NBNPHA 2014 Conference Saint John - Workshop G – Teaming up for impact and sustainability
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New Brunswick is seeing the emergence of mergers, consolidations and shared service delivery amongst housing providers in order to balance budgets, improve services and ensure viability over time. Learn the step-by-step process by which these groups have developed these partnerships and how they are working today.
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NBNPHA 2014 Conference Saint John - Workshop G – Teaming up for impact and sustainability
- 1. New Brunswick Non Profit Housing Association Conference Karen Brodeur, Program Manager CHF Canada
- 2. Objectives Discuss the reasons that we are talking about scale at CHF Canada Review the current scale of the co-operative housing sector in Canada and abroad What a successful future looks like Advantages and disadvantages of our scale Why and how co-ops unite Other ways to work together
- 3. CHF Canada CHF Canada • is the national voice of the Canadian co-operative housing movement • has more than 1090 members and associates Membership in CHF Canada is voluntary. More than eight out of ten housing co-operatives outside of Quebec are members of CHF Canada. 3
- 4. What does scale mean? the relative size of the sector we have built together, from individual co-ops to the organizations that serve them
- 5. Why are we talking about scale? • 2011 CHF Canada member resolution • End of operating agreements means that a loss of co-op housing is a real threat • Increasingly complex demands being placed on co-operatives e.g. Provincial legislation
- 6. Failure rates for small businesses in North America: 35-56% within five years. In co-op housing terms that would mean up to 30,000 homes could be lost by 2025.
- 8. Scale of Operations Isolated Co-op Sector Affiliations Cost-Sharing Partnerships & Joint Operations Mergers and Amalgamation
- 9. In Canada… Co-op Size # of co-ops # of units % of all co-ops % of all units Less than 25 1,088 15,572 49% 17% 25-49 510 18,234 23% 20% 50-99 458 31,569 21% 34% 100-199 137 17,882 6% 19% 200 and over 28 8,633 1% 9% TOTAL 2,221 91,890 100% 100%
- 10. Average co-op size 3717 1800 1178 847 738 634 500 236 216 188 156 154 102 66 41 0 500 1000 1500 2000 2500 3000 3500 4000 Avg Size *Information taken from ICA Profiles of a Movement: Co-operative Housing Around the World
- 11. Looking at scale across Canada Conversations on Scale Vancouver/Victoria Manitoba PEI Ontario New Brunswick
- 12. Prince Edward Island Steering Committee Purpose To explore opportunities for housing co-operatives in Prince Edward Island to work together by considering the impact of the end of the Operating Agreements, new development and consolidation.
- 13. British Columbia • 2012 CHF/BC AGM – member resolution • Information sessions • Vancouver – commercial drive area • Victoria • 30 co-operative members representing 13 co- operatives • Both groups have agreed to a second meeting
- 14. Ontario A co-operative is considering acquiring units in Southern Ontario that could be lost to the co-op sector. Meetings have been held with two co-operatives in Northern Ontario who are exploring the options.
- 15. New Brunswick One city, one co-op? (279 units) • City Centre • Heatherway • High Meadow Park • Jenny’s Spring • Lower Cove • Neighbourhood • North End • South City • Wright Street 15
- 16. Manitoba Protecting the co-operative housing stock.....
- 17. Work in progress..... • Creation of standardized materials • Pilot projects – mergers, expansion and hopefully new co- op development • Documented examples of the benefits of scale in Canada and abroad • Support to staff and federations
- 18. Getting the messaging right
- 19. Existing benefits of scale Insurance Bulk purchasing Shared management agreement contracts Local and national federations
- 20. Housing co-operatives are not currently at their optimum size for success Some disadvantages of the existing scale of co-ops Duplication of effort and expense Smaller pool of potential directors Fewer management options Less financial security Less likely to have access to financing Redevelopment a huge challenge Unable to access and pay for specialized services
- 21. Board burnout – what we know! If we assume that the average number of seats on a co-op board in Canada is 7 then.... We require 14,000 co-op members to be capable directors with a clear understanding of governance.
- 22. The importance of planning Co-operatives that.... Less than 50 units More than 50 units have an investment policy 29% 37% have a long term financial plan 35% 71% have a completed BCA 65% 88%
- 23. Growth may be the only option for some co- operatives Why should co-operatives grow? To strengthen their future viability To better serve their members needs To strengthen governance To create different co-op management options To achieve operating efficiencies For long-term risk reduction Create new services for members For reasons unique to a co-op
- 24. Scale What are the advantages and disadvantages of our housing co-ops’ existing scale? ?
- 25. Advantages to Current Scale We have experience with this current size of operations We know how to build close-knit communities in our current co-operatives
- 26. Disadvantages to Current Scale Duplication of effort and expense Smaller pool of potential directors and fewer management options Less financial security and opportunities
- 27. Why Should Co-ops Grow? To strengthen their future viability To better serve their members needs To strengthen governance To create different co-op management options To achieve operating efficiencies For long-term risk reduction Create new services for members For reasons unique to a co-op
- 28. How Can Co-ops Grow? Development Redevelopment Expansion Mergers For many co-ops, the only viable way to grow is thro
- 29. Impact of Scale Each one requires its own board of directors some form of competent operational management a maintenance and capital repair program an annual audit where this is a program requirement, as it is for most Canadian housing co‐ops. In Canada there are approximately 90,000 units of co‐op housing that are operated by some 2,100 co‐op housing corporations.
- 30. Impact of Scale on Governance Board member burn-out Lack of involvement Inability to have access to time and/or funding for education Lack of new ideas and direction for the co-op Drawing on too few members for the board often leads to:
- 31. Impact of Scale on Management The present scale of the sector results in a great deal of duplication of effort and expense. Consider audits: an audit of a 500 unit co‐op will not cost 10 times as much as the combined cost of the audits for ten 50‐unit co‐ops. What about capital plans? Or procuring accounting services? Or the cost of governance training?
- 32. Merger Models Brand new co-op model Two or more co-ops coming together to form a new co- operative. Growing a co-op model One or more co-operatives joining an existing co-operative.
- 33. The Merger Process Must be member led Led by a leadership group of co-op members Discussion of concept by co-op members Approval in principle by co-op members Foster environment of respect with full disclosure Technical work includes long-term financial planning, capital repair planning, modification of governance and management structures.
- 34. Causes of Failure Member mistrust Disinformation Strong sense of belonging Members are risk averse Fear of change
- 35. Keys to Avoiding Difficulties Never underestimate the importance of member engagement and buy-in Avoid a structure that entrenches previous co-op identities Provide opportunities for information sharing and discussion Dedicate special resources to support governance and community building
- 36. Other Options to Work Together Maintenance services Contracted services Group buying Community building Co-ordinated capital repair projects Member recruitment
Notas del editor
- Our objectives for today are......
- First let me tell you a bit about the Co-operative Housing Federation of Canada.CHF Canadais the national voice of the Canadian co‑operative housing movementhas more than 1090 members and associates Membership in CHF Canada is voluntary. More than eight out of ten housing co‑operatives outside of Quebec are members of CHF Canada.
- At CHF Canada, we define scale as the relative size of the sector we have built together, from individual co-ops to the organizations that serve them.
- CHF Canada has been thinking and talking about scale for several years.In 2011, a resolution was passed by our members that gave CHF Canada direction to assist local housing co-operatives in non-federated regions to:Identify ways to establish enhanced co-operation among co-operativesHelp these co-ops develop relationships with provincial governments that expand their capacity to serve their members; andHelp local co-operatives to identify areas of common interest as a base for future collaborationIn addition, we have been looking for ways to ensure that housing co-operatives are strong viable businesses as the end of their operating agreements approach and as they face new legislative challenges and changes. Sizing up may be the solution for some co-operatives.Due to a current environment where we are competing more and more with other housing, it is important that we are able to have strong governance, management and principled leadership to ensure that we can maintain our units and keep them full.Preventing the loss of affordable co-operative housing units means that our sector needs to be constantly finding ways to remain strong. Looking at scale and being united as a movement is one way of strengthening the sector.
- We also know that...Failure rates for small businesses in North America are between 35-56% within the first five years. For co-operatives coming to the end of their operating agreement, it is like starting all over. In co-op housing terms that would mean up to 30,000 homes could be lost by 2025.
- To determine what impact scale has on the operations and future securities of housing co-operatives and the organizations that serve them, CHF Canada first looked at the current environment.
- To better understand the current scale, lets look at how the size of housing co-operatives in Canada compares to other countries. We know that in comparison to other housing co-ops in the world, Canada’s housing co-ops are small. While there may be some advantages to this, we are definitely losing out on efficiencies.
- In Canada….Over 85% of housing co-operatives (excluding Quebec) have under 50 units. The smallest housing co-operative is 2 units. The largest housing co-operative is 770 units. there are approximately 90,000 units of co‐op housing that are operated by some 2,100 co‐op housing corporationsHow does this compare to other countries......
- According to the ICA, Profiles of a movement publication, the average size of a housing co-operative in Canada is 41 units compared to Austria at 3,717. So as you can see from this graph, we can confirm that indeed housing co-operatives in Canada are amongst the smallest in the world.So we ask ourselves, how can we maximize our efficiency and provide our members with the best possible outcomes in the future?
- In 2013, I (Karen Brodeur) was hired to spend time working to explore the benefits of scale and find opportunities across Canada to work with co-operatives on this issue.This map shows us where groups across the country have began to explore scale.Let’s look in a bit more detail at the different projects underway.
- At an education event last spring in Prince Edward Island, a suggestion was received that a committee of housing co-operative members be established to discuss options for their co-operatives to work together to strengthen their long term viability. CHF Canada and the local management company agreed that they would support the creation and activities of the group and organized their first meeting in June 2013. At their second meeting in October 2013, the group agreed that the purpose of the committee is to explore opportunities for housing co-operatives in Prince Edward Island to work together by considering the impact of the end of the operating agreements, new development and consolidation. The responsibilities of the committee are:• to oversee the process for developing a proposal • to develop a plan for the long term viability of the existing co-operatives • to report to members of the participating co-operatives about the group’s activities and advise them about how new initiatives would affect them • to present the draft plan to participating co-operatives and seek the co-ops’ support • to meet with government representatives to receive supportRepresentatives from the group will be meeting with the Minister responsible for housing in early May.
- In 2012, CHF BC member housing co-operatives passed a resolution that asked for the federation to investigate the financial implications of merging housing co-operatives, including the development of several models ranging from shared use of contractors up to a full legal merger.In March of this year, two separate meetings were held, one with co-operatives from the Commercial Drive area of Vancouver and one in Victoria with a group of housing co-operative members. Each session had approximately 30 participants representing 13 co-operatives.The primary discussions at these initial meetings were around common experiences and the importance of working together.The two groups have both agreed to meet again to discuss in more detail ways that they can work together including information about the merger process.
- In Northern Ontario, I recently met with the boards of two housing co-operatives that are located side-by-side. The groups were interested in opening up a discussion about scale for a couple of key reasons: they want to explore better opportunities for refinancing, succession planning is also a concern as one co-operative has a staff person that could be retiring soon, and they want to explore opportunities that would enable their members to age in place as well as exploring opportunities for growing families as consolidation could provide a better diversified range of unit sizes.In Southern Ontario, a larger, stronger co-operative is looking to aquire a smaller co-operative that may be lost to the sector if not.
- All of the housing co-operatives in Saint John, New Brunswick met to discuss their options for the future over a year ago. After a third meeting, they all agreed to develop a steering committee with representation from each co-operative. The Steering Committee is now meeting monthly to establish goals for their future. Ultimately, the group agrees that some or all of the co-operatives should merge. If they all merged the new co-operative would have a total of 279 units.
- In Winnipeg, a larger housing co-operative has decided to amalgamate with a smaller co-operative that is located 40 minutes away. Why? Well the smaller co-operative is struggling with both their governance structure and their cash flow and their is a real risk that the units are going to be lost. The larger co-operative wants to ensure that the co-operative units are protected as non profit co-operative housing. This co-operative is also looking at a current expansion project that will build smaller units to allow their aging population to stay within the co-operative.When I recently visited this co-operative I had the opportunity to speak about how community might be impacted due to the location of the two co-operatives....an extremely interesting discussion about redefining community to suit members needs was the focus of our discussion and will is how this group plans to remove barriers and protect their community.I am often asked why co-operatives decide to work together or what might bring them to the table for the discussion, and as you can see from the groups that I am currently working with across the country, their are unique triggers, reasons and experiences, creating individual starting points for each group.
- Now that I have given you some information about projects that I am currently working with, I should give you a little bit of information about how my work at CHF Canada is supporting the work that is being done....The scale project includes the creation of standardized materials, developing pilot projects for mergers, expansion and potentially new co-op development, finding documented examples of the benefits of scale in Canada and abroad as well as providing support to staff and federations.It can be overwhelming for co-operatives to know where to begin. Because of this, I have spent time developing slide decks, notices, steering committee job descriptions, information sheets and newsletters that can be used by co-operatives and/or local federations.As we just discussed we are also working on pilot projects across the country and in doing so we are establishing best practices and examples of the benefits of scale. Two research projects are also underway: one that looks at vacancy loss and arrears statistics of small and larger co-operatives; the other is a project designed to hear how co-operatives are defining community after they merge, both the advantages and the barriers that they are facing.From this work, some key messages have emerged.....so let’s talk a bit more about that.
- What I have found, is that getting the message right is half the battle. Ensuring that members understand that this process must be member led and that it must foster an environment of respect and full disclosure.
- Housing co-operatives are already benefitting from scale.How?InsuranceBulk purchasingShared management agreement contractsLocal and national federations
- Message #1: Housing co-operatives are not currently at their optimum size for successSome disadvantages of the existing scale of co-opsDuplication of effort and expenseSmaller pool of potential directorsFewer management optionsLess financial securityLess likely to have access to financingRedevelopment a huge challengeUnable to access and pay for specialized servicesHow do we know that housing co-operatives are not at their optimum size?
- What we know is that.....Good governance means the board has to keep its eye on the big picture, on the overall direction of the co-opGood governance needs leadershipHowever, when we look at the current size of co-operatives we know that if we assume that the average number of seats on a board is 7 that we require 14,000 co-operative members to be capable directors and to have a clear understanding of governance. We need to ask ourselves if this a reasonable expectation.
- We also know that planning is key to the success of any co-operative.A survey was completed by32 housing co-operatives in Canada responding to specific questions about the 2020 standards. The results showed that smaller co-operatives were less likely to have an investment policy, have a long term financial plan and have a completed BCA.Without these plans, co-operatives have less financial security, are less likely to be able to refinance, and have eliminated any option for redevelopment.
- Message #2: Growth may be the only option for some co-operativesWhy should co-operatives grow?To strengthen their future viabilityTo better serve their members needsTo strengthen governanceTo create different co-op management optionsTo achieve operating efficienciesFor long-term risk reductionCreate new services for membersFor reasons unique to a co-opIn my work on the front lines with projects in difficulty, I can certainly attest to this statement. We have pockets of extremely small housing co-operatives across the country that are definitely at risk. Unfortunately, I have experienced that it is not only those smallest co-operatives that are at risk.
- What are the advantages and disadvantages of the existing scale of housing co-operatives?
- Advantages of our current scale are that:We have experience with this current size of operationsWe know how to build close-knit communities in our current co-operatives
- Disadvantages include:Duplication of effort and expenseSmaller pool of potential directors and fewer management optionsLess financial security and opportunitiesWe know that positive change is needed to preserve advantages and overcome disadvantages of our present situation.
- We believe that our housing co-operatives should grow:To strengthen their future viabilityTo better serve their members needsTo strengthen governanceTo create different co-op management optionsTo achieve operating efficienciesFor long-term risk reductionCreate new services for membersFor reasons unique to a co-op
- How do we grow? There may be other opportunities for co-ops to expand or redevelop. Another viable way is to consider partnerships – working together.
- In Canada there are approximately 90,000 units of co‐op housing that are operated by some 2,100 co‐op housing corporations. Each one requiresits own board of directorssome form of competent operational managementa maintenance and capital repair programan annual audit where this is a program requirement, as it is for most Canadian housing co‐ops.
- A serious issue flagged by the list on the last slide is the need for the sector to populate over2,000 co‐op boards with capable directors who have some understanding of the requirements of goodgovernance. Assuming that the average number of seats on a housing co‐op board in Canada is seven, that means that at any given moment, we require 14,000 co‐op members to be sitting on their co‐ops’ boards, or one person for every 6.5 households. This presents a formidable challenge, and one that it is hard for the sector to rise to with any consistency.
- The present scale of the sector results in a great deal of duplication of effort and expense.Consider audits: an audit of a 500 unit co‐op will not cost 10 times as much as the combined cost of the audits for ten 50‐unit co‐ops. What about capital plans?Or procuring accounting services?Or the cost of governance training?
- Let’s talk a bit about the mergers and what we know about the process.There are a couple of ways that we see housing co-operatives merging:Brand new co-op modelTwo or more co-ops coming together to form a new co-operative.Growing a co-op modelOne or more co-operatives joining an existing co-operative.
- We know from our experience that the merger process:Must be member ledLed by a leadership group of co-op members Discussion of concept by co-op membersApproval in principle by co-op membersFoster environment of respect with full disclosureTechnical work includes long-term financial planning, capital repair planning, modification of governance and management structures.
- Through the mergers that have already been completed or are underway we have learnt that:Member mistrustDisinformationStrong sense of belonging Members are risk averseFear of changeAre often the causes of failure.
- So, how have we managed these difficulties?It is essential to:Never underestimate the importance of member engagement and buy-inAvoid a structure that entrenches previous co-op identitiesProvide opportunities for information sharing and discussionDedicate special resources to support governance and community building
- Co-operatives can find other ways than mergers to work together. Some examples include:Maintenance servicesContracted services Group buyingCommunity buildingCo-ordinated capital repair projectsMember recruitmentContract services includes snow removal, waste disposal
- I will leave you with this quote from Henry Ford.Coming together is the beginning. Keeping together is progress. Working together is success.