Questions and Answers about
Affordable Home Ownership Programs
Why is Affordable Home Ownership Important to Canadian Communities?
1) Builds Multi-Generational Equity: Housing ownership creates financial security that benefits future generations and society as a whole. Affordable ownership producers keep home ownership within reach for more Canadians creating multi-generational equity and a long-term, effective poverty alleviation measure.
2) Supports Retirement Savings, Economic Resilience and Community Engagement: Homeownership creates an equity foundation that plays an important role in Canadian households’ financial planning for retirement. It can buffer periods of unemployment and support periods of adjustment with less risk of dislocating families. It offers a solid basis on which to engage both long-time residents and newcomers in their communities.
3) Fosters Increased Financial Literacy and Sound Household Budgetary Decision-Making: Affordable ownership providers want to help people to take on only the obligations they can afford. Affordable home ownership programs have a very low default rate of less than 1%. Workshops in advance of their purchase assist first-time buyers in understanding risks and responsibilities inherent in home ownership, and to assist them in planning for financial sustainability.
Who is the target market for affordable ownership housing?
Affordable homeownership housing providers target households not well served by either social housing or market ownership housing. This includes a range of households (singles, seniors, couples, families); family situations (New Canadians, downsizing empty-nesters, families with children, single-parent families, divorced individuals); and income groups ($43,000 - $100,000). Some providers have explicit income and asset criteria while others do not. In every case, a purchaser will need a down payment and to be able to qualify for a mortgage.
Does affordable ownership housing provide ongoing affordability?
One of the goals of affordable home ownership programs is to facilitate households in growing equity, allowing them to stay in the ownership market when they sell their unit. This in turn helps to provide an ongoing benefit to future generations. It’s true that government loans or deferrals can help households enter the housing market by lowering the initial cost of the housing unit or providing down payment assistance. It’s true that the benefit of this assistance accrues to the first purchaser. It’s also true that all of the assistance is paid back by the first purchaser and a portion of the appreciated value of the housing unit is captured to provide a revolving, on-going source of funds that can be used to continue expanding opportunities for affordable home ownership. The ongoing affordability is in the creation of new units, rather than the support for an individual unit.
Why should we subsidize people becoming homeowners?
First of all, it is not a subsidy, but an investment. In the Greater Toronto Area there are estimated to be more than 225,000 households living in rental units for which they pay less than 30% of their income. For considerable numbers of these households, the private ownership market housing is just beyond their reach (because they do not have significant savings for a down payment). By offering loans and deferrals (that will be paid back) to help people buy affordable ownership housing, government is also freeing up affordable rental units. If just 5% of these households were able to buy a home, it would potentially free up 10,000 affordable rental units, or far more units than can be supplied by government programs.