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Social Purpose Real Estate: Solving the Space Problem of Not-for-Profits.
by Thomas Bevan
Social capital is what makes Vancouver spectacular. Specifically, it is the diversity of people, neighbourhoods, and entertainment that provide some of the reasons for why real estate costs have been driven so high. Consequently, these price increases also affect the financial viability of not-for-profit organizations that provide essential services in the community.
These groups often rent space for their operations in lower income areas of the city, assisting individuals who are in the largest need. However, as rental rates for space in these areas increase in sync with market demand and new development, these groups may be forced to relocate to more distant locations, away from the organization’s client base.
There is an alternative. Not-for-profits can convert their leases into mortgage payments, which can help insure the financial sustainability of the organization. By owning a real estate asset in the community, the space that these groups occupy is secure from redevelopment that is not in line with the mission of the organization.
Additionally, mortgage payments are less likely to fluctuate compared to rents in a gentrifying area, making financial planning more certain. Lastly, owning a real estate asset enables a not-for-profit to accumulate equity that can be used to leverage additional financial resources, or buy more real estate in the future.
Through this model, as real estate prices increase, the organization’s asset base and rental income potential also grows. A traditional private landowner or developer would take these financial gains and use them for remuneration or to finance other projects that do not necessarily benefit the local area. Conversely, a not-for-profit is able to use the surplus to improve or expand the services it provides directly to the local community.
This is the foundation of Social Purpose Real Estate, which aims to balance social and economic impacts to find the most appropriate use of land, rather than maximising the profit potential through the highest and best use.
The problem is that buying and managing real estate is complicated. It requires many new responsibilities that organizations new to the real estate industry may be unfamiliar with. Vancity Credit Union has helped to put together a video that interviews local Vancouver professionals and takes the viewer through three fundamental lessons of social purpose real estate.
Learn more about social purpose real estate here:
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