Saskatoon program to provide down payment assistance to middle income renters
City council, this week, approved a new program that would provide down payment assistance to middle income renters. The objective of the program is to free up units in our low vacancy rental market while opening the door to home ownership for some who have the financial capability of servicing a mortgage but have not yet saved the required minimum down payment.
Billed as “the first program of its kind in Canada,” the Equity Building Program will be available to those who earn too much to benefit from social housing programs. This $3-million program will provide down payment loans to home buyers earning between $45,000 and $70,000 per year, who are currently renting a home in Saskatoon. As part of the arrangement, the home buyer agrees to pay back the loan, at a low interest rate, over a five-year period of time.
City planner, Alan Wallace is quoted in a story published in the Star Phoenix on February 9. “House prices have risen dramatically. We think there are a number of households out there that are in rental situations that will find it extremely difficult to fund the down payment.
“What we’re concerned about is if incomes aren’t able to keep pace with house prices…people have a tendency to slide backwards on the housing continuum. We want them to move up.”
Interested parties can obtain full details on conditions and qualifiers from the Affinity Credit Union in Saskatoon.
Read the Star Phoenix story here.
A television report from Global News is here.
More details on the Affinity Credit Union website are here.
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Norm Fisher
Royal LePage Saskatoon Real Estate
16 comments so far. We'd love to hear your thoughts.
February 12th, 2011 at 11:07 AM
This is a great program. I hadn’t heard about it. I hope that it inspires other municipalities to set up similar programs. I know that in England anyone who works in the social service industry, like Teachers and Police Officers, get half their mortgage covered by the British government.
Interesting post.
February 12th, 2011 at 12:21 PM
Socialist program… the city needs to stick with maintaining roads and infrastructure. If a family can’t come up with at least 5% down, the hard truth is that they do not have any financial savvy to own a house.
February 12th, 2011 at 3:43 PM
Wonder what CMHC will have to say about this. Thought the downpayment couldn’t be financed money? This program is a bit at odds to what Flaherty is trying to fix. The debt machine keeps on churning…
February 12th, 2011 at 10:18 PM
Should’ve put the dollars towards a dome over downtown.
“first of its kind”…
That’s because all the other municipalities know their biz and realize that banking isn’t it.
February 13th, 2011 at 10:28 AM
It is nice to see policy innovation coming from the City of Saskatoon. They’re trying something new and it’s not without risk. So kudos for that.
However, I disagree with this particular innovation. If someone can’t come up with a measly 5%, what are they going to do when the furnace dies or the roof needs new shingles? These people are probably better off renting for now. Even though that’s stigmatized, as the very existence of this program demonstrates – can’t have middle income folks renting, now can we?
I also think this type of program actually exacerbates the issue of unaffordable housing (even though this program will likely have only a marginal effect on the overall market). The cure for high prices is, conviniently, high prices! That’s because high prices curtail demand and encourage supply, all other things being equal. So, by doing this, the City is actually “propping” up high prices since it keeps demand for home ownership artificially strong.
This gives people with no money the ability to “buy” $350K homes – how is that good? Home ownership isn’t some panacea; and I think we’re going to find that out the hard way. Just ask an American.
England is broke. The UK is laying off something like 1M public sector workers!
February 13th, 2011 at 1:38 PM
Minus administrative and promotion costs would leave about $2.5M to go out the door. Say the average home is $300K and all down payments provided are 5%.
$2,500,000 / $15,000 = 167 down payments. Maybe you could get 175; but I doubt it.
What’d'ya think Norm. Will this make a noticable or even significant impact?
Thanks
February 13th, 2011 at 2:47 PM
Guy_,
This program may be the “first of its kind” but social housing programs are nothing new for most municipalities. Saskatoon has actually been involved in one that targeted low income families and core area homes with forgivable loans of almost $20K
To your other question, the media release details a bit more some of the parameters of the program.
“Supporting 250 households over a five year period, the program will allow eligible households to purchase a home (includes all forms of housing in any part of the city) ranging in value from $220,000 to $280,000. The program will assist the homeowner with the down payment requirement by providing assistance of approximately $12,000 per unit.”
I doubt that this program will have much impact on the market given that we’re talking about 50 deals a year.
Brian,
CMHC’s current rules actually allow for the borrowing of a down payment provided that the buyer’s income is sufficient to meet the allowable debt service/income ratios.
February 13th, 2011 at 9:06 PM
Wow. I suck. Epic fail.
Thanks Norm.
February 14th, 2011 at 8:36 AM
Programs like this might be necessary in municipalities where rental properties are not available, but in Saskatoon, there are plenty of rentals out there. Some might view the rental market as being unaffordable but a program like this will prop up the housing market, making rents even more unaffordable. The people cheering for this are the ones least likely to benefit.
The Canadian Press:
Eric Howe, an economics professor at the University of Saskatchewan, suggests making more homes affordable in a tight housing market will increase demand and, in the end, the program will have “no consequence whatsoever.”
“There’s a certain supply of housing in Saskatoon, a certain supply of housing you can buy, and all it will do is drive up the price of that until the mortgage program doesn’t make any difference at all,” said Howe.
“I understand that politicians want desperately to look like they’re doing good things, but I wish they wouldn’t do this sort of thing. It’s just going to somewhat distort the market.”
February 14th, 2011 at 11:20 AM
I think this program is ridiculous. Like Guy_in_Regina touched on…. So the program is designed to get families who currently rent their 5% downpayment to buy a home. Well, in today’s housing and rental market, it’s cheaper to rent, but for the sake of this arguement let’s say it costs the same – these new qualified people are now going to be faced with a mortgage, plus, way more $ for insurance, property taxes, unexpected expenses and repairs PLUS they’re going to be expected to pay back 5% of their purchase price, WITH interest to pay back the loan that they weren’t able to save up in the first place while renting.
Great program! I’m glad the AFU is on the hook for this so tax payers don’t have to foot the bill when some of these families default on their loans.
Owning a home is a priviledge, not a right! Not everyone should own a home.
February 14th, 2011 at 1:52 PM
“What we’re concerned about is if incomes aren’t able to keep pace with house prices…people have a tendency to slide backwards on the housing continuum. We want them to move up.”
So. Wages flat, house prices rising, and the answer is? You guessed it — borrow more money! (Did I hear someone in the back say ‘Bring down house prices until they’re in line with wages again?’ Security! Remove that troublemaker!)
Honestly, I don’t get it. How does this help *anyone* except those who are involved in the housing industry? If someone can afford to pay back a downpayment LOAN (which includes interest) then shouldn’t they just as easily be able to sock that money away and *save up* their own downpayment? Or does that require too much self-control and willpower for people who are more used to instant gratification and “I want it all, and I want it now”?
This whole program is predicated on the definitely-disabused-in-USA-but-still-alive-and-kicking-in-Canada notion that “House prices can only go up.” Under that theory, saving up now for a house in the future is seen to be a losing proposition because no matter how fast you save, housing prices will go up faster. To be fair, the world of ‘perpetually rising house prices’ is all that many people have ever seen, and people are LOUSY students of history; if it didn’t happen directly to them, it never really happened. Sadly, it’s GOING to happen directly to many people, and it will shape their perceptions for the rest of their lives.
On a more practical side… Norm, how many of Saskatoon’s 1000 listings would even qualify for this program ($220k-$280k)?
February 14th, 2011 at 2:00 PM
Guy_,
You do not suck!
Chris87,
“I’m glad the AFU is on the hook for this so tax payers don’t have to foot the bill when some of these families default on their loans.”
This from the news story:
To mitigate the risk of losing money, the city will fund two-thirds of any losses while Affinity will fund one-third. The city will be paid the interest earned at the end of the five years, which will be used to fund the program, which is considered self-financing.
I agree that most of these schemes don’t do much for affordability. Every new “innovation” that has been introduced over the past few years has had the effect of pushing prices higher. Seems that people are willing to spend X percent of income on housing and that the external factors have more of an impact on who can get in, and how much they’re able to pay.
February 14th, 2011 at 2:06 PM
Bookrat,
“On a more practical side… Norm, how many of Saskatoon’s 1000 listings would even qualify for this program ($220k-$280k)?”
152 with 82 of those being something other than a single family home.
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February 14th, 2011 at 4:22 PM
This really upsets me:
My wife and I were born in Saskatoon are new graduates and newly married, both in our mid to late twenties. We gross 100 000/year, and have saved up enough for a down payment, but continue to rent. We both agree that housing prices are overvalued in Saskatoon and refuse to pay these prices for some run down shack. We will continue to save, and if house prices come down we will buy a house, if not, we are goint to move somewhere else. Now City councul has decided to be a charity case and give out down payments to people who shouldn’t be in the housing market, further pushing up housing prices. This city is starting to make me sick. It does absolutely nothing to address the real problem, which is an overvalued real estate market.
February 17th, 2011 at 3:19 AM
Not to worry. In 5 years when the loans should have been repaid the city will realize most of the people will already be in arrears on their repayments or will have given up on ever repaying the down payment.
Then the city will have but one choice – “forgive” the loans. That’s right folks. You’ll all be on the hook for the loans using your tax dollars. Just like the loans that were given to low income folks.
Same sh*t. Just a different pile.
What? You thought city council was doing this out of a genuine desire to help us?
Come on. How long have you been on this planet?
February 20th, 2011 at 1:04 PM
Assuming the FTB’ers brought in by the 5% loan generate more new home construction, and not just more condo conversions, shouldn’t the property taxes on the new builds more than make up for the defaulted loan?
I know the city will claim that the defaulted loans = mill rate increase, but they’d blame abnormally high/low barometric pressure as an excuse given the chance
Anyways, anyone who can’t come up with 5% should be thinking a little harder about it, BUT, If you’ve just graduated and come into a good job but have no savings, whats to lose?