B.C. Premier David Eby was in Surrey Sept. 25 to announce a new housing loan plan.
The B.C. NDP unveiled a provincewide plan to offer low-interest loans to middle-income renters. The loans would cover 40 per cent of the purchase price of a new home for those that qualify.
“Everywhere I go, families tell me they dream of buying their first home, but decades of rampant speculation in the market has put it out of reach for too many,” said Eby. “Our plan will make that dream come true for thousands of first-time, middle-class homebuyers by substantially reducing the listing price and the mortgage you will pay.”
Called “Opening Doors to Homeownership,” Eby said the plan will add 25,000 homes over the next five years, or 5,000 per year.
He said the provincial contribution will be repaid—as will a share of the appreciation of the home when the owner sells the unit—which will finance the next generation of homeowners.
“The benefit of this plan means that people will be able to buy with a smaller down payment, the monthly payments will be lower and will be affordable, and taxpayers will be protected,” he said. “If home values go up, revenue to the public goes up, and resources for more affordable housing projects is more available. If housing prices go down, taxpayers are protected. This is a loan—this is not a grant—and the homeowner pays interest on it just like they would any other kind of financing.”
Eby said there will be strict income and asset rules for people to qualify. He said applicants have to be in rental housing. He also said he doesn’t think the scheme will increase housing costs—in that multiple buyers will all of the sudden have a greater ability to purchase a property, thereby forcing up the market value of homes.
“Functionally, it’s a loan to the homeowner that is registered against the property,” Eby explained. “The homeowner pays interest on that loan to the government—it’s 1.5 per cent over the period of the loan—and also the government participates in the equity increase. If the home value goes up, taxpayers participate in that to the value of the contribution, which is 40 per cent of the increase in the equity.”
Eby called the loan program “innovative” and likened it to post-secondary education loans.
“It’s treated differently than any other kind of capital expense, in terms of government finances, because it's actually, in a financial sense, it’s a loan, so it’s closer to a student loan,” Eby explained. “It creates a flow of revenue for the government to invest in future affordable housing initiatives.”
Eby said he didn’t think the program could be a back door for the province to get itself into the housing market if participants in the program defaulted on their mortgage and the property was repossessed.
“It’s possible that that scenario could happen,” Eby told the Cloverdale Reporter. “But given the structure of the program, and the income qualifications people have to have to participate, we think the risk of default will be quite low among qualified home buyers.”
The plan could see up $1.29 billion per year in financing provided to prospective homeowners.
According to the NDP, “Buyers only need to secure financing for 60 per cent of the market price. This would mean a two-bedroom condo that would normally cost $1 million would be accessible at a price of just $600,000.”
Applicants with an annual household incomes of less than $131,950 would qualify. The government's 40 per cent loan would have to be paid back when the property was sold, or after 25 years.
