Homebuyers with moderate to low incomes in other Canadian cities are getting a mortgage booster through shared equity programs that proponents see as one solution to the housing affordability problem in B.C.
Shared equity offers cashstrapped buyers a chance to buy into the market in exchange for a future share of equity they can normally expect to earn in a rising market, participants at the Housing Affordability Symposium in Richmond heard last Friday.
But attempts by a nonprofit model successful in Toronto for almost 20 years have yet to work in B.C.
In Calgary, however, those earning between $53,000 and $80,000 can apply to the city-run Attainable Housing Calgary Corp. for a free downpayment, said spokeswoman Tara Cooney.
Homebuyers who qualify for a mortgage and have a $2,000 downpayment would receive, in one example, a five per cent downpayment of $11,000 as a forgivable loan for a $220,000 home in an Attainable Housing complex, leaving them with a $207,000 mortgage.
When they sell, they would forfeit one-quarter to three-quarters of any earned equity to Attainable Homes, said Cooney.
For instance, if they sold after four years and the home rose to $254,700, the couple would keep 75 per cent of the $45,700 equity, or $34,275.
The remaining 25 per cent of the equity would remain with Attainable Homes, which uses it to fund downpayments for other homebuyers.
Options for Homes, a non-profit in Toronto, offers shared equity under a complicated formula that prevents speculation and provides even those living below the poverty line a chance to own a unit in their housing co-operatives with no downpayment, president Mike Labbe told the conference.
"It's using the problems of housing affordability to solve the problem of housing affordability," he said in an interview with The Province.
Options has since 1994 built nine developments in Ontario and has three more in the works, some in trendy downtown Toronto areas.
It reduces construction costs, mostly by slashing traditional high marketing costs and cutting costly features like pools or saunas, making high-end finishes optional and by negotiating for cheaper land or other deferred developer construction costs from the municipality.
The non-profit corporation in essence subsidizes the downpayment for the lowincome buyers and it is only repayable when they sell.
That repayment in theory will be paid for by the equity built up over the years, considering the market rises in value.
Labbe said the model could work here, but needs to be spearheaded locally by someone with knowledge of housing development.
He said one local gave up after five years because he was unable to secure the land for a development. A second attempt is in the works but the organizer didn't return a request for comment.
Vancouver urban planner Michael Geller said, "The concept of shared equity definitely has a place in Vancouver" and can be as simple as a relative or friend agreeing to lend a downpayment or portion of the house price for a percentage of the eventual gain, a kind of "silent second mortgage."
Geller said Verdant, at SFU's UniverCity, offered no-frills lower-cost housing to faculty and staff with the proviso they sell only to other staff and at 20 per cent below market value at the time of the sale.
He suggested Vancouver could offer the North False Creek land for a shared equity community. He acknowledged there are risks if owners are forced to sell during a market downturn. "But that's the same risk with any form of home ownership," he said.
Shared equity was included in a list of 17 suggestions he presented to the conference to increase housing affordability in Metro Vancouver, most based on the solution of building "smaller houses on smaller lots."
"Our familes are getting smaller and we're building bigger houses," said Geller.
And more expensive ones. He said homebuyers have to be prepared to lower expectations and cut costs by living without granite countertops, fireplaces and other fixtures.
His solutions and those of most speakers at the two-day symposium included calls for higher density neighbourhoods, including more row housing, semi-detached houses, secondary suites, suites within suites and laneway houses, to name a few.
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