Vacancy loss

 

At our last meeting, there was a question raised about the way vacancy loss is reported.

The following is from the Co-operative Housing Federation of Canada’s “10 things to look for in your co-op’s financial statements.”

When you create a budget for your co-op, you assume that you will collect the maximum housing charge for each unit—either from the member directly, or from a combination of the member’s payment and any subsidy to which the member is entitled. then you make a small allowance for any vacancies that might unavoidably occur.

The combination of the housing charges and the allowance for vacancies is your housing-charge budget for the year. If you find that your actual housing charge revenue is falling short of budget then you need to ask why.

In all likelihood the reason will be vacancies that are greater than the vacancy allowance you budgeted for. It won’t be because of members who are in arrears, because you count housing charge revenue when it is due at the beginning of each month, not when you collect it.

You need to take unbudgeted vacancies very seriously, because that’s lost revenue you can never recover. the causes could be

  • a poor process for filling vacant units, perhaps involving too many decision steps
  • no marketing strategy
  • vacant units are not in occupancy condition
  • a combination of these factors. 


It’s important for the board to take the time to look carefully into the reasons for unbudgeted vacancies and to address the causes, and make sure, when the budget is set for housing charges, that the allowance for vacancies is not a large one. A large vacancy allowance could be a sign that the co-op has come to accept vacancies as normal, which is not good. Co-ops should aim to avoid having any vacancies through effective member recruitment and sound unit maintenance and preparation practices.

 

OGHC budgeted $5692 for vacancy loss for 2021.

We had six unit turnovers in 2021.

  • Unit 38 turned over twice
  • Unit 41 turned over once
  • Unit 19 turned over once
  • Unit 56 turned over once
  • Unit 8 turned over once

 

For three of these turn overs there was no vacancy loss.

For the other three was an average of one month’s vacancy loss.

The longest period of vacancy was just under 1.5 months: in that case the board had granted the departing member an exemption from the three-month notice provision in recognition of a medical condition.

In one case, there was one month’s loss, and in one case there was .5 month’s vacancy loss.

 

In future when I provide the Finance Committee with a report on turnarounds, I will also include information on the extent of the vacancy loss.

 

Brydges has been reporting vacancy loss under two lines in the monthly financial reports.

  • 4411: rent residential vacancy
  • 9002: residential vacancy expenses
  • When these are totalled they provide the appropriate figure.

The budgeted line for these is 4411. I have requested that Brydges stop using the 9002 account.

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