Helping Members in Financial Distress during COVID-19

  25 March 2020

The COVID-19 outbreak caught everyone by surprise.  Now we are living through a pandemic, and it’s difficult to remember what “business as usual” looks like.  As more businesses close their doors – temporarily or otherwise – the resulting layoffs are creating widespread financial distress and uncertainty.  So far almost one million Canadians have applied for unemployment benefits and that number will surely grow.

Not surprisingly, housing co-ops are reporting that many of their members are worried that they can’t afford to pay next month’s housing charge – or the one after that.  Co-ops, in turn, are wondering if this will affect their ability to meet regular financial obligations like mortgage payments and property taxes.

This memo will deal with:

  1. Approaching the discussion in your co-op
  2. Help for members in financial distress
  3. Options for co-ops in financial distress
  4. Next steps

Approaching the discussion in your co-op

Housing co-ops are member-centered businesses and communities.  Directors have a legal obligation to act in the best interest of the co-op, remembering that the co-op exists to serve its members.

In ordinary circumstances, most housing co-ops have strict arrears management procedures that discourage late payment of housing charges.  These are not ordinary circumstances, though, and co-ops will need to be more proactive.  Both BC Housing and CMHC have urged a freeze on membership terminations or evictions for non-payment during the period of the pandemic, and co-ops should take this request seriously.

We suggest that you follow these four steps:

Step One:  Reassure your members.  These are very stressful times.  Many people are coping with enormous pressures at home or at work, or both.  The co-op should try to make things better, not worse.  So reach out.  Tell your members you know they are worried, but you’re in it together and things will work out.  They will be relying on the board’s leadership in this very uncertain time.  This is just the kind of moment co-ops were created for, so let’s rise to the occasion.

Step Two:  Ask your members to reach out to you.  Before you can decide on a solution, you need to understand the problem.  How many members are experiencing an interruption in their incomes?  What’s the specific shortfall for each household?  What are they asking of the co-op?  Without this information you will not be able to design a solution that targets the problem.  And let’s be clear, you do need to target the problem.  Some members will not be facing any hardship, and they won’t need the co-op’s help.  This is no time for a blanket housing charge holiday, so don’t mistake equality for fairness.  No one knows how long the pandemic or its impact on our economy will last, and you need to think about how to help members who need it without compromising the viability of the co-op.

Step Three:  Decide on your approach.  CHF BC will share some sample resources for co-ops later this week.  In short, we will recommend that members be allowed to defer payment of housing charges if their incomes have been interrupted due to COVID-19.  This arrangement will be documented in a written agreement between individual members and the co-op.  The co-op and each member will commit to exploring other available options before drawing on the co-op’s resources.  Some of these options are described below.  There may not be time to implement a full solution before April housing charges are due.  Don’t worry about that.  As long as you communicate the approach you plan to take broadly to members, you can catch up on the paperwork before May housing charges are due.  In the short term, we recommend that you book all unpaid housing charges as receivables until you have a chance to decide if you are deferring or forgiving those payments.

Step Four:  Communicate and implement.  Be clear with members (and your manager or coordinator) about the approach you are taking.  Engage key volunteers and staff to get the message out and get ready to administer housing charge assessment and collection.  Approve arrangements with each eligible member, or delegate that authority to officers or managers.  Above all, don’t make it more complicated than your own capacity to oversee the solution you have chosen.  And don’t get bogged down in the paper; you can backfill for that later.

Help for members in financial distress

There may already be options available to assist members, depending on when your co-op was developed.  This can reduce the final draw on the co-op’s own resources.

Homes BC and other provincially funded co-ops:  Members who are already subsidized and require a deeper subsidy will receive it effective immediately.  Advise your manager to complete the forms provided by BC Housing.  Members experiencing loss or reduction of employment income due to COVID-19 can also benefit from a reduction in housing charges.  Advise your manager to follow the procedures in BC Housing’s Covid-19-Bulletin.  This should reduce or eliminate the need to draw on the co-op’s own resources. Update June 2020: If you are a member of a co-op developed under the HOMES BC program, not receiving a subsidy but have seen a loss of income due to COVID-19, you now could be eligible for a temporary rent reduction. Please see the latest COVID 19 Bulletin for details of the conditions for eligibility.

ILM co-ops:  Check with your manager or BC Housing to find out if you have unused ILM rent supplements that could be assigned to members experiencing income loss.  We are in the process of confirming if BC Housing will agree to release unused ILM rent supplements and reassign them to co-ops with members who need them.  We will be in touch soon with more information on this option.  Every ILM co-op has a Security of Tenure Fund for members who aren’t receiving a rent supplement but experience a loss of income.  Check to confirm the balance in your Fund.  If you have been saving it for a rainy day, now is the time to use it.  Follow the policy you have adopted for your Fund or amend that policy if it’s not adequate for the circumstances.  If you have no policy, refer to your ILM operating agreement with CMHC for advice.

Section 95 co-ops:  If you have room in your monthly subsidy payment from CMHC or a balance in your Subsidy Surplus Fund, now is the time to use it.  CMHC has delayed the implementation of its FCHI-2 subsidy program until September 2020, but all subsidy currently being delivered under FCHI-1 will be automatically extended until then.

Co-ops with no operating agreements:  Some co-ops with expired CMHC operating agreements have been receiving subsidies for low-income members under the terms of FCHI-1 and that program will continue until it is replaced by FCHI-2 in September 2020 or later.  If your co-op is one of the 22 receiving subsidy administered by CHF BC under the interim subsidy program funded by BC Housing, funds for that program will be exhausted by June 1, 2020.  CHF BC and CHF Canada are pressing both BC Housing and CMHC to provide funds to continue those subsidies.

All co-ops:  Every member requesting a housing charge reduction should be asked at the same time to explore every other option available to them.  This includes municipal rent banks, employment insurance, and other provincial and federal assistance as details of new programs are announced.  Government phones are jammed these days and email responses are slow, so it would be unreasonable to expect members to have answers to their inquiries before receiving a housing charge reduction, but it is reasonable to ask that those inquiries be made.  New announcements are being made weekly as governments respond to the emerging crisis with new funding programs.  CHF BC will alert members to each new possibility as it emerges.

Options for co-ops in financial distress

Co-ops may find that a growing balance of deferred housing charge payments is enough to impair their ability to meet regular financial obligations like mortgage payments and other bills.  It’s important in these times to monitor cash flow even more carefully than ever and there are options available if you just can’t make ends meet.

Mortgage payments:   CMHC, BC Housing and Vancity have all signalled that they will accommodate requests to defer mortgage payments wherever possible.  CMHC is urging other lenders to show similar flexibility and patience.  You should reach out to explore this option at the earliest opportunity if you think it will be necessary, but not until you can document the shortfall you will be facing.  If your co-op is a client of The Agency for Co-operative Housing, you should speak with your Relationship Manager at the Agency before contacting CMHC directly.

Taxes:   It may be possible to defer municipal property tax payments or other remittances to government.  Again, you should explore this option at the earliest opportunity if you think it will be necessary, once you can document your projected revenue loss.

Other Payables:  Some contractors or service providers may be willing to negotiate full or partial deferrals in contract fees or invoices.  This is more likely if you have a long-term relationship with those partners.

Note:  You can expect all of these conversations to be more challenging if you have opted for a blanket housing charge holiday for members instead of targeted reductions or deferrals based on members’ actual income losses.

Next Steps

There is a lot to think about when deciding how to help members whose incomes will no longer support the housing charges they owe the co-op.  This memo has focused on the choices to be made and the assistance available to members and co-ops.  CHF BC will follow up by publishing sample policies and template agreements to help co-ops implement the choices they make.  In the meantime we welcome your inquiries at members@chf.bc.ca and will do our best to respond with timely and useful advice in these challenging times.