Want some free money? The city has $1 million to give away. All you have to do is buy a house with your share of the loot.
If that sounds like a good deal, that's because it is. Unless you're a taxpayer, of course.
The city has just received $25.8 million in federal and provincial affordable housing money. Now it has to figure out how to spend, sorry, invest the free money. Most of it will go toward building or acquiring new rental units, but there is a nod to home ownership, too.
Low-income working families bringing in about $45,000 a year could probably afford a mortgage, just, but often lack the savings for the down payment. No problem. Under the new program, the city will play the role of mom and dad, and advance up to 100 lucky families down payment loans of up to $15,000.
The term loan is a bit of a misnomer. One would think the two key elements of a loan would be interest and the need to pay it back.
Interest doesn't apply in this plan and the loan only has to be paid back if the home is sold or refinanced. Keep it for 20 years and the money is yours.
Unlike rent supplements, the home ownership plan is not contingent on your future income. Those qualifying for the down payment program only need to have a low income at the time of application.
What are the goals of this spending, and how will they be measured? An argument can be made that loaning a person $15,000 is cheaper and better than giving them open-ended rent supplements, but the program is not limited to that target group. This is simply broadening the circle of subsidy.
If the new homeowners move out of apartments, that frees them up, but doesn't make them more affordable to others. Where is the gain?
The down payment plan is not a new idea, but a bad idea making a comeback. The province offered such a program for about five years starting in 2005.
In Ottawa, the average annual income of those getting the free money was just over $44,000, although the province allowed loans to families making as much as $77,900. People could buy a house valued at up to $281,118. One would really have to question assisting people with that kind of income.
Across the province, 4,095 families benefited from the program, which has since been cancelled. One would have thought the lure of free money would have been irresistible, but the province actually had a hard time giving it away, despite the generous eligibility criteria.
In reviving its own version of the home ownership plan, the city hopes a builder will come forward to work with it on the program, taking over the administration and offering the elusive affordable housing.
The greatest flaw of the city program is that it selects a lucky few individuals when many more have needs that are just as great. That won't bother those who argue that social problems can be solved one tiny step at a time, even if it takes 100 years, but the broader problem of housing affordability will not be addressed. The predecessor provincial program had as one of its goals "encouraging developers to build affordable housing by fostering demand." There is no shortage of demand for cheap housing. The question is how to build a house that lower-income people can afford.
If that sounds like a good deal, that's because it is. Unless you're a taxpayer, of course.
The city has just received $25.8 million in federal and provincial affordable housing money. Now it has to figure out how to spend, sorry, invest the free money. Most of it will go toward building or acquiring new rental units, but there is a nod to home ownership, too.
Low-income working families bringing in about $45,000 a year could probably afford a mortgage, just, but often lack the savings for the down payment. No problem. Under the new program, the city will play the role of mom and dad, and advance up to 100 lucky families down payment loans of up to $15,000.
The term loan is a bit of a misnomer. One would think the two key elements of a loan would be interest and the need to pay it back.
Interest doesn't apply in this plan and the loan only has to be paid back if the home is sold or refinanced. Keep it for 20 years and the money is yours.
Unlike rent supplements, the home ownership plan is not contingent on your future income. Those qualifying for the down payment program only need to have a low income at the time of application.
What are the goals of this spending, and how will they be measured? An argument can be made that loaning a person $15,000 is cheaper and better than giving them open-ended rent supplements, but the program is not limited to that target group. This is simply broadening the circle of subsidy.
If the new homeowners move out of apartments, that frees them up, but doesn't make them more affordable to others. Where is the gain?
The down payment plan is not a new idea, but a bad idea making a comeback. The province offered such a program for about five years starting in 2005.
In Ottawa, the average annual income of those getting the free money was just over $44,000, although the province allowed loans to families making as much as $77,900. People could buy a house valued at up to $281,118. One would really have to question assisting people with that kind of income.
Across the province, 4,095 families benefited from the program, which has since been cancelled. One would have thought the lure of free money would have been irresistible, but the province actually had a hard time giving it away, despite the generous eligibility criteria.
In reviving its own version of the home ownership plan, the city hopes a builder will come forward to work with it on the program, taking over the administration and offering the elusive affordable housing.
The greatest flaw of the city program is that it selects a lucky few individuals when many more have needs that are just as great. That won't bother those who argue that social problems can be solved one tiny step at a time, even if it takes 100 years, but the broader problem of housing affordability will not be addressed. The predecessor provincial program had as one of its goals "encouraging developers to build affordable housing by fostering demand." There is no shortage of demand for cheap housing. The question is how to build a house that lower-income people can afford.
One of the fundamental reasons why housing costs as much as it does is the artificial shortage of land created by the city's efforts to constrain the urban boundary. It wouldn't be right to say that land is in scarce supply, but developers can't simply buy the next inexpensive farmer's field and start building. City development charges also add to a home's cost, comprising nearly $18,000 of the $210,000 cost of the suburban stacked townhouse the city thinks loan recipients might buy.
The city's policies are perfectly valid, but they do drive up the cost of housing.
Builders have little incentive to create cheap, basic and completely unadorned houses because they aren't attractive to home buyers who have the luxury of choice. Replicas of the tiny homes that were built for veterans after the Second World War would have little interest for buyers today.
Before councillors sign off on this million-dollar gift, they should remind themselves that housing is a need, but owning a home is not. There is no reason why taxpayers should help a select group make a housing investment, especially when those taxpayers include families that make no more than the people lucky enough to get the free down payments.
Randall Denley is a member of the Citizen's editorial board. He blogs at ottawacitizen.com/randalldenley and tweets at twitter.com/randall_denley. Phone: 613-596-3756. Email: rdenley@ottawacitizen.com
The city's policies are perfectly valid, but they do drive up the cost of housing.
Builders have little incentive to create cheap, basic and completely unadorned houses because they aren't attractive to home buyers who have the luxury of choice. Replicas of the tiny homes that were built for veterans after the Second World War would have little interest for buyers today.
Before councillors sign off on this million-dollar gift, they should remind themselves that housing is a need, but owning a home is not. There is no reason why taxpayers should help a select group make a housing investment, especially when those taxpayers include families that make no more than the people lucky enough to get the free down payments.
Randall Denley is a member of the Citizen's editorial board. He blogs at ottawacitizen.com/randalldenley and tweets at twitter.com/randall_denley. Phone: 613-596-3756. Email: rdenley@ottawacitizen.com
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