelop it and maintain that housing for its social housing purpose. Once it's out of contract, they can sell it and it'll be picked up by developers in any city in Canada. It's great real estate, so it would be picked up in a hurry. We'd lose that capacity in the affordable housing system. We've got a crisis today, and anything we can do to stop digging this hole we're in would be helpful.