New Financing Model for Cohousing
The Community Wealth Fund is a financial mechanism that has the potential to make homeownership in Cohousing financially more accessible. We interviewed Michel Labbé, CEO of Options International and Development Consultant at Cohousing Options Canada to give you a better understanding of what exactly the Community Wealth Fund is and how it can help Cohousing communities move forward.
Michel, can you briefly describe what the “Community Wealth Fund” is?
Let me start by telling you that I am very excited to be part of the team and I look forward to welcoming Cohousing Options Canada as a member of the Community Wealth Fund. So what is it? The Community Wealth Fund is a seed capital fund. It is like a venture capital fund for social enterprises. The fund is controlled by participating non-profit and co-operative corporations. Through its participation in the Community Wealth Fund, Cohousing Options Canada will soon be able to access loans for Cohousing communities and second mortgages for member households. Eventually, we also hope to have loans available to help cover some of the soft start-up costs needed to get new communities formed.
What purpose does the “Community Wealth Fund” serve?
In a Cohousing context, the Community Wealth Fund will allow communities to obtain the front-end equity investment that is needed to obtain various other sources of financing for the development of successful projects. To Cohousing households who lack the typical 20% for a downpayment but meet other financial criteria for a mortgage, the fund will provide guarantees. Guarantees are more commonly known as a “second mortgage”. They will enable Cohousing households to access a mortgage via their bank or credit union with as little as a 5% down payment. This will make home ownership and participation in a Cohousing community financially more accessible.
How exactly does it work?
To borrow the money that is needed to move their venture forward, Cohousing communities who have formed a non-profit development co-operative will need to apply to the fund through Cohousing Options Canada who functions as their development consultant. The Community Wealth Fund will review the application and, if accepted, grant a loan at an interest rate of 1% above the prime rate. In exchange, the community needs to commit to placing the surplus generated form their venture activity into the fund. The communities who have been accepted become part of the Community Wealth Fund. They will have the opportunity to democratically impact how their surplus contributions to the fund are used.
Who is eligible to tap into the “Community Wealth Fund”?
Any non-profit corporation is eligible to apply to the fund. They must commit to the vision of the fund which is to reduce poverty, improve society and protect the planet.
What does this mean for Cohousing projects?
The participation and contribution of Cohousing communities will not only move their respective projects forward but also help kickstart and support future Cohousing communities. This is our hope.
Who governs the Community Wealth Fund?
It is a multi-stakeholder fund that has 5 categories:
- Short term co-operative development corporations (this is where Cohousing would fit in)
- Long term co-operative and Non-profit corporations
- Development consultants
- Non-profit corporations that do not use the fund
- Community champions (individuals with a lot of societal good will such as a David Suzuki that would like to add their good will to the vision of the fund).
What organizations are part of the Community Wealth Fund?
As a starting point there is only one organization per category and they are: Options For Homes International Non-profit Corporation, Ontario Co-operative Association, Northern Housing Non-profit Corporation, Bricktown Co-operative Development Co-operation and Evelisa Genova, a Community Champion. There will be several more joining this year.