The BC Construction Association (BCCA) has launched a mortgage investment corporation (MIC) to make securing a mortgage easier for B.C.’s skilled tradespeople, medical care providers, educators, and emergency responders.
Despite their in-demand skills, steady employment and higher than average wages, thousands of essential workers in B.C. cannot afford a home near their workplace. Often, they must either commute long distances to work, live in unreliable rental housing, or move elsewhere.
Lisa Stevens, BCCA’s chief strategy officer, and Peter Elkins, co-founder of Capital Investment Network, had previously looked to a MIC as a possible solution for the southern Gulf Islands, whose communities have trouble finding service providers who can afford to live there. When Stevens joined the association, she saw the same need, but on a much larger scale.
Unlike banks and credit unions, MICs are not subject to the federal mortgage stress tests which thousands of B.C. workers struggle to meet. Additionally, shares in MICs are eligible for government deferred and tax-sheltered savings plans such as RRSPs, RESPs, RRIFs, TFSAs and RDSPs. While MICs typically generate revenue by attracting higher-risk customers willing to purchase higher-rate mortgages, this MIC sought to be an impact-investment that would thrive by offering tradespeople and other gainfully employed essential workers the competitive-rate mortgages they couldn’t get from a bank or credit union.
“Our goal is to create a social impact investment vehicle that offers value for investors while also helping tradespeople and other professionals to establish roots in B.C. communities,” said Stevens. “Guiding our approach is the belief that these highly skilled and hard-working earners should be able to afford housing, and organizations that employ and represent them are willing to invest in a financial vehicle that helps them succeed.”
To help address this complex challenge the BCCA team partnered with the Gustavson School of Business at UVic to create a capstone project for the school’s 2019 MBA program. That work became the foundation of the business case for the Impact MIC, Canada’s first impact-investment mortgage fund.
Whereas MICs typically offer higher mortgage interest rates, shorter terms for fixed rates and lower loan to (home) value ratios compared to banks, as a fund dedicated to helping essential workers, the Impact MIC will offer more favourable terms by roughly matching bank mortgage interest rates and term lengths for fixed rates, while also offering longer amortization periods (25-40 years) and a higher loan-to-value ratio (up to 90%).
“The BCCA board has approved funding to move the Impact MIC forward,” confirms Chris Atchison, president, BCCA. “We’re proud to pioneer an affordable housing solution with the potential to improve the quality of life for thousands of skilled tradespeople and other essential workers across the province, benefitting every B.C. community.”
BCCA is planning to make mortgages from the Impact MIC available as of April 2020. For more information, contact Peter Elkins at 778.966.1250 or [email protected]. Visit https://www.bccassn.com/resources/mortgage-investment-corp/