Effectively working with non-profit owners and organizations to provide affordable housing for their clients can be one of the most rewarding property management assignments. Hayes Gibson and its’ affiliates have worked closely with non-profits dating back to 1974. Within this sector of our business, we work primarily with two types of non-profits: faith-based and standard non-profits. In this blog, I want to discuss some of the challenges as well as the rewarding aspects of third-party management for non-profit organizations.
A non-profit is created under IRS Regulation to serve a charitable purpose. Many business advantages are potentially available to the non-profit, including property tax exemption, income tax exemption, and sales tax exemption. The type of non-profit is a broad scope definition, including service, healthcare, case management, and housing, to name a few. Most non-profits that own housing do so as a furtherance of their organization’s mission in the organizational documents. Rarely does this initiative only focus on the housing aspect. Rather, it is the housing coupled with supportive services (employment, ministry, job training, life skills training, education, and rehabilitation) furthering the mission of the non-profit. It is challenging for the non-profit in many cases to be both the service provider and the landlord.
Experience From the Field
Several years ago, we were managing for a national faith-based non-profit. I asked one of their leaders, “with all of the units you have throughout the United States, why do you use third-party management?” He smiled and replied, “it’s tough to minister to someone on a Sunday and then evict them on a Monday.” His statement has stuck with me all of these years as a clear guiding principle of third-party management’s role in working with non-profits. We are there to further their mission and help them meet their clients’ needs, and distance their organization from the clients when needed. Surely this does not mean we have to compromise any best practices management procedures, but it does mean we need to look through the lens of their mission as we manage their housing stock.
One of the first considerations for any organization contemplating third-party management is to learn as much about the organization’s purpose and mission as possible. Certainly, if your management entity has an issue with the goals and purpose of the non-profit, you should decline the assignment. If your management company and the non-profit do not line-up with values, goals, and approaches, the assignment will never work. One of the methods I prefer to use is to spend time on the “front lines” of the organization and observe the service to their clients, which will help understand the organization.
Looking Through the Mission Lens
Several years ago, I had the opportunity on multiple evenings to ride on a Salvation Army Canteen in Detroit – a winter event providing food, clothing, and ministry to the homeless in the Cass Corridor. Over 2,500 meals and assistance were afforded most nights in Detroit! Seeing the multitude of challenges these clients faced daily and then trying to plan how to effectively create and manage housing communities to serve them gave me an invaluable experience. It helped me understand the approach needed in management to house these individuals and families who previously were homeless due to drugs, mental illness, abuse, criminal background, or other unfortunate circumstances. Each client we served from that point on in the housing we managed had a detailed case plan that was a partnership between the resident, non-profit, and our management. Sometimes the best-laid plans do not work out, but it is a struggle many times to keep the resident housed without the plan in place.
Evolving Protocols for Effective Asset Management
Another critical factor the non-profit must consider is how to ‘run’ the property. Program regulations will provide guidance in many areas, but there are still other areas to be defined, such as:
- Tenant Selection Plan
- The use of clients in management functions (service stipend, grounds, housekeeping)
- House Rules
- Lease violations and evictions
- Rent collection
- Non-smoking policy
- Damages vs. normal wear and tear
Each of the above areas provides potential challenges between the non-profit and management, resulting in a policy and management approach both parties need to accept. The above is not a fixed set of documents or policies. Rather, it is an ever-changing and evolving protocol requiring reexamination to ensure the given policy is reasonable, enforceable, measurable, and most of all supports and furthers the mission of the non-profit while still enabling management to manage the asset effectively.
Improving Communication for Assignment Success
Communication with the non-profit is critical for a successful management relationship. We have regular “bridging meetings” with the non-profit stakeholders to ensure any concerns are quickly addressed before it has an opportunity to grow into client or management dissatisfaction. Such meetings also allow management staff and non-profit support staff to discuss any residents who may be in danger of losing their housing and what interventions can prohibit that event. In the end, if there is effective communication with the non-profit in advance and eviction becomes inevitable, then the work put in on the front end will help foster agreement in the unfortunate outcome. It is also essential that the property management team regularly communicate with the owner on any financial or programmatic (compliance) concerns.
I have seen many times where the project gets into financial or programmatic trouble, and the owner is only brought into the discussion when the project is in free-fall, which is neither fair to the owner nor the clients we serve. When the first sign of problems arises, it is time to discuss with the non-profit and develop a work-out plan to address the issue. Also, including the other stakeholders (lender, HUD, state agency) early in the process will help achieve a favorable outcome for the project and the client. As the assignment continues, it is important to discuss with the non-profit their future goals and vision for the housing portion of their mission. It has been gratifying for me to work with non-profits who start with one housing project and then grow their dream into multiple properties serving a multitude of clients. Thoughtful and long-range planning is critical to long-term success!
In the end, not every non-profit will be an organizational fit with your management company. Their mission may not line up with your values. The operational plan they desire may not be achievable in your estimation. However, when you find an “organizational match” to provide housing for those in need within the mission of the non-profit, it can be one of the most rewarding assignments in your portfolio!