Tracee Smith, CEO of Keewaywin Capital, is a financial executive with experience at two of Canada’s largest banks and a member of the Missanabie Cree First Nation.Tara Walton/The Globe and Mail
A private credit fund focused on speeding up construction of new housing in Indigenous communities has raised its first funding and is nearing agreements to build its first homes.
Indigenous-led Keewaywin Capital Inc. announced an $11-million first tranche for its inaugural fund, and aims to close with at least $30-million by the end of the year.
Keewaywin is founded and led by Tracee Smith, a financial executive with experience at two of Canada’s largest banks and a member of the Missanabie Cree First Nation. The fund has a five-year partnership with Canada Mortgage and Housing Corp. to build affordable rental housing on or off reserve, and has the ability to finance its own projects.
Keewaywin’s first five investors are impact investing companies Realize Capital Partners and Rally Assets, Canso Investment Counsel Ltd., investment firm Addenda Capital and the private Tachane Foundation.
Indigenous-owned private credit fund partners with CMHC for home-building venture
Using private credit to build on-reserve housing is a novel attempt to fill a funding gap that has hindered the ability for new housing to be built at pace with a growing Indigenous population.
In 2021, more than one in six Indigenous people – and one in five First Nations people – lived in crowded housing considered unsuitable for the number of people living there, according to Statistics Canada census data.
Government programs provide low-cost financing but struggle to meet high demand for housing, and lack of access to capital has been a key sticking point. Keewaywin will lend at higher rates more in keeping with market levels for lending, with the goal to add to add an additional pool of funding to meet the needs of Indigenous communities.
“Everyone’s doing something new here,” Ms. Smith said in an interview. “We look forward to proving it and showing them how it’s done so that everyone else can do it too and open up more capital.”
A change in leadership at CMHC and recent wildfires in Manitoba delayed Keewaywin’s original launch plans, and it reset the CMHC partnership for another five-year term, until 2030.
Keewaywin is currently assessing two potential projects in Manitoba. One would build 30 on-reserve housing units in a community with a projected shortfall of at least 100 homes.
The second would provide financing to build six single-family homes in a different community in addition to a CMHC plan for three new homes through the housing agency’s On-Reserve Non-Profit Housing Program, known as Section 95.
“You have a housing crisis and basic needs not being met,” Ms. Smith said. “And when is that going to be enough for Canadians to say, ‘Enough is enough, we want to solve this?’”
Canada’s banks have often balked at financing on-reserve housing, Ms. Smith said, because the Indian Act prevents non-Indigenous entities from seizing the land underlying those homes as collateral.
More than one in six Indigenous people – and one in five First Nations people – lived in crowded housing considered unsuitable for the number of people living there in 2021, according to StatsCan.NICK IWANYSHYN/The Globe and Mail
Keewaywin is exploring ways to use cash collateral or other assets to back loans. One option could be securing claims against cash flows from Impact Benefit Agreements (IBA) from resource projects.
“It just takes that much more time to underwrite these loans,” she said. “People think it’s risky for some reason. We’re just going to have to show you that it’s not.”
The new homes can cost anywhere from $350,000 to $500,000 to build, and Ms. Smith said Keewaywin aims to build 200 to 300 units by 2030, most of them single-family homes.
In a statement, CMHC said it shares Keewaywin’s goal to support Indigenous housing needs.
“CMHC continues to explore opportunities to support Keewaywin as they drive investment in scalable, community-led housing projects by and for Indigenous communities, on and off reserve, and contribute to reducing barriers to housing for Indigenous Peoples,” the agency said.
In some cases, Keewaywin will work with modular home providers to get units built quickly, especially in remote communities where harsh weather and supply shortages can be barriers.
Keewaywin lends to communities at a 9-per-cent interest rate, then seeks to have a financial partner – CMHC or other collaborators – take over the loan after a few years, so it can make new loans.
“It allows that capital to flow, it gives investors a great return,” Ms. Smith said. “Yeah, they want to see the returns but what they’re excited about is seeing, what community are we working in? How is this making a difference in the lives of the community?”
Addenda Capital has a mandate from its parent company, a subsidiary of Canadian insurer the Co-operators Group Ltd., to invest a part of its assets in impact investments. But viable investment opportunities that drive Indigenous community development are still rare.
“It’s an economic imperative, an opportunity. But it’s kind of a moral imperative too,” said Monika Freyman, Addenda’s vice president of sustainable investing. “This is just one little seed of change but I think it’s something that’s really exciting for Canadians.”