Nightingale as a not-for-profit — an explainer

Jun 15, 2022

Nightingale occupies a strange space in the property market. We’ve made a very conscious decision to operate as a not-for-profit organisation within a notoriously profit-driven sector. So who owns the company? What is a profit and how do we avoid making one? How do we price our homes? How do we make sure our employees get paid and the lights stay on at Nightingale HQ?

For those interested in the organisational side of Nightingale, here are your most pressing questions answered.

Who owns Nightingale?
Last year, Nightingale changed its company structure to reflect our new not-for-profit status. From this point on, the company could not be owned by any individual or group. The technical term for this structure is a ‘company limited by guarantee’, which is a legal entity with no shareholders.

Instead, the organisation is governed by a constitution, and overseen by members. These individuals act as guardians to ensure that Nightingale always acts in accordance with the purpose laid out in the constitution (but they are not owners or shareholders and as such can not profit from the operations of Nightingale).

What does it mean to be a ‘not-for-profit’ housing provider?
Traditional property development is all about creating profit for shareholders. In contrast, the Nightingale approach is to deliver housing at cost and then to take any residual revenue from a project, and put it back towards our mission of delivering environmentally, socially and financially sustainable housing. To maintain our not-for-profit status, we must ensure any residual revenue (which might otherwise be considered ‘profit’) is used to further the purpose of the organisation, not for the benefit of individual shareholders as in the case of commercial property development.  

As a not-for-profit, our financial reports are lodged with the Australian Securities and Investments Commission (ASIC) and are accessible through their register. In the future we hope to qualify for charitable status, which would also require us to report to the Australian Charities and Not-For-Profit Commission (ACNC).

When Nightingale talks about selling homes ‘at cost’, what does that mean?
The price you pay for a Nightingale home is the amount it costs us to produce it. This includes purchasing the land, engaging consultants, architects’ fees, builders’ fees and materials, and the financing costs for each project. It also covers a project fee for Nightingale which is 2.5% of the total project cost. This keeps the lights on in the Nightingale office, and pays our team to keep the whole operation running.

If homes are sold at cost, why would there be any profit from a project?
Nightingale includes a contingency in its project budgets to cover any unexpected costs during construction (these could arise from building delays, or building material prices going up, for example). If the contingency isn’t spent at the end of the project, those unspent funds constitute a profit, which goes back to the Nightingale mission.

Why does Nightingale sometimes use the name Nightingale Communities instead of Nightingale Housing?
The short answer to this is that we are using the name Nightingale Communities while we are still in a transition period.

When we became a registered not-for-profit in April 2021, we had to choose a new name since ‘Nightingale Housing’ was already taken… by us! As there were projects already in train under our original, pre-NFP name Nightingale Housing Pty Ltd, we could not immediately begin working as a not-for-profit under the name ‘Nightingale Housing’.

When the existing Nightingale Housing projects are completed, Nightingale Housing Pty Ltd will be dissolved and any associated funds transferred to the not-for-profit, to go towards our mission. With the Nightingale Housing name no longer tied to another entity, we’ll then be able to claim it as the name for our ongoing not-for-profit operations.

If something goes wrong with a Nightingale project, does that affect the delivery of other projects?
There are risks involved with every project, and we plan accordingly. One protective measure we take is to quarantine each Nightingale development from the risks of other projects, by managing them all through individual companies called Special Purpose Vehicles (SPVs). This is common practice across many sectors within organisations delivering multiple large-scale projects. SPVs are created for the sole purpose of managing and assuming liability for individual projects, and they are dissolved on completion of the project.

Can these SPV companies be used to make a profit?
SPVs are responsible for managing project budgets, and they could make a profit through not spending that contingency we mentioned earlier. However, with Nightingale Communities as the sole shareholder of the SPVs, any profits come back to us and are returned to mission in line with our constitution.

Making the not-for-profit Nightingale Communities the sole shareholder for every project ensures that legally there is no way for individuals to profit from Nightingale projects through the use of SPVs. Under the Corporations Law Nightingale as the sole shareholder of the SPV has the right to any profit made by an SPV when the SPV is dissolved at project completion — and in turn, the profit goes back to mission.

Is Nightingale a charity?
No. Nightingale is a registered not-for-profit, but not officially a charitable organisation. We hope to qualify for charitable status in the future.

Why did Nightingale become a not-for-profit?
We have always been driven by our mission to revolutionise the way we live together by providing carbon-neutral, community-centred housing — rather than by any profit motive. As Nightingale homes grew in popularity, the Nightingale team became increasingly concerned that under a for-profit structure, there was no guarantee that all their hard work would continue to benefit Nightingale residents and be used to sustain its mission. There were insufficient safeguards against shareholders, rather than residents, becoming the main beneficiaries of Nightingale’s projects. We moved to a registered not-for-profit model in order to ensure that our efforts could not be monetised by shareholders, and that everything we do as a company is in line with our core purpose.

There are other benefits of operating as a not-for-profit. One key benefit is that Nightingale is free of the shareholder interests that traditional property developers are tied to. Instead of looking for ways to maximise profit for shareholders, we can focus on providing great quality, carbon-neutral homes designed to foster community connection.

Still have questions? We’d love to hear from you.

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