BRIEF FROM THE HOME OWNERSHIP
ALTERNATIVES NON-PROFIT CORPORATION
Affordable Housing and Economic Stimulus
Two years ago, your Government identified the construction of
residential housing as a highly effective means to deliver stimulus to the
economy. Residential construction is an investment with little leakage to
foreign jurisdictions and has broad spin-off impacts in the local economy.
Depending on the housing type, new residential construction creates 1.3 to 2.2
person-years of employment for every unit built.
I’m pleased to inform you that HOA has financed over 800 units of
housing that are currently under construction and creating jobs in Canada. We
hope to break ground on over 1,000 additional units over the next 18 months.
We will continue to finance the construction of affordable housing and provide
economic stimulus and job creation.
1. Target tax credit for middle class home purchasers
Building on your Government’s success in the creation of the First
Time Home Buyer Tax Credit (HBTC), Home Ownership Alternatives proposes
refinements to the tax credit to better support modest income, middle class
Canadians.
HOA proposes four important changes to the HBTC.
1. Restrict the HBTC to NEWLY-constructed homes registered on title at a
value below the local MLS average price.
2. Restrict the HBTC to home purchasers with incomes below the local median
household income.
3. Streamline the process – eliminate eligible expense criteria.
4. Revenue neutral – maintain the current total funding available for the
HBTC and increase the value of the tax credit amount available to the smaller
pool of middle class home buyers.
The targeted HBTC will simultaneously achieve several policy
objectives.
First, by focusing the tax credit to families below the median
income, the Government will lend greater support to the 50% of Canadian’s more
in need of assistance in acquiring a first home. This will help expand the
demand for housing by families who otherwise would be less likely to enter the
market and create increased construction activity. It will also focus the
support to families who might be dependent on more expensive government
supports for adequate housing thus reducing government expenditures in other
areas.
By targeting the tax to newly constructed homes, the Government
will further stimulate new home construction and the important economic spin
offs that this generates.
By targeting the tax credit to new homes provided to the
entry–level of the market, that is below the local median price, the Government
provides a market signal to the development industry to build affordable
housing - letting the market build more affordable housing without direct
Government capital grants or on-going operating costs.
The thresholds recommended above would permit the elimination of
eligible expense criteria which will result in simpler tax filings and lower
tax administration costs for the government. The expense criteria could be
replaced by a tax credit based on a percentage of the price of the new home,
providing support commensurate with the housing prices facing Canadians in each
market.
The newly targeted tax credit will reduce the impact of the
regressive charges and fees built into the cost of new homes. Currently,
regressive Development Charges are calculated on a per unit basis. This means
a modest $150,000 home will be charged the same Development Charge as the
million dollar home. Our proposals will make it fairer for hard working,
modest income Canadians to fulfill their home ownership dream.
The tax credit improvements would provide a one-time support for
middle class families to purchase a home. It would better support working
families to leave government subsidized housing and will reduce the housing
cost burden for taxpayers overall.
By taking a leadership role in developing the HBTC, the Government
of Canada is in a position to target this tax credit to increase the number of
Canadians who can afford to purchase a home and also influence supply by giving
the market signals to build affordable housing. These proposals are directly
revenue neutral for the overall federal budget however they will indirectly
increase government revenue through increased economic activity and job
creation.
2. Building on the success at Canada Mortgage and Housing Corporation
Federal government activity and support of the housing sector is
largely provided through the Canada Mortgage and Housing Corporation (“CMHC”). CMHC
has been successful in developing robust businesses that support the housing
industry in Canada. To further strengthen the housing market and in particular
the provision of affordable ownership housing HOA has two recommendations.
Pre Development Funding
CMHC has a successful program of providing support at the earliest
stages of new affordable project development through its Seed and Proposal
Development Funding (“PDF”) programs. We recommend that the Federal government
direct CMHC to reallocate within its budgets increased support for early stage
housing development through the Seed and PDF programs. Not only will these
small investments support the government’s overall stimulus program, they have
high multipliers for job growth and economic impact. CMHC should also consider
widening the list of eligible costs under these programs as this funding is
critical to support the establishment of new developers focused on affordable
housing.
A doubling of SEED and PDF funding could be achieved by less than ½
% reduction in CMHC’s operating budget for other activities. The multiplier
effect of encouraging housing development has been provided above.
Insurance Products
The success of the CMHC businesses in the provision of various
types of insurance products has resulted in important cash flow for the federal
government. However, the application of strict assessment rules to non-profit
providers of affordable housing when they are designed to mitigate risk when
insuring profit-maximizing private developers, does not reflect the broader
mandate of CMHC to support housing affordability for Canadians. The result is
a lack of insurance service and product availability in support of affordable
housing developments or of the introduction of innovative financing products
that support housing affordability for middle class Canadians.
HOA recommends that the federal government direct CMHC to ensure:
1. all of CMHC business
divisions, including insurance, apply to their operations the CMHC Mission "Committed
to housing quality, affordability and choice for Canadians";
2. a priority
should be placed on providing insurance products to developments that provide
affordable housing to Canadians or that introduce innovative financial products
which support housing affordability.
This proposal has no direct cost associated with it. If there is a
perceived increase in risk exposure of CMHC insurance activity due to these
changes they can be easily offset by a relatively small tightening in insurance
criteria for the balance of CMHC’s insurance activities which support
profit-maximizing development activity. The small adjustments to insurance
criteria will have a direct positive impact on the ability of affordable
housing developments to proceed and result in new job creation and economic
stimulus.
Who we are
Home Ownership Alternatives is a non-profit organization dedicated
to the financing of affordable ownership housing. To date, we have financed
over 3,000 units of housing that are affordable to families of all income
levels. Our recommendations are focused on building affordable ownership
housing for working families with incomes from $20,000 to $60,000 a year.
In 3 recent projects in the Greater Toronto Area, over 50% of homebuyers had
annual incomes below $60,000 whereas the average household income of homebuyers
overall in the GTA exceeded $90,000.