City hall votes to begin proposed initiative to help middle-income long-term residents into home ownership, starting with 300 discounted homes
Joannah Connolly
Van. Courier
Vancouver City Council voted April 20 to approve the first steps towards a proposed pilot Affordable Home Ownership (AHO) program, which hopes to initially supply 300 below-market-priced units to eligible middle-income, working Vancouver residents.
The vote passed by City Hall was to request the province to amend the Vancouver Charter to permit the pilot program to go ahead, and to begin consultation with residents, stakeholders, mortgage lenders and the Canada Mortgage and Housing Corporation to come up with the best model for the pilot.
The three-year pilot program, which would be extended further if successful, initially aims to supply 300 affordable units for purchase. One discount model being considered would ensure the homeowner’s housing costs (mortgage payments, property taxes, utilities, strata fees, etc.) do not exceed 35 per cent of their gross monthly household income. Alternatively homes under the scheme could always be priced at least 20 per cent below market value.
The program would be open to residents who:
- have lived in Vancouver for five years or more;
- are citizens or permanent residents of Canada;
- have at least one employed member of the household;
- earn a maximum total household income (singles and couples with no dependent children living at home: $67,540 a year; single/dual-parent families with dependent children at home: $96,170 a year); and
- complete the required home ownership education workshops.
The proposed AHO program may use a shared appreciation model, with the buyer and the City sharing in the benefit of any price increases on the property, in proportion to their stake in the unit. This system is modelled on successful similar programs in the UK and other countries.
The proposal report said, “Under any future AHO program that Council would elect to approve, qualifying income bands for both initial purchase and resale would need to be reviewed and adjusted annually to reflect housing price, income and interest rate trends at the time.”
The AHO program would likely also have rental restrictions in place to prevent investors and speculators attempting to purchase the units. The report added, “Consideration will also be given to time restrictions on the first resale to minimize flipping.”
The City’s proposal puts a heavy emphasis on creating enough units for families, and would likely restrict singles and couples to studio and one-bedroom units.
“Given the significant affordability challenge facing families with school aged children, staff are recommending that singles and couples are restricted to units with less than two bedrooms and units with two or more bedrooms are restricted to offering to families with at least one school aged child.”
The pilot program may rely on the City working with the development community to build the units as part of larger developments. The AHO units could be partly paid for by the City in order to make them affordable under the AHO system.
The report said, “In the working model for an affordable home ownership pilot program, the City invests the value created from the density granted on the site to make units affordable. The affordability is then secured as an ownership stake for the City in all or some portion of the building’s units and at various levels of discount (e.g. 20 per cent of the fair market value). This City stake creates the opportunity for an eligible buyer to purchase an affordable unit.”
It went on to say there would likely be a minimum requirement – and an ideal target – for the proportion of family housing being built under the program. “Due to the limited supply of affordable family-oriented units in the City’s housing stock, the working model sets a target that 50 per cent of all units in a project must be two- and three-bedroom units developed for and sold to families with children, and requires a minimum of 35 per cent of units that work for families.”
The report also proposed hiring an independent third-party administrator to operate the AHO scheme on behalf of the City. The considerable tasks involved include:
- designing and facilitating the required home buyer/owner education workshops;
- screening applicant buyers for eligibility;
- developing a pre-qualified list of mortgage lenders;
- ensuring buyers have appropriate financing in place;
- ongoing compliance monitoring and enforcement;
- creating an annual program review and report to Council;
- making recommendations to Council to ensure the long-term viability, sustainability and affordability of the program.
If launched, the AHO program, with its initial 300 affordable units under a pilot scheme, would likely see some stiff competition among thousands of potential applicants. The proposal report said, “An analysis of the City’s renting households through Statistics Canada reveals approximately 30,000 households earning between $50,000 and $99,000 per year could potentially qualify for the AHO pilot program.”
However, it did not specify how the successful applicants would be selected for the pilot.
© 2016 Real Estate Weekly
