3 Variants of the Giving Circle

By: Hannah Kim

For clarification, I would like to distinguish between three variants of the giving circle that are at the centre of our Homeless Sponsorship Model.

Investment Giving Circles

As explained in previous posts, the 5 investors in this type of giving circle pool their dollars for a down payment on a property unit that is rented to 2 – 3 homeless clients. The collective rent paid by the tenants (using their social assistance housing allowance of $375/month per person) will cover the bare minimum monthly costs, such as mortgage payments and property taxes. Investors receive a moderate ROI as property is an appreciating asset. Potential additional incentives to investors include lower mortgage rate from a local bank, lower taxes and utilities fees from government, and local businesses’ donations of services and in-kind goods for repairing and refurbishing the housing unit at regular intervals.

1) Silent Investors Giving Circle: The investors contribute their dollars towards the down payment, and take a hands-off approach in terms of any interaction with the homeless clients.

2) Hands-On Investors Giving Circle: Members of this giving circle offer their time, talents and skills in addition to capital funds. They may interact with the homeless clients, providing companionship and mentorship; they may bring their own innovative ideas to the Homeless Sponsorship Model using their expertise. This type of giving circle is also a great way for members to network with like-minded investors by volunteering as a group.

3) Donation-Based Giving Circle

Members of this giving circle pool funds to simply subsidize the rent for a homeless client for a designated period of time. This means that we must find an existing landlord who is willing to rent empty space (e.g. basement suite, apartment suite) to homeless people.

Property Tax Exemption – City of Coquitlam

By: Arita Liu

Considering that our Giving Circle Model is dedicated to housing homeless individuals, we looked into municipal bylaws and property tax regulations to find if we are eligible for property tax exemption. Following is what we found about City of Coquitlam tax exemption procedure.

City of Coquitlam Council considers property tax exemptions on an annual basis for properties that provide some general public benefit or good. The general procedure is as follows:

• Applications for permissive property tax exemption should be submitted before the end of August to be considered for exemption in the next calendar year. Information supporting the application should include:

– What type of benefit the organization provides to the community;

– Whether the programs and services benefit primarily Coquitlam residents;

– Whether programs and services are accessible to Coquitlam residents;

– Any other information that the applicant feels may support their request;

• The City Clerk will acknowledge the receipt of applications for permissive exemption by mail and advise the applicant of the timeline for consideration.
• The application will be reviewed to ensure that:

– The exemption is allowed under the enabling legislation where applicable;

– The organization are considered as a non-profit or charitable organization;

– The organization is operating consistently with City policies and bylaws;

• All applicants will be provided with an opportunity to address Council at a formal meeting with respect to their request for an exemption.
• Vacant properties will not be considered for permissive property tax exemptions.
• Properties under construction will not be considered for a permissive property tax exemption until construction is complete and occupancy is issued.
• Residential buildings not used for public worship (i.e. manse or a rectory) located on church property shall be taxable including a portion of the property surrounding the residential building equal to the size of an average city lot.
• After the application deadline the City Clerk will prepare a Report to Council which provides information on all the applications received. Once direction is received from Council the City Clerk will prepare the annual tax exemption bylaw.
• After Council has adopted the annual tax exemption bylaw the City Clerk will advise applicants of the decision on their application.
• It is the applicants responsibility to ensure compliance with the Assessment Act and it is the British Columbia Assessment Authority’s responsibility to review the use of the properties in accordance with the Assessment Act.

(Bylaw No. 4013, 2009.  A Bylaw to adopt 2009 to 2013 Financial Plan)

Sustainability of Giving Circles: Part 2

By: Hannah Kim

Aside from covering administrative costs, Colleen Willoughby, president of the Washington Women’s Foundation in Seattle, makes the following suggestion in Jessica E. Bearman’s report “More Giving Together: The Growth and Impact of Giving Circles and Shared Giving” for keeping giving circles sustainable:

“Keep founding board members in place for several years to build a solid culture for your organization. … If you bring in new people too early, you get new ideas. It can take your original concept in many different directions rather than establish the idea you had in mind. … I think that the value of institutional memory is a benefit to a new and growing organization.” (p.19)

Here are some other questions to address early on regarding sustainability, as we apply the recommendations in Bearman’s report to our Homeless Sponsorship Model (p.18):

• How big do we want our giving circles to grow?
• Exactly how much administrative cost will we need to cover per year?
• How much volunteer work versus work by paid staff will be required?
• What proportion of giving circle members will take a hands-off approach (where the only involvement is funding contribution), as opposed to greater engagement/interaction in supporting homeless clients?
• How long must members be committed to the giving circle, especially if we plan on applying Willoughby’s value of institutional memory provided by founding members?

Sustainability of Giving Circles: Part 1

By: Hannah Kim

In my previous post “From Concept to Practice”, I had raised the question of how exactly to mobilize capital and human resources to manage any tenant issues, attract and retain investors, manage investment funds, liaise with external partners, and take care of other administrative duties required to keep our Homeless Sponsorship Model flowing continuously.

Indeed, one of our major challenges with the model is covering the administrative costs of implementing the client selection → housing → job placement → self-sustainability process.

According to Bearman’s report for the Forum of Regional Association of Grantmakers (“More Giving Together: The Growth and Impact of Giving Circles and Shared Giving”, p.16), administrative costs of running giving circles can be funded by various external sources, including donations and grants from local community foundations. However, report findings suggest that external grants and donations are not very sustainable.

Another way of covering administrative overhead is requesting giving circle members to contribute additional funds just for that purpose. Of course, keep in mind long-running giving circles’ learning that members are much more hesitant to see their contributions going towards administrative costs than directly to the social cause (p.18).

The challenge of addressing administrative issues is one already brought up by a representative of SHARE Family & Community Services at the Tri-Cities Homelessness Task Group meeting on July 10, 2009. Watch for further posts on our progress in overcoming this challenge!

Giving Circle Example

By: Hannah Kim

In her report for the Forum of Regional Association of Grantmakers “More Giving Together: The Growth and Impact of Giving Circles and Shared Giving”, Jessica E. Bearman defines a giving circle in the following manner:

“A giving circle is formed when individuals come together and pool their dollars, decide together where to give the money (and other resources such as volunteer time), and learn together about their community and philanthropy.” (p.1)

Bearman adds that “no giving circle looks or acts exactly like another” (p.1). One particular example is the Birmingham Change Fund, formed in 2005 by a Ford Foundation Program Officer “to identify, cultivate and raise resources that improve the quality of life for African-Americans living in the Birmingham region” (http://www.givingforum.org/s_forum/doc.asp?CID=2120&DID=8779).

For instance, this giving circle of 20 or so members has helped to increase financial planning knowledge among its community by supporting the 2005 and 2006 Financial Discovery Forum.

Partnership Network

It seems that the Birmingham Change Fund also values strategic partnerships highly. For instance, it raised $2,000 for adult and paediatric AIDS research by partnering with the Birmingham Children’s Hospital to host a “party with a purpose” on National Philanthropy Day.

The Birmingham Change Fund also works closely with HindSight Consulting on researching ways in which young urban African Americans donate their talents, time, and dollars to improve their communities. The ultimate goal of this partnership is to further develop African American giving circles.

The partnership with HindSight Consulting to conduct such market research shows that, in order to enhance sustainability, giving circles—as small as they may be—must also take much of the proactive and strategic approach that is mandatory among for-profit businesses.

Giving Circles Portfolio

By: Hannah Kim

Another great piece of feedback received after presenting the Homeless Sponsorship idea to the Tri-Cities Homelessness Task Group on July 10, 2009 revolved around expanding the portfolio of giving circle solutions.

A concerned citizen advocate suggested applying the giving circle model to simply subsidize homeless clients’ rent for 6 – 12 months. Whereas our original model centred on rounding up investors to purchase housing units, we would first find existing empty spaces available for rent. Then, members of the suggested variant of the giving circle would each contribute about $100 per month to subsidize rent payment of the 2 – 3 homeless clients per housing unit. In essence, the giving circle would be purely donation-based in covering the rent requirement above the monthly $375 social assistance housing allowance that each homeless client receives. For instance, two homeless clients would be able to collectively pay $750 per month for an apartment suite that requires $1,200 in rent; a donation-based giving circle consisting of five members would then contribute $450 per month (=$90/month per member) to make up the difference for 6 – 12 months.

I’d like to note that another way of expanding the portfolio of our novel solutions is to implement giving circles with differing degrees of involvement in interacting with the homeless clients. On the one extreme, giving circle members would be completely hands-off and only supply funding (whether that funding is a down payment for purchasing property or subsidizing rent). On the other extreme, giving circle members would participate in some of the support services for homeless clients, such as providing companionship and mentorship.

Watch for further posts that detail further development of these ideas!

Home Makeover

By: Hannah Kim

On Friday July 10, 2009, Jackie and I had the opportunity to present our Homeless Sponsorship idea to the Tri-Cities Homelessness Task Group at the Coquitlam City Hall. As a reminder, the Homeless Sponsorship idea is centred on model of using a giving circle of socially conscious investors to buy a housing unit and then rent it to 2 – 3 homeless clients while providing support services to these clients with the help of outreach workers and volunteers (see previous post, “A Flowchart to Visualize Our Idea”).

After the presentation, feedback on our novel solution included a great suggestion from a prominent local businessman (who is also a board member on the Tri-Cities Chamber of Commerce): in addition to foreclosures, look for properties that are in need of repair when finding housing! Such properties would be less expensive for the giving circles to purchase. Once the property is purchased, we can look to support from the local business community in the form of services and materials donations for the repair and refurbishing. This process adds value to the property for the giving circle members, which is another incentive for these investors. Further, if we are able to garner support from the same local businesses in refurbishing and repairing housing units on a yearly basis after a given group of homeless clients move out, investors would have even more reason to participate in our Homeless Sponsorship idea.

Break Down of an Investor Giving Circle

By: Ryan

Currently you can purchase a 3 bedroom apartment at around $200,000 in Port Coquitlam so this is the price we will use to run though this example. We would need a 25% down payment so that we would not require any CMHC insurance so that makes $10,000 from each of our five investors.  The interest rate used is below the current interest rate on mortgages but we will be able to source this through a bank that is willing to help our cause.

• 3 bedroom apartment – $200,000
  • 25% down – $50,000

• Interest Rate – 4.5%($710)
• Yearly Taxes – $1,700
• Yearly Insurance + Maintenance – $3,400

• Monthly Total Payments – $1,135

With 3 homeless people combining their allowance of $375 a month for rent it provides a total of $1125 which can be used to cover the monthly payments that have to be made.

}3 Bedroom Apartment   $200,000

◦25% Down  $50,000

}

}Interest Rate  4.5% ($710)

}Yearly Taxes  $1,700

}Yearly Insurance + Maintenance $3,400

}

}Monthly Total  $1,135

A Flowchart to Visualize Our Idea

By: Jackie Go and Arita Liu

To illustrate our idea, we created a flow chart which shows the entire cycle of our program, from homeless client selection all the way up to the client being self sustainable and able to live on their own.

From the pool of homeless people, we will specify selection criteria so that low needs homeless people are targeted. Focusing on low needs people who are not addicted or hard to house will reduce the number of barriers our client has. Outreach workers and other homeless advocates can help our organization with identifying the appropriate clients.

The main benefit which our organization provides the client with is housing for a period of up to 6 months. Here we have identified 3 possible options for funding the housing unit. For detailed descriptions of each funding option, please see our other posts. Once we are able to fund the housing, we will work to coordinate job placement and support services for the client. The support services include tutoring, mentorship, and cooking meals which will be provided by community volunteers. The combination of support services, job placement and housing are designed to help get the client off the streets. Following this, we can start the cycle again and help the next person, using the same housing unit.

Property Management with a Conscience

By: Hannah Kim

Another business model we could use to help provide supported housing for the homeless is to set up a non-profit property management company that specializes in looking after residential real estate.

The investment groups idea in a previous post aims to actually place homeless people in apartment suites at a rental rate of just $375/month by connecting them with a group of about five landlords (I.e. investors in a “giving circle”) who own the suite together.

In this alternative scheme, we would attract relatively affluent tenants who are willing and able to pay premium rental rates on high-quality apartment suites. Such premium rent would be the incentive for landlords to hire our property management company. The commission our property management firm earns would then be used to subsidize rent for the homeless people we are helping. In other words, the homeless people are NOT the tenants of the apartments we are managing; they are the recipients of some of the revenues our organization makes from managing premium real estate. Here is a simple diagram illustrating this model:

Here are some of the tasks that we would be responsible for as a property management company (Wikipedia, June 2009, http://en.wikipedia.org/wiki/Property_management):

• Accepting rent
• Taking care of maintenance and repair
• Acting as a buffer between tenant constituency groups and landlords who want to be distanced from them
• Looking after accounts and finances of the real estate properties
• Participating in or initiating litigation with tenants, contractors and insurance agencies

This property management model must of course be combined with “behind-the-scenes” efforts to 1) actually find affordable housing for the homeless that we subsidize, and 2) provide counselling and employment assistance for the homeless. For instance, the homeless may be trained to work as part of the property management team (in maintenance, security, bookkeeping, etc.)!

As you can see, setting up a property management requires expertise in the areas listed above as well as a high degree of involvement with the landlords. This business model also assumes that we can either steal existing clients away from other property management firms or convince owners of a newly built property to trust us without prior experience/reputation.

How viable do you think this social innovation is? Let us know by leaving a comment!