Inside the Solutions Lab

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Over the first two episodes of The Equity Gap, we've followed a group of people who
believe that collective ownership is an important solution to Canada's housing crisis.
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The group is made up of community land trusts, CLTs for short, and credit unions.
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CLTs are organizations that work to keep housing permanently affordable by removing land
from the speculative market.
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And credit unions are member owned financial institutions
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that invest in the communities they serve.
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Through the lab, this group is trying to bridge an equity gap.
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That's the financial chasm that limits the ability of non-market housing organizations
like community land trusts to acquire and preserve existing affordable housing.
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A solutions lab brought these two sectors into the same room through a structured social
innovation process funded through Canada Mortgage and Housing Corporation's NHS Solutions
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Lab program.
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The goal of the lab was to co-design new financing tools, test them, and map a path toward
implementation.
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The lab produced tangible prototypes that have the potential to push the needle on the
troublesome equity gap.
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And my conversations with the lab participants revealed another critical problem solving
resource coming out of the lab.
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Something less technical, but no less important.
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Relationships.
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James Yool from Kindred Credit Union.
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And Sean Campbell from Union Cooperative are convinced of the importance of this.
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It's the relationship piece, getting to know these people so you can pick up the phone and
call them, um, and bounce ideas off them, but also learning about the opportunities and
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challenges in their industry and uh, you know, see how we can add value for their
businesses.
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Means I get to hang out with this guy.
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I I a lot of this is just based on trust and relationships and
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No, we're just getting to know each other through this work right here, but now it's you
know, James is someone I can I can call with an idea and and an opportunity to work
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together and I think that's really important in this work.
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Today on The Equity Gap, we go inside the lab.
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We hear from the architects of the Solutions Lab program about what it is and why it
works, and we hear from the participants about the solutions they've been building and
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what they've been learning along the way.
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[Group discussion in the background]
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To understand what's happening in this lab and
what it could mean for housing in Canada, we need to start with the government program
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that made it possible.
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In 2017, the federal government passed Canada's first national housing strategy, often
shortened with the acronym NHS.
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Out of that strategy came a number of programs to address gaps in the housing ecosystem.
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Eleven of those programs were focused on addressing research data and innovation needs.
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This included the NHS Solutions Lab housed at Canada Mortgage and Housing Corporation,
CMHC for short.
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Andrew Cowen is a senior specialist at CMHC and the lead administrator of the NHS
Solutions Lab program.
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He's been with CMHC for nearly a decade.
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It is a program that was part of the National Housing Strategy.
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Prior to the strategy being uh approved by government and implemented, there was of
course uh a period of consultation with housing stakeholders uh across the housing
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ecosystem in Canada.
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And through those consultations it became um clear that stakeholders would uh advise and
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did need um, you know, support in not only um innovation, but in programs that help them
deal with sort of data gaps, uh how to how to do things differently or how to solve
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problems uh differently, and sort of capacity building through a demonstrations program,
et cetera.
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So we're we're part of uh 11 other um or 10 other uh programs.
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all looking at trying to address that particular need in in terms of better data, uh
better research and more focused research, and then uh a number of uh innovation programs
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that help address you know complex problems or just doing things a bit differently and and
building capacity in the ecosystem to then deliver those those improvements.
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The designers of this program actually did their homework.
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And so they they looked at sort what existed in Canada and you know elsewhere around um
sort of meeting uh some key objectives around eliminating barriers to complex problems, uh
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sort of dealing with uh the building of capacity in the housing sector and also creating
um an ethic of innovation.
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And and so they they engaged uh some firms in looking at what existed in Canada and
elsewhere.
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And and those firms came back with this idea of social innovation as a uh environment in
which to sort of deal with these uh these complexities uh and and the principles that come
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with that, right?
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So so the idea of systems based, user centered design, et cetera, et cetera.
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So that all came out of some pre dis program design research that then informed the the
folks working on sort of the program design uh to utilize and come up with the concept of
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a solution lab program.
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Over roughly eight years, the program has funded around one hundred labs across Canada.
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The lab led by the Canadian Credit Union Association that we're following in this series
was one of them.
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To design and facilitate the lab, the Canadian Credit Union Association brought in Sean
Geobey, an associate professor in the School of Environment, Enterprise and Development at
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the University of Waterloo, and a consultant with Scaled Purpose.
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Sean has been working in social innovation labs for close to 25 years.
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One of the things about working in this space is that there's a lot of terminology that
sounds very similar and sounds like it is describing
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very similar kind of processes or phenomena.
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And fundamentally, they often are.
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So Solutions Lab, Social Innovation Lab, Change Lab, at its core between these things,
because there are differences between them, 90% of what's happening is the same.
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It's bringing large groups of people together, either in person or virtually, usually from
a variety of different stakeholder perspectives, to have them co design a set of solutions
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that can hopefully have an impact on a complex
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challenge.
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The lab process has three main phases: mapping, designing, and prototyping.
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So the social innovation lab that we're conducting here really has three big phases.
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The first is mapping out what the actual system looks like.
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Um the second is trying to collectively design what we think a better version of that
system could look like.
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And the third is figuring out how to prototype possibilities to bring us from here to
there.
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So in this case, it really is this equity gap in financing of non-market housing and
community land trusts.
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but as a baseline, we need to get a sense from all of our stakeholders, like what is
happening on the land trust side, what's happening on the credit union and financial side,
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um, to think about how we might be able to think about how that could look better.
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The lab language is intentional, Sean explains, because what's happening in these rooms
really does resemble the scientific method.
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We have some questions, some research questions.
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And in this case, one of the big overarching ones is do we think that community-based
finance, like credit unions, and community-based housing providers, like the land trusts,
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can find complementary ways of working together?
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That's our question.
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Our hypothesis is yes, they can.
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And then we test that.
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So that at a high level.
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Is what that process looks like in the social innovation lab.
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We're using post-it notes, we're using spreadsheets, we are uh sometimes you'll you know
use clay or play-doh.
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Uh, but whatever the tools you're working with, what you're trying to do is in a fairly
controlled environment, combine together concepts, ideas, in ways that are novel, just
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like a chemistry lab might.
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Unfortunately, because we are dealing with very complex social systems.
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If you were to try and do those experiments out in the real world right off the bat, it's
going to cost you an incredibly large amount of money.
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And the potential damage to the people you're trying to help it could be incredibly high
as well.
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So in this more controlled environment, we can start mapping out what we think are likely
outcomes before we start trying them in the real world.
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Rather than a single bet on one big solution, the lab builds a portfolio.
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Multiple prototypes tested simultaneously, each informed by what the others are
discovering.
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None of these solutions is ever going to be capable of fixing the equity gap on its own,
but they each address a different part.
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And whether or not all of these solutions end up finding a permanent home are permanent
products that can be rolled out across Ontario, across Canada, all of them are going to
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give us something to learn from it.
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And ultimately, the way that
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We often think about these in social innovation lab processes is that we're not trying to
develop silver bullet solutions, we're trying to develop silver buckshot.
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What makes housing such a hard problem to solve that it requires a specialized tool like a
solutions lab?
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Andrew Cowan at CMHC points to the fundamental complexity of the housing system itself.
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Housing isn't homogeneous, first of all, right?
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Like are we talking about
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market housing?
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Are we talking about for-profit housing?
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Are we talking about housing for the middle class?
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Are we talking about, you know, housing for the homeless, for for newcomers, for you know,
people with disabilities.
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They all have different sort of needs and they all work within an ecosystem uh
differently.
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And so it is really uh like try and map that system out.
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and then try and model it.
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Like it it's also affected by sort of economic uh stimulus, e economic changes, uh
anything that happens, yeah, you know, resource availability, uh all of that, social sort
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of um cultural norms, etc.
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All that feeds into housing in general in Canada.
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And so um you really have to uh have
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context in which to sort of build a solution.
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The lab model helps to de-risk innovation in a complex problem area like housing.
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Andrew explains that before a credit union or a land trust invests real money in a new
financing product or solution, the lab allows them to stress test the idea first.
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The program does a few really interesting things.
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Like it it does it de-risks innovation because you're
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you're essentially going through uh a an analysis of like, can this actually work?
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And sort of asking those hard questions before you're taking the widget and designing it
and then introducing it into the market, uh, you know, at a at a cost, right?
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And then hoping it will work or sort of fine tuning as you go.
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You you've de risked some of that sort of uh
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uh potential for um failure early on.
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And so I I think that's why um the program uh had such a uh sort of positive um feedback
from those who were using it.
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The lab ran over several months in 2025 and 2026 with in-person sessions in the
communities where the land trusts operate.
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The process moved from mapping through design to prototyping
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With participants doing research and outreach within their own organizations between
sessions.
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One of the most significant things the lab produced, Sean says, isn't just the new
solutions.
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It's the relationships.
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One of the other pieces of the lab that, from my experience, outlasts the process is the
relationships that are built.
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When we bring people together into the room, there is nobody who knows everybody.
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When we start.
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But by the end, everyone does.
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Now you know who to pick up the phone and call because you've worked with them, you've
built some trust.
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And a permanent piece of the post lab infrastructure is that those relationships outlast
the lab.
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And so it makes new ideas easier to bring to scale or come to market than it would without
those relationships having been built.
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What comes after the lab ends?
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According to CMHC's evaluation data, around 65% of labs move forward and implement their
solutions, some of which go on to be replicated elsewhere.
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But the path from lab to impact, Sean says, depends on what participants do next.
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Part of what comes next is sharing the results.
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So we are trying to make sure that what we have found in this lab process is not only
embedded in the experiences.
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Of our participants and clarified so everyone knows what everyone else is doing, but also
is shared across the credit union networks, the land trust networks, and with Canada
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Mortgage and Housing Corporation.
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In a lot of ways, what happens next is really going to be driven by those three different
groups of stakeholders.
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That said, what I am hopeful about or anticipating is that the people who've come together
to work on this problem.
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see value in continuing to come together and work on this problem.
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In the last episode, we heard from Kevin VanKampen at Meridian Credit Union about an
innovative idea that came out of the lab: a reverse waterfall loan guarantee structure in
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which foundations are called upon first before foreclosure to help stabilize a distressed
affordable housing property, preserving it rather than losing it to the open market
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forever.
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That idea evolved in the conversations between credit union lenders and CLT leaders in the
lab.
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Sean Goby, the lab facilitator, says the lab solutions fall into one of three buckets.
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First, shoring up tenant income so lenders see less risk.
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Second, reducing that risk directly, and third, increasing the overall supply of capital.
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Together, they squeeze the equity gap from both sides, making sustainable financing easier
to get and making more of it available in the first place.
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Let's hear about a few of the solutions coming out of the lab.
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Keith Taylor is the executive director of the DUCA Impact Lab, an offshoot of DUCA Credit
Union, and a space for credit unions to collaborate on solutions for financial
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vulnerability challenges in mainstream banking.
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He has been developing a program called the Escalator Loan in collaboration with Coast
Capital, Kindred, Your Neighborhood, and Vancity Credit Unions.
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The Escalator Loan is a consolidation loan for people trapped in predatory debt.
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And it became a solution of interest for the equity gap lab.
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So people that, you know, lower income, lower credit score, uh, that generally don't show
up in great numbers on main t mainstream banking balance sheets, uh, but that are in
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trouble with um, you know, the the payday lenders of the world or or some of the the
higher priced online lenders, and are struggling to get out of those loans and and move on
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with their financial lives as a result.
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The program works by buying out borrowers' debts from predatory lenders and refinancing
them under far more favorable terms.
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So it's quite a quite an interest savings.
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It's quite a uh a bit of money back in people's pockets, and that's particularly
meaningful for people that are in trouble.
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uh
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Or having access to the banking system and you know generally making lower income when you you you start channeling that kind of money back into their pockets, it's a it's a
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meaningful impact.
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By some estimates, the segment of Canadians who don't have full access to mainstream
financial services because of low credit scores or low income is between ten and twelve
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million people.
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It's a group that major financial institutions had largely written off as too risky.
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I ultimately what excites me about the idea is if you can find viable ways of including
this demographic in mainstream financial services, you not only create a a huge amount of
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social value, um, you're creating a a net new segment for the financial institutions.
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They don't, you know, the the the folks we're we're figuring out how to work with in this
pilot generally don't show up in great numbers in mainstream institutions, which is why
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they're in the predatory.
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lending space to be to begin with.
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Uh and there aren't many like net new segment opportunities in in financial services, in
retail financial services.
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So it's a fairly um developed market.
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Aaron The social impact goes well beyond the immediate interest savings.
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Keith worked with Social Value Canada and a UK-based firm called Symmetrica Jacobs to
quantify the knock-on effects of financial stability for borrowers.
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First of all, we want to understand
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If it created the social impact we were hoping it would.
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But through, you know, the process of doing that work, we're able to get a really clear
understanding of of what actually happens when, you know, you're able to address people's
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financial vulnerability.
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and it's it's more than just a good story.
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It's an extremely valuable opportunity ah if you're able to kind of reduce that that risk
in the system.
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at scale, it would be a sizable opportunity for for Canada, generally speaking.
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Uh and a lot of it is driven through mental health improvements, a lot of it's driven
through, you know, food security and ability to participate in in communities.
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Um a lot of it's uh there's a big impact on housing uh stability.
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You know, the more you're able to reduce that risk of, you know, people not being able to
to pay their debts or struggling to pay their their debts.
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There's all these knock-on effects that are actually worth quite a bit to you know to the
broader society in Canada.
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In conversations with land trust leaders through the lab, Keith realized that many
residents of affordable housing communities, including those owned by community land
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trusts, were caught in the same predatory lending traps that the escalator loan was
designed to address.
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It really came up in our discussions that this was, you know, a broad
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need within the the community land trust world and and in h in housing, uh affordable
housing generally speaking, that, you know, a lot of the residents in these communities
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were getting uh into trouble with these same lenders.
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Uh and that was, you know, creating some knock on risks to the uh you know, to their
ability to pay their their rent um and meet their obligations from a housing perspective.
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So we are envisioning some opportunities to utilize the the loan pool that we've built
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To uh to start providing service to those living in in affordable housing communities, not
just where we are, but probably across Canada.
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Keith's goal is to scale to 3,000 loans, a large enough sample to validate new credit
scoring models and challenge conventional assumptions about the risk of lending to this
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demographic.
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It's opened up, you know, my eyes to the need in the in the affordable housing space.
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but also it's given us a sense of of, you know.
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where we might collaborate on affordable housing and how we can support, you know, the
needs in those communities uh more generally.
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Community land trusts often acquire properties with affordable rents and long histories.
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These older buildings can come with a sizable price tag for retrofits and climate
upgrades.
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Mike Bulthuis, Executive Director of the Ottawa Community Land Trust, and Chloe Wong, a
business development manager from Vancity Community Investment Bank, have been working
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together in the lab on a prototype to help community land trusts finance an acquisition
and retrofit simultaneously.
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So I really do want to see this through.
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I'm partnering with Ottawa Community Land Trust, and we're talking about how maybe the
next acquisition will look like if we can marry the two together.
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For Ottawa Community Land Trust, the issue is urgent.
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Mike explains the tension between affordability and climate responsibility.
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For our land trust, we have begun to grow our portfolio through acquisition.
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And of course, the acquisitions that are available to us in our early days are, you know,
price is really important.
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And so we're finding buildings from the 50s and 60s and 70s that have really strong bones.
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Some of them are also a little tired.
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Um, and you know, that affordability is really important and we want to protect that.
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But we also need to ensure that when we buy a building, we can sustain that, you know, in
the decades to come.
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And so, you know, I think what we are looking at is is there a way to ensure.
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you know, from day one at a very high level, um, that we can actually make that
commitment, that we can, you know, preserve the affordability and also take the steps
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necessary to protect the building and actually improve it in some cases from an energy
conservation point of view.
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I think that what we have sort of seen in the landscape is that, you know, that that
retrofit or or cleanup work is often funded through rental increases or, you know,
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development that is of a higher qu um a higher cost kind of housing.
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And so we're trying to find
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An alternative to that.
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And so the the the ideas that we're talking about, we've sort of landed on this
terminology of reno protect as an alternative to the idea of renovictions, which we know
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happens so often.
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Yeah.
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Reno protect.
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Reno protect line of credit.
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The reno protect line of credit.
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Yeah.
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Yeah.
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We've just branded the the product.
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The challenge is straightforward but thorny.
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Adding a retrofit on top of an acquisition means financing two things at once and making
the numbers add up
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is not easy.
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I think we're trying to find a financing pathway that would allow us to both preserve
affordability and enhance um energy use at the same time.
24:04.447 --> 24:08.669
And so to pursue a retrofit concurrent to the timing of an acquisition.
24:08.669 --> 24:20.414
From a lender's perspective, it's having it's health having a healthy performa and budget
and what that will look like in the next three, five, ten years.
24:20.506 --> 24:26.610
Um, based on, you know, acquiring the property while also doing the retrofits that are
needed.
24:26.610 --> 24:32.154
Um, you know, what the f feasibility studies look like and if it makes sense.
24:33.595 --> 24:36.877
so I I think there's something here for sure.
24:36.877 --> 24:49.045
And I think if we have all the right people come together, we you we can see, yeah, if if
if it's feasible across all land trusts.
24:49.045 --> 24:50.516
So being patient.
24:51.160 --> 24:54.472
Persevering um for the project as well.
24:54.472 --> 24:58.924
And um yeah, it's really it really is like community coming together.
24:58.924 --> 25:00.835
Yeah.
25:00.835 --> 25:01.496
I would echo that.
25:01.496 --> 25:08.279
I mean, I I I think, you know, we know that it's possible in the sense that there's
there's obviously financing for retrofits and there's lots of experience in how to
25:08.279 --> 25:12.922
retrofit a building and there's funding for acquisitions and lots of experience on how to
acquire buildings.
25:12.982 --> 25:17.325
I think that what we haven't seen yet is a lot of attention towards how do we do those
things at the same time?
25:17.325 --> 25:20.406
And how does one potentially impact the other and vice versa.
25:20.406 --> 25:28.149
And so it's just having um yeah, having a bit of space and as Chloe said, to work together
up bringing those different pieces of information into one space.
25:28.669 --> 25:34.092
Mike sees this not just as a financial puzzle, but as a question of quality of life.
25:34.092 --> 25:38.103
I think for tenants quality of life, like this could make measurable differences.
25:38.103 --> 25:47.397
So, you know, we know that like in Ottawa, we're getting incredibly hot and humid weather
in the summer and the buildings that we're buying don't necessarily have air conditioning.
25:47.397 --> 25:50.104
So if we can pursue a retrofit that enhances
25:50.104 --> 25:52.955
preserves affordability and enhances their own quality of life.
25:52.955 --> 25:54.876
Like I think that's a really exciting thing.
25:54.876 --> 25:59.837
And and I don't I don't know that we typically think of buying older buildings.
25:59.837 --> 26:06.546
We don't typically align that with our visions of, wow, that is like a beautiful place to
live, but that is um there's no reason for that.
26:06.546 --> 26:13.401
These, you know, I think we can make those places into incredibly comfortable, desirable
places to live.
26:13.401 --> 26:16.072
And this this I think moves us in that direction as well.
26:19.352 --> 26:23.826
Dominique Russell is the co-director of the Kensington Market Community Land Trust.
26:23.826 --> 26:29.270
Kevin VanKampen is Senior Vice President of Business Banking at Meridian Credit Union.
26:29.370 --> 26:38.788
Together, they've been exploring how to better support commercial tenants from
equity-seeking groups, newcomer businesses, and small enterprises without access to
26:38.788 --> 26:40.319
traditional capital.
26:40.440 --> 26:48.386
It's a prototype that's specific to a community land trust like Kensington Market, which
stewards both residential and commercial space.
26:48.556 --> 26:58.930
the initial idea was, you know, the land trust in some ways already supporting our tenants
by, you know, often there's a there's a fixturing period where you're not paying rent or
26:58.930 --> 27:01.551
you're asking for less rent as they as they scale up.
27:01.551 --> 27:05.653
And is there a way that the credit union could be supporting that?
27:05.653 --> 27:17.288
I mean there's there's risks to that in uh for the for the the land trust as we were
exploring it, the realities of taking that on, and given that there's an existing product
27:17.288 --> 27:18.188
that might make
27:18.188 --> 27:22.471
More uh sense to to direct our our tenants.
27:22.471 --> 27:29.985
So the kinds of commercial support starts to think more about how do we connect them um to
to resources.
27:29.985 --> 27:33.237
Um so we Yeah, exactly.
27:33.237 --> 27:39.551
So it's it's you know the there's no sense uh building something that already exists
because it could be you know quite redundant.
27:39.551 --> 27:45.844
And it it wouldn't be practical for a a community land trust to have like business loans
on its balance sheet.
27:45.902 --> 27:52.856
because that's actually taking on some some risk that the Community Land Trust doesn't
necessarily do for a living, and it's a little bit more unfamiliar, but it is very
27:52.856 --> 27:54.407
familiar to what we do.
27:54.407 --> 28:04.233
As they dug into the problem, Kevin revealed that Meridian already had a product developed
three years ago in partnership with BDC, the Business Development Bank of Canada.
28:04.233 --> 28:09.756
Meridian had been the first and for a time the only financial institution in Canada to
offer it.
28:09.756 --> 28:12.758
The idea was that we're going to create a whole new credit box.
28:12.758 --> 28:19.601
And it's really to appeal to equity-deserving groups because you know, access to capital
is uh is a constraint.
28:19.601 --> 28:31.237
So we created uh a new credit box with much wider um and a lot more flexibility on credit
scoring than what would normally be available to just improve access and the amount of
28:31.237 --> 28:32.287
credit that was available.
28:32.287 --> 28:33.968
So we did this as a pilot.
28:34.128 --> 28:37.720
BDC would provide a guarantee to merit and credit union.
28:37.720 --> 28:45.922
For approximately 80% of the loan, but it would give us, you know, confidence that even
though this is a deal we would not normally do based on the various credit score, we're
28:45.922 --> 28:48.933
gonna do it with BDC to but by backing it up.
28:48.933 --> 28:56.595
And BDC did approach all of the financial institutions like the big banks to pilot on this
as well, and they couldn't find any takers.
28:56.595 --> 29:01.316
The program was risky because there was simply no data to predict what might happen.
29:01.377 --> 29:07.148
The loan program was designed for a group that the mainstream financial system had never
tried to serve.
29:07.234 --> 29:11.697
So the data on how those loans would perform simply didn't exist.
29:11.778 --> 29:15.501
Meridian decided to create the data themselves.
29:15.742 --> 29:26.671
Three years later, RBC joined the program, TD, Desjardins, and credit unions across the
country, because Meridian had done the work of proving it could be done.
29:26.811 --> 29:33.077
Now the lab is testing out a path to connect that product with the commercial tenants of
community land trusts.
29:33.077 --> 29:34.584
We're a neighborhood.
29:34.584 --> 29:35.595
community land trust.
29:35.595 --> 29:39.259
And so for us it's important to support the entire business ecology.
29:39.259 --> 29:49.731
So this is is one way that, you know, we're we're able to bring um together the any
business owner that might be interested and then new businesses that might want to join as
29:49.731 --> 29:50.532
well.
29:50.713 --> 29:55.938
What's interesting about this this lab and these there's multiple solutions.
29:56.084 --> 29:59.658
in and some of them are more aspirational or some of them require more work.
29:59.658 --> 30:04.805
It's just great that there's something like click, okay, here's the path, here's you know,
it's ready to go.
30:04.805 --> 30:16.138
Bringing these two groups together and and there's some instant kind of fits, which is,
you know, it's it's it's good to have the the quick and immediate solution.
30:18.274 --> 30:27.327
The solutions we just heard about have the potential to address the equity gap by
increasing tenant success through access to more affordable credit, and by reducing
30:27.327 --> 30:31.958
operating costs and making a building more attractive to tenants through a retrofit.
30:32.358 --> 30:42.711
For a lender, these solutions can make a CLT mortgage less risky by lowering vacancy rates
and rent arrears, increasing the value of the building, and increasing the CLT's debt
30:42.711 --> 30:46.272
capacity by reducing utility and maintenance costs.
30:46.934 --> 30:56.618
Sean Geobey told us about a few more solutions coming out of the lab, focused on the other
side of the equation, increasing the amount of capital that community land trusts can
30:56.618 --> 30:57.658
access.
30:57.819 --> 31:03.761
We'll start with the solution the lab participants are calling blended finance for higher
LTVs.
31:03.761 --> 31:07.363
So, the blended finance for higher LTVs really has two parts.
31:07.363 --> 31:09.424
The first part is the blended finance.
31:09.424 --> 31:14.882
What that means is that instead of taking just one type of credit, say a mortgage.
31:14.882 --> 31:17.404
You're taking two or more types of credit.
31:17.404 --> 31:25.170
So we're taking a mortgage and we are also taking capital that's coming from a foundation,
so from a charity.
31:25.531 --> 31:30.355
The higher LTV really speaks about a loan-to-value ratio.
31:30.495 --> 31:32.997
LTV stands for loan to value.
31:32.997 --> 31:37.982
It's the ratio between the mortgage principle and the value of the property behind it.
31:37.982 --> 31:39.463
Here's an example.
31:39.463 --> 31:43.458
A $6 million mortgage on a property worth $10 million is
31:43.458 --> 31:46.099
Has a loan to value of 60%.
31:46.179 --> 31:53.342
It's an important metric for a lender who set a maximum loan to value ratio to limit how
much risk it takes on.
31:53.543 --> 31:58.865
To shrink the equity gap, we can't simply ask a credit union to bend those rules.
31:58.865 --> 32:01.406
Blended finance gets there another way.
32:01.406 --> 32:10.646
It brings in other more flexible kinds of credit union capital and stacks them on top of
the mortgage, such as a local community investment pool.
32:10.646 --> 32:13.968
Or a loan from the credit union's charitable foundation.
32:14.629 --> 32:25.677
The lab participants call this catalytic capital because it increases a CLT's access to
capital, lowers the risk on the deal, and brings down financing costs.
32:25.677 --> 32:33.903
Sean put it this way. If I go to a cafe, one of the things that I might buy as a snack with
my tea is a brownie.
32:33.903 --> 32:34.664
I like a brownie.
32:34.664 --> 32:35.365
Brownie is great.
32:35.365 --> 32:38.546
But the thing is, a brownie is just one thing all the way through.
32:38.638 --> 32:44.002
If I go to the cafe and they offer me a nanaimo bar, I'm absolutely going to get the
nanaimo bar first.
32:44.002 --> 32:45.804
Why do I like that nanaimo bar?
32:45.804 --> 32:47.935
Because the brownie part is great with you there.
32:47.935 --> 32:49.366
Love the brownie.
32:49.387 --> 32:54.378
But I like that buttery cream thing and I like that little bit of chocolate on the top.
32:54.378 --> 32:59.635
When we're talking about blended finance, we're talking about basically you'd have a
mortgage before.
32:59.635 --> 33:01.016
That's your brownie.
33:01.056 --> 33:03.598
But this is a Nanaimo bar here.
33:03.598 --> 33:08.802
And the fact that you've added in that layer of chocolate and that layer of cream.
33:08.920 --> 33:11.832
To me, that makes it a more delicious snack.
33:12.073 --> 33:17.117
Stretch that analogy into the world of finance and you're looking at a capital stack.
33:17.117 --> 33:21.840
The cream filling in the middle is the credit union's local community investment pool.
33:21.961 --> 33:32.529
It's a special kind of capital that credit unions in Ontario can set aside to take on
added risk in support of organizations providing essential community services, including
33:32.529 --> 33:34.130
affordable housing.
33:34.431 --> 33:38.604
The chocolate on top is the credit union's charitable foundation.
33:38.644 --> 33:44.398
That's money that's there to maximize social impact first and financial return second.
33:44.419 --> 33:55.328
Now, if they get the financial return, that is fantastic because that means they can take
that financial return and put it back out as even more social impact, even more chocolate.
33:55.328 --> 34:00.473
But if they don't, their impact has come from providing that chocolate in and of itself.
34:00.473 --> 34:07.000
So the foundation gets to be that highest risk capital because if things go wrong, they're
primarily.
34:07.000 --> 34:10.812
concerned about making sure that affordable housing is provided.
34:10.812 --> 34:22.809
The community impact, that one layer down from that local community investment capital,
that is there to have that blend of the social impact, but also the financial return and
34:22.809 --> 34:33.134
creating those connections in the community for the credit union, all there, protecting
that mortgage layer on the bottom, which is the huge amount of capital that a credit union
34:33.134 --> 34:34.285
can deploy.
34:34.345 --> 34:36.586
You do those top two layers well.
34:36.929 --> 34:43.073
The credit union can bring way more brownies to the table than if they were just providing
a plate of brownies on their own.
34:43.254 --> 34:48.778
Layering in that community investment and foundation capital does two things at once.
34:48.778 --> 35:00.126
It absorbs the first loss if a deal goes wrong, which protects the credit union's more
heavily regulated mortgage capital, and it unlocks new sources of money that shrink the
35:00.126 --> 35:01.226
equity gap.
35:04.642 --> 35:14.346
The next solution starts with a financial tool almost every credit union member already
knows, a GIC or guaranteed investment certificate.
35:14.346 --> 35:23.440
So the way the GIC capital raise solution works is it takes something that people already
kind of know what they are, a guaranteed investment certificate, and ties it directly to
35:23.440 --> 35:25.491
the provision of affordable housing.
35:26.091 --> 35:33.070
From the side of a credit union selling a product, what it looks like is a bit of a
marketing shift.
35:33.070 --> 35:35.192
It's like, we already have this GIC.
35:35.192 --> 35:38.855
We're going to take it and channel it in a specific direction.
35:38.855 --> 35:41.518
Versions of this already exist.
35:41.518 --> 35:46.722
Kindred Credit Union offers a GIC that directs its proceeds into affordable housing.
35:46.742 --> 35:53.087
And Vancity Community Investment Bank offers an affordable housing savings account that
works on a similar principle.
35:53.168 --> 36:00.564
Investors earn a standard rate of return, and the financial institution gains capital it
can put toward affordable housing lending.
36:01.270 --> 36:04.292
What the lab is exploring goes a step further.
36:04.292 --> 36:12.436
They are considering how to turn the GIC into a platform that can take on the job
community land trusts currently do themselves.
36:12.736 --> 36:22.452
In episode one, we heard how the Kensington Market Community Land Trust and the Ottawa
Community Land Trust have raised millions of dollars by issuing community bonds to local
36:22.452 --> 36:25.463
investors to help close the equity gap.
36:25.764 --> 36:28.985
Running that kind of raise is a lot of work.
36:29.065 --> 36:30.496
The idea here
36:30.496 --> 36:34.847
is to let a credit union's infrastructure carry that weight instead.
36:34.847 --> 36:40.309
The first benefit to community land trusts is it allows access to more capital.
36:40.649 --> 36:49.071
The second benefit to community land trust is they don't have to deal with the
administrative headache of running that capital themselves.
36:49.152 --> 36:50.952
Here's how it would work.
36:50.952 --> 36:57.770
A credit union creates a specialized GIC like product where 100% of the investors' money
36:57.770 --> 37:02.413
goes to fill the equity gap on a specific community land trust project.
37:02.534 --> 37:12.040
But unlike an ordinary government insured GIC, this capital is entirely at risk, behaving
much more like a community bond.
37:12.301 --> 37:22.448
For the land trust, relying on the credit union's established systems can strip out the
transaction cost and complexity of managing hundreds of individual investors.
37:22.448 --> 37:25.590
The reporting, the security, the compliance,
37:25.964 --> 37:33.740
And because the investment runs through a credit union, it can more easily be held inside
an RRSP or a TFSA.
37:33.881 --> 37:39.405
If it is the guaranteed investment certificate, it's me to the credit union.
37:39.405 --> 37:52.366
And then the credit union manages all of the systems around information and data, the
registration of all the accounts, the administration of all the reporting of T5s and
37:52.366 --> 37:55.438
contracts and all those pieces, and has the
37:55.438 --> 37:57.219
credibility attached to it.
37:57.439 --> 38:01.741
And it takes my money, it pools it with all the other people who are buying that GIC.
38:01.741 --> 38:04.552
And it's not just deploying it to that one community land trust.
38:04.552 --> 38:08.203
It could potentially deploy it to a number of different community land trusts.
38:08.444 --> 38:11.164
There's something in it for the credit union too.
38:11.225 --> 38:16.427
Growing membership is a strategic priority for most credit unions, and it isn't free.
38:16.567 --> 38:23.980
Here the land trust markets the product to its own supporters and to invest those
supporters have to become credit union members.
38:24.286 --> 38:31.029
Once that account is open, the door is open too, to a residential mortgage or other
products down the road.
38:31.190 --> 38:34.712
To keep everyone protected, the model comes with a guardrail.
38:34.712 --> 38:41.015
The GIC money can only fund a property where the credit union is also providing the
primary mortgage.
38:41.335 --> 38:49.940
That generates new commercial lending business for the credit union, and it gives
investors the reassurance that the credit union's own professionals have underwritten and
38:49.940 --> 38:51.500
vetted the project.
38:52.021 --> 38:54.362
Now, it isn't friction-free.
38:54.540 --> 39:04.556
The staff time and transaction cost of dealing with hundreds of small investors may run
too high for some credit unions, even with an administrative fee charged to the land trust
39:04.556 --> 39:05.836
to offset it.
39:06.177 --> 39:08.598
And there's a brand risk worth naming.
39:08.639 --> 39:16.223
Even with clear legal disclosure that the capital is fully at risk, an ordinary credit
union member may assume their money is safe.
39:16.243 --> 39:21.526
If a project were to default, managing that community fallout would fall to the
institution.
39:22.284 --> 39:29.057
There's also a reason a land trust might keep selling its own community bonds, even if a
credit union builds a great product.
39:29.097 --> 39:39.802
One of the things that the community bonds offer is that they do provide a really direct
one to one relationship between the investor and the land trust.
39:39.802 --> 39:42.783
And it's very difficult to replicate that any other way.
39:43.404 --> 39:48.692
And even a community land trust that achieves a level of scale.
39:48.692 --> 40:00.745
May still want to have community bonds as a part of their portfolio of how they raise
capital because they still want to have those direct lines of communication to the broader
40:00.745 --> 40:02.586
community that they're working in.
40:02.666 --> 40:10.128
For example, a community land trust that is providing affordable housing isn't abstractly
providing affordable housing.
40:10.128 --> 40:12.509
They're providing it in a neighborhood.
40:13.069 --> 40:17.250
They may want to still have community bonds as part of their raise.
40:17.260 --> 40:25.472
So that they can allow the neighbors in that neighborhood to be invested in that land
trust in a way that might be hard otherwise.
40:25.993 --> 40:39.316
That said, to raise a lot of money at scale and to administer it long term is really
difficult for a land trust to do administratively.
40:39.717 --> 40:44.648
And that is where the expertise of the credit union can really step in.
40:44.864 --> 40:47.536
A community bond is more than a way to raise money.
40:47.536 --> 40:54.419
It ties community members directly to a housing project's success so they earn a return
when their neighbors do well.
40:54.960 --> 40:56.881
And this isn't untested.
40:56.881 --> 41:07.886
Vancity Community Investment Bank runs its Preserve and Protect Guarantee Program, which
holds investor deposits in an Impact GIC to guarantee a land trust acquisition loan.
41:08.227 --> 41:14.700
Vancity's program currently only accepts deposits from charitable foundations and high
net worth investors.
41:14.754 --> 41:22.408
The Solutions Lab has been looking at how to make these models available to a broader
public and beyond the credit unions already testing them.
41:25.506 --> 41:28.447
The third solution asks a bigger question.
41:28.447 --> 41:33.049
How could we raise money for land trusts at a much larger national scale?
41:33.149 --> 41:37.931
The Collective Impact Investment Fund is the prototype that could answer it.
41:37.951 --> 41:42.813
A lot of the tools in this lab support CLTs deal by deal.
41:42.973 --> 41:49.796
There are some tools, like the GIC, which can support land trusts community by community.
41:50.056 --> 41:54.178
What the collective investment fund allows the sector to do.
41:54.414 --> 42:02.636
Is raise money from across the country and support CLTs at scale all over Canada.
42:02.636 --> 42:10.977
The idea is to pool money from credit unions, foundations, pension funds, even federal
housing agencies into one shared fund.
42:10.999 --> 42:17.040
That scale is what unlocks investors who'd otherwise never look at affordable housing at
all.
42:17.160 --> 42:20.981
The problem this solves that the other solutions don't quite get at is scale.
42:20.981 --> 42:23.662
Because so much of the work here is, again,
42:23.662 --> 42:24.423
It's artisanal.
42:24.423 --> 42:26.674
It's land trust by land trust.
42:26.674 --> 42:28.346
It's community by community.
42:28.346 --> 42:30.787
Think about things like big pension funds.
42:31.188 --> 42:39.014
They don't really have an easy way to invest in affordable housing directly that has the
credibility and the community impact tied into it.
42:39.035 --> 42:44.378
This collective impact investment fund would allow those folks to come to the table.
42:45.660 --> 42:53.378
All together, these solutions are a portfolio of practical tools that have the potential
to harness the power of the credit union sector.
42:53.378 --> 42:57.486
To bridge the equity gap the community land trust must overcome.
43:06.892 --> 43:16.468
As the lab moves into its final phase, compiling its findings and sharing them across the
credit union and land trust sectors, I asked participants what they were taking away from
43:16.468 --> 43:17.849
the experience.
43:17.970 --> 43:27.326
Kevin VanKampen from Meridian and Dominique Russell from Kensington Market Community Land
Trust reflect on what it meant to see the complex housing problem from a different vantage
43:27.326 --> 43:31.062
point and how it might affect future collaborations.
43:31.062 --> 43:38.976
I think it's just getting different perspectives from from different organizations and and
understanding the challenges that they have and and and vice versa.
43:38.976 --> 43:49.622
It's actually kind of just understanding or or seeing a perspective, try trying to say so
trying to solve the same problem, but looking at it from a completely different um side of
43:49.622 --> 43:50.022
the table.
43:50.022 --> 43:55.395
So I think that's that's always enlightening when you kind of get a deeper appreciation of
of of all different parties.
43:55.395 --> 43:55.996
Yeah.
43:55.996 --> 43:56.509
I'd agree.
43:56.509 --> 44:00.462
I I think that the so many of the things that you're kind of
44:00.462 --> 44:09.975
cracking your head against multiple kind of pro I wanna say problems, but like obstacles
and then understanding it from from the the other side, but also seeing this sort of
44:09.975 --> 44:24.729
synergy and the way in which n what what has been kind of piecemeal uh types of uh
collaborations can can really grow and and um yeah, I'm I'm excited about the things that
44:24.729 --> 44:30.260
we'll be able to do together uh in terms of advocacy and just there's I think
44:30.488 --> 44:34.749
There's a there's a whole level of just simplification which is exciting.
44:34.749 --> 44:41.021
Like, okay, what how do we simplify and and sometimes that's further along, but other
times it's like very concrete.
44:41.021 --> 44:42.141
This is how you simplify this.
44:42.141 --> 44:43.201
You don't have to take it on.
44:43.201 --> 44:45.722
There's somebody gr that's already doing it.
44:45.722 --> 44:55.925
Mike Bulthuis from Ottawa Community Land Trust points to something less tangible, but
perhaps more fundamental as his biggest takeaway, a shared sense of purpose.
44:55.925 --> 45:00.006
I think we are, you know, we do this work professionally.
45:00.184 --> 45:03.497
But it's very clearly a response to something that people leave in as well.
45:03.497 --> 45:07.460
And I I I think I can speak on everybody on behalf of everybody in the room for that.
45:07.460 --> 45:11.663
And so I think the takeaway is is just, you know, feeling that shared commitment.
45:11.663 --> 45:19.190
Um, and that I think people are doing this because we believe that these are, you know,
good things to do and and they will benefit the quality of life of folks.
45:19.190 --> 45:22.913
Um, so you know, maybe that's an indirect kind of a takeaway.
45:22.913 --> 45:27.777
Um, but I think that's a prerequisite for tackling some of the challenges that we're
talking about.
45:27.777 --> 45:29.516
For Keith Taylor at DUCA.
45:29.516 --> 45:33.708
What the lab gave him was something rare in the housing file, hope.
45:33.708 --> 45:43.934
I think just how much passion there is for for solving uh the problem and willingness to
to to be at the table.
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I think they're you know, there's different parties involved in in this ecosystem.
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Uh and sometimes when we're trying to kind of s fit a a square peg into a round hole to
solve the the problem, it can be frustrating.
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Um
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But there's a willingness to to work together to to figure that out.
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Um, so it kind of gave me some some hope for our ability to to solve it as w as we move
forward.
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And Kate Pierce from Kindred Credit Union wants to see that sense of hope translate into
tangible outcomes.
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Hopefully some new projects and more housing.
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Yeah.
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New relationships.
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Um
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Just more more good things happening, more groups talking to each other, more sharing
going on, hopefully purchasing more land um or buildings to either protect or enable the
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creation of new housing.
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That's the goal.
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We started this series with the Community Land Trust model, an idea with roots in the
American civil rights movement that has found new life in Canadian cities grappling with a
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housing crisis.
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CLTs offer a fundamentally different answer to the question of who should own land.
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Not speculators, not developers chasing returns, but communities holding land in trust
permanently for the people who live and work there.
47:09.378 --> 47:19.485
In the second episode, we looked at credit unions, financial institutions that are
different by design, born out of mutual aid, owned by their members, accountable to their
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communities rather than to shareholders.
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And in this episode, we went inside the lab, a structured process that brought these two
sectors together to see whether it might be possible to build more bridges to cross the
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equity gap together.
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The solutions that emerged are not yet finished.
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They're prototypes.
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They're hypotheses being tested.
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But that, as the lab facilitator Sean Geobey reminds us, is how you do innovation
responsibly.
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You test before you bet everything.
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Andrew Cowen at CMHC has watched a hundred labs now.
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He's seen what happens when the process works and what the limits are.
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It it's not something that's easily described and or uh understood by by folks unless you
actually attend it or you see it in action or um yeah, you know, within the sort of
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innovation, social innovation sector and housing.
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It's like, yeah, well this is this is great.
48:23.092 --> 48:27.236
It's it's research and yeah, it it you know it's not.
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And so I used to get I used to get pretty upset about like this is not and I would say
that when I was introducing the program to potential applicants.
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This is not a research program.
48:37.145 --> 48:42.460
It funds sort of research to help frame the problem, but we're we're action oriented,
right?
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So um I'm hopeful.
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I'm hopeful something will will happen.
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Action oriented is the right word to describe the people we've spent time with in this
series.
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They're not waiting for the perfect policy or product.
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They are building carefully, collaboratively, and with clarity about what's at stake.
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The equity gap is real.
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It exists at the intersection of financing structures, regulatory environments, sector
silos, and the fundamental mismatch between the speed of the housing market and the
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requirements of community led development.
49:17.848 --> 49:27.945
Closing it won't happen with one product or one lab, but it might happen with what this
lab has started, a set of relationships between people who believe that permanently
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affordable housing is worth fighting for, and who now know each other well enough to pick
up the phone when it's time to act.
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Thanks for listening to The Equity Gap.
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Thanks to the guests on today's show: Andrew Cowan, Sean Geobey, and the participants of the lab featured in this episode: Mike Bulthuis, Sean Campbell, Kate Pierce, Dominique
49:50.117 --> 49:55.330
Russell, Keith Taylor, Kevin VanKampen, Chloe Wong, and James Yool.
49:55.631 --> 50:00.554
You can hear all episodes of this three-part series wherever you listen to podcasts.
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The Equity Gap was produced and edited by Jay Harrison at Untied Productions.
50:06.380 --> 50:10.053
The music in today's show was courtesy of epidemic sound.
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This show was made possible by the Canadian Credit Union Association and Scaled Purpose,
with support from Canada Mortgage and Housing Corporation's NHS Solutions Lab program.