Using economies of scale to solve housing problems

Purchasing building supplies in bulk, setting up a central rent collection company for First Nations across the North and working on a pan-northern approach to heating homes on reserves are just a few of the ideas being considered to address the massive housing problem in Nishnawbe Aski Nation (NAN) communities.
With over 5,000 new homes needed immediately across NAN communities, and the housing shortfall growing each year as populations in First Nations continue to rise, NAN’s deputy chief Les Loutit knows the status quo is nowhere near good enough.
Loutit presented NAN’s proposed solution to the First Nations Northern Housing Conference on February 16.
The proposal focuses on economies of scale. NAN wants to use its position as a regional organization to coordinate and implement regional solutions for all of its First Nations.
The idea marks a shift away from current practices of having individual First Nation communities deal with their own housing needs.
“It’s all about using economies of scale and scope to provide cost savings on building houses,” Loutit said.
Loutit noted that most First Nations do not have the capital funds to purchase housing materials in bulk. In many cases they are building only a few homes per year, and paying much higher prices to do so than if they were building an entire subdivision.
NAN’s proposal plans to remedy those high costs by grouping together the purchasing needs of as many communities as possible. As Loutit explained, instead of a community buying 10,000 feet of two-by-six boards to meet its needs, NAN may be able to buy 50,000 or 100,000 feet for a number of communities, and negotiate a much lower price in doing so.
Loutit also noted that there may be an opportunity to open a First Nation warehouse to store the bulk orders of supplies, cutting out the wholesalers and retailers.
“When we extend this across the Nation, we start to maximize our ability to reduce costs and the benefits go right back to the communities,” Loutit said.
Besides using economies of scale to lower the cost of purchasing building materials, NAN also plans to set up a central rent-collection agency to service communities across the NAN territory. The premise of the central agency is the same: using economies of scale to lower costs.
Currently, Loutit explained, each community has to collect rent for housing on reserve from band members. Often those rents are paid through government social service agencies, for people without jobs who find it hard to make rent or mortgage payments. The result has been a huge workload on individual First Nations, with minimal success.
“A lot of communities have gotten behind on rental payments,” Loutit said. “Many First Nations are using capital dollars to recoup on rental arrears. That would be eliminated with this new model.”
NAN is also looking at other business models in relation to housing, including creating local home heating solutions in communities and manufacturing certain housing components such as doors and tresses at a centralized NAN-run facility.
“This is all going to be built on a business model, where we will reinvest excess funds from cost savings to earn income that First Nations can use to renovate or build more housing,” Loutit said.
NAN expects a feasibility study on the proposal to be completed in early March. The feasibility study will be brought to the next NAN chiefs gathering for consideration of the entire territory.