I have been a longsgtanding fan of the concept of 'Shared Equity' housing programs in which a portion of a homebuyers cost and appreciation is shared with another individual or organization. In September 2024, the provincial government announced such a program to considerable fanfare.
There was just one problem. While over the long term real estate prices always go up, they don't always go up in the short term. While the premier talked about how this program would help people buy, he never once discussed the fact that if someone had to sell within a relatively short timeframe, and the price went down, or the home wasn't worth as much as they had paid for it given all the upfront costs associated with buyng a new home (GST, PTT, legal fees, etc.) the homebuyer could lose a lot of money, including some or all of their downpayment.
So when Frances Bula called me to ask my opinion of the provincial program, I had to mention this. Here is her Globe and Mail story.
B.C. shared-equity housing plan prompts both hope and skepticism
Imagine buying a brand-new studio apartment in a prime location on Vancouver’s west side, close to the city’s major hospitals, to schools, and to a spectacular city garden park, for $372,000.
Or a two-bedroom apartment for $780,000 – an amount of money that normally would get you no more than a small one-bedroom in the less-pricey east Vancouver neighbourhoods, a two-bedroom townhouse in the southern suburb of Surrey, or a house with yard in Chilliwack, an hour’s drive east of the city.
No, the time machine hasn’t rolled back to 1990. That’s what the provincial government is offering B.C. residents who are in a targeted middle-income bracket through a new affordable home-ownership program that was announced just before the recent election.
Premier David Eby said those prices would cover 60 per cent of the cost and the province would provide a second mortgage for the other 40 per cent, payable only after the buyer sells or has lived there for 25 years.
In that announcement, the deal was limited to the 2,600 new homes being built by Vancouver’s powerhouse Indigenous development group, MST Development, in what is called the Heather Lands development just off Oak Street near Eric Hamber high school and Van Dusen Gardens.
It’s something the local Indigenous nations in MST had lobbied for since the early days of development planning.
“Through offering the opportunity of homeownership to more people, we are aligning our cultural values of caring for the people who live in our territories, while also delivering economic benefits to our community and the next seven generations,” said Chief Jen Thomas from the Tseil-Waututh Nation.
During the election campaign, Mr. Eby also said it would be expanded to the rest of the province. (Details are still to come on that with his new, smaller, and very different group of NDP MLAs now in charge at the legislature.)
In the meantime, the first promise is set to roll out in 2025, according to the original news release from October.
Vancouver's Heather Lands development near Van Dusen Gardens, was limited to the 2,600 new homes being built by Vancouver’s powerhouse Indigenous development group, MST Development.
CANADA LANDS CO.
And that program – a novelty for B.C. – is prompting a mix of hope, skepticism, and interest among both locals and people across the country as the province tries out a new strategy that has been undertaken in Ontario for many years by philanthropic or non-profit private organizations, not government.
“From the point of view of individual families, it’s awesome,” says John Fox, a lawyer who is one of the country’s pre-eminent specialists in this type of housing strategy, often called shared-equity home ownership. “You have security of tenure and, if the underlying value goes up, that benefits them.”
Mr. Fox, with the Toronto firm Robins Appleby, also noted that the program was likely conceived not just to benefit those individual families but to create a healthier city. It makes room for middle-income families with children in a neighbourhood that they would otherwise be shut out of, rather than having to move an hour or more away to get the same value for money.
“It does create diversity in a neighbourhood and that can be a positive. And it’s a wonderful thing to have nurses close to the hospitals. Those are important aspects.”
But he and others noted that a program like this can have some pitfalls. As well, it provides only a very limited strategy for one small piece of the much larger housing crisis in B.C. and Canada that has resulted in everything from homelessness and a sense of massive housing insecurity for lower-income renters to double-income professional households finding themselves forced to either buy far from where they want to be, squeezed into tiny spaces if they stay central, or confined to renting indefinitely at high prices.
Mr. Fox noted that, for someone to buy the two-bedroom units, which the province estimated would go for $1.3-million, the buyers would have enough to qualify for the $780,000 that would still cost. That means a household income around $168,000, but it can’t be too much more than that or it exceeds the province’s limit on income that is part of its effort to make sure the right group is buying in. That limit would be $191,000.
For local developer Michael Geller, who created the shared-equity home-ownership program at Simon Fraser University when he oversaw housing programs there, the risk for the buyer is that prices might go down – an almost unheard-of event in recent Vancouver history but still not outside the realm of possibility. Then buyers who might have to sell for various personal reasons, especially if it’s shortly after they purchase with all the attendant extra fees and “new-car” premium, will end up losing a lot. They’d have to pay back the province the 40 per cent of the original selling price, not 40 per cent of whatever their unit might sell for in a down market.
“It’s often difficult, if you have to sell in the first couple of years, to recover the initial cost,” said Mr. Geller.
Others who have been involved in running Ontario’s successful shared-equity home-ownership programs, the province’s offer to cover 40 per cent is much higher than anything they have done. It means that it will take a lot of money to run the program for a limited number of buyers. The province committed $672-million for the Heather Lands supports.
As well, the province’s program is different in another way. It is saying the program will only be an option for the first generation of buyers at the Heather Lands (and presumably elsewhere in the province). Once those buyers sell and the province makes money on its 40-per-cent equity share, it won’t necessarily be ploughed back into that same development or even a project in another location. Instead, the province is promising that it will going into housing, in general, somewhere, somehow.
The 40 per cent “is a significant amount,” says Heather Tremain, who was the CEO of Ontario’s Options for Homes program for a decade, where about 3,400 homes have been developed in 14 different projects since it started more than 20 years ago. “That money won’t go far.”
Another difference: in the B.C., the equity profits won’t be recycled back into a similar program.
That’s what Options, which takes any money it makes on its portion of the shared equity, typically 15 per cent, and puts it immediately back into new projects.
“If we lend someone $15,000, when they sell in five to 10 years, if it has doubled, we receive $30,000. When people pay it back, that allows Options to buy more land and fund early stages of construction,” said Ms. Tremain.
Options is also different from the B.C. program in that only some of the homes in the projects it builds are offered to buyers with the shared-equity option. The rest go to regular buyers who get no special help.
That’s the way it has operated since 1994, when the original founder simply bootstrapped a small incentive program together. The profits from the equity increases helped fund everything after that, which has included projects in various parts of Toronto from the Distillery District and The Junction to suburbs like Markham and Weston.
At Trillium Housing, also in Ontario, the program operates on a slightly different model by using donated money from foundations or private investors wanting to create some social impact with their money.
There, one of the directors, Joe Deschênes Smith, said he has the leeway to provide more than 15 per cent in special cases where he thinks it’s needed and will work out financially for the family. As well, if the market goes down, the organization shares in that.
“We decided we set up Trillium 10 years ago that we’ll take more of the downside,” said Mr. Smith. As well, Trillium doesn’t charge a set interest rate on its part of the mortgage, but makes most of its profit from the equity appreciation over the years.
Ultimately, he, like Ms. Tremain, believes shared-equity programs are a powerful tool for a particular group of people who just need a small boost to get into the housing market -- similar to the one that some first-time buyers get from their parents, to get into the housing market. They’re often households headed by single women, immigrants or non-white people.
They’re working, they’re financially stable, they just can’t quite get over all the current hurdles to get to ownership.
In spite of the differences, Mr. Smith thinks B.C.’s program is strong and promising.
“I’m excited that they’re doing it. I think we need governments like B.C. taking these first steps.”
He’d love to see big investors, particularly union pension funds that should have an interest in providing housing to their members, participating in these kinds of programs.
“It would leverage a lot more support. B.C. needs to figure out how to attract those institutional investors.
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