Dmitriy Yakovlev
The Way Home is a series looking at the challenges faced by different generations of people who are in the market for a home – from first-time buyers and growing families to baby boomers who are downsizing.
After Rachel and Brandon Eymann moved to Calgary from Lethbridge, Alta., a few years ago, they found themselves at the mercy of the rental market: The couple needed enough space to accommodate his two kids on weekends at a reasonable price in a decent neighbourhood. They got the first item on their wish list, but that's about it.
The bathroom tiles were broken so badly that the Eymanns, both lab technicians, had to keep a bath mat on the floor to avoid cutting their feet. The windows were positioned in such a way that hardly any light entered the home. The place was cramped and induced claustrophobia.
"We were renting a really crappy three-bedroom main floor [of an older house] for way too much," recalls Ms. Eymann. "The landlords weren't interested in fixing anything. We got really fed up. …We were paying $1,450 a month. We were basically making ourselves house-poor without having a house."
That rent came as a shock after living in Lethbridge, where their basement suite cost them $500 a month. The two wanted to get out of their overpriced and underwhelming Calgary rental, but with its hefty monthly fee, they were finding it difficult if not impossible to put money aside for a down payment to buy their own home.
Then they saw an ad in a local newspaper for an affordable-home ownership program run by Attainable Homes Calgary Corp. (AHCC). A non-profit social enterprise and wholly owned subsidiary of the City of Calgary, it enables people like the Eymanns to buy their own home with a down payment of just $2,000. By working with builders, developers, lenders and lawyers, the organization brings down the upfront costs of ownership to deliver entry-level townhomes and condominiums for those who are caught in Calgary's housing-affordability gap.
The Eymanns now live in a bright two-level-plus-basement townhouse with a patio big enough for a barbecue and a couple of chairs in a nice neighbourhood. Their monthly mortgage payment is less than what they were forking over in rent.
Before they enrolled in the program, the Eymanns represented a growing number of people across the country who dream of owning their own home but, because of rising housing prices and expensive rents, just can't get there, even in dual-income, childless households. It's a familiar scenario in overheated markets elsewhere, notably Vancouver and Toronto. In turn, affordable-home ownership programs for lower- to moderate-income earners are becoming more common nationwide.
Toronto has Options for Homes and Trillium Housing, for example, while in Quebec, there's Accès Condos. Vancouver is the latest city to turn its attention to a program for low- to middle-income earners, with its city council having recently requested that the provincial government amend its charter to enable and authorize an affordable-home-ownership pilot project.
Each of the existing initiatives is structured a little differently, with Vancouver looking to all of them, as well as other programs around the world, for ideas on how to best set up such a venture. But they have in common the goal of making home ownership a reality for average Canadians – those who neither qualify for social housing nor would make the list of the "1 per cent" – at a time when the prospect of a white picket fence for so many of them is shrinking.
"We're not taking homeless people off the streets," explains Joe Deschênes Smith, one of three founders of Toronto-based Trillium Housing. "It's for people you would normally think would be homebuyers – a nurse or a teacher … people who are not going to get any government support on the housing front but for whom the market has gotten out of reach."
Trillium Housing is a social enterprise that has direct partnerships with conventional builders, which develop entry-level homes. Affordability is facilitated through the Trillium Mortgage, a shared-appreciation mortgage that does not have a conventional interest rate. There are no regular payments; rather, the homeowner repays the mortgage principal and a share of any appreciation in the value of the home at the time of sale or by refinancing the first mortgage. The Trillium Mortgage can either offset a portion of the down payment or decrease the amount of the first mortgage, reducing the monthly mortgage payment.
Units are customized, not "cookie-cutter," with varying sizes and layouts, and with buyers' income levels taken into account.
"You know the people who walk into a presentation sales centre on the weekend that would really like to buy a unit but between what they can afford on a first mortgage and value of the unit they have to walk away? We work with developers and say, 'Why don't you refer them to us? Let's make them into homeowners," Mr. Deschênes Smith says. "We look at what's an appropriate amount of income going to housing costs and then make sure it's the right-size mortgage to fit their needs."
Trillium has its first project hitting the market now in Kemptville, Ont.; preliminary agreements are in place for others in Toronto and Hamilton.
In Calgary, Attainable Homes has sold more than 700 units to date.
"Our program recognizes that one of the biggest barriers to people who are at lower income levels but who have a steady job, a steady income, is the down payment," says AHCC president and chief executive officer John Harrop. "They have the ability to pay a mortgage, but they don't have the ability to save up a $20,000 down payment, so that's fundamentally what we do: We provide the down payment for them so all they have to do is put down $2,000, regardless of what price the house is."
It uses a "one-time" affordability model, which is least expensive for the first purchasers. When homeowners decide to refinance or sell their home on the market, a share of the appreciation goes back into the program to fund more developments. The longer people keep their home, the more of its appreciation they keep, up to a maximum of 75 per cent after three years, allowing them to build equity and move up the home-ownership ladder.
Eligibility criteria at Attainable Homes include a maximum household income of $90,000 a year for single and dual-parent families with dependent children living in the home, or a ceiling of $80,000 a year for singles and couples with no dependents.
Moving people into home ownership provides a relief valve to the rental market as well, Mr. Harrop notes. Attainable Homes works with rental providers to give mortgage-education programs to tenants: "A lot of them could get into home ownership but they just need more information," he says.
Toronto's Options for Homes was born in 1992, after government grants dried up for affordable and co-op housing. Options founder, Mike Labbé, who had been working in the co-op housing sector, went on a working trip to South Africa where he was introduced to the idea of the second mortgage. Understanding that without the government funding there would be a section of the population that would become underserved in the housing market, he began to look at ways the second mortgage mechanism could help make housing more affordable for moderate-income families and single-person households, those who would be left behind without government funds. Seventy-five per cent of purchasers at Options' Danforth Village Estates in Toronto's Scarborough suburb, which just began construction, are in the 50-per-cent income percentile, making less than $70,000 a year.
Vancouver, meanwhile, has become a nightmare for people with good jobs who can't get into the market because of astonishing real-estate prices. While city council waits for provincial amendment of its charter to move forward with its pilot project, councillor Raymond Louie says that an affordable home ownership program is just one piece of a much larger puzzle related to the entire housing continuum.
"If built, these condos are geared toward first-time middle income and moderate income people with young families so they can stay in our city and raise a family in the city they grew up in," Mr. Louie says. "This is not magic solution. This is one piece of a number of initiatives necessary to deal with housing affordability.
"This is not a city issue on its own," he adds. "It does require the federal and provincial government to be significant partners. … When we have regular people with good jobs unable to live in our city, that's not a healthy climate for us overall. We don't want a hollowing out of our city where it's only the rich that end up being here, which is why we're attempting to do this."
Vancouver architect and real-estate consultant Michael Geller notes that similar programs exist all over the world, from England to Singapore. However, he questions whether government involvement in individual purchases is wise in the long run, with governments acting as landlords, especially if housing prices were to drop or people were to start defaulting on their payments. Some people in England in such shared-equity ownership situations have ended up with negative equity or losing their homes altogether.
Another problem is allocating homes in government programs: He recalls a problem arising with an affordable home-ownership program in Toronto that had a "first-come, first-served" set-up, but people who had friends at City Hall just so happened to end up being the lucky beneficiaries. "There could be thousands of people lining up to get these few units; how do you avoid the favoritism and cronyism, which so often happens in a political program such as this?"
In Vancouver's case, Mr. Geller suggests the city consider looking at leasing land and having non-profit organizations handle affordable home-ownership programs. More effective strategies, he says, may be to allow smaller homes to be built and laneway homes to be sold.
"Those initiatives could have a more significant impact than any one housing program," he says. "At the end of the day we all want to see more affordable housing, and the one thing that municipalities can do is to help increase the supply of housing."
For new homeowners like the Eymanns, the impact of having a place to call their own can't be measured strictly in financial terms.
"It's really nice to be able to do exactly what we want to do with our home," compared to renting, Ms. Eymann says. "If we want a purple kitchen we can have a purple kitchen. I have more pride in our home now. I've never vacuumed so much in my life."