BC Housings HousingHub Raymond Kwong September 11, 2018 Role of BC - - PowerPoint PPT Presentation

Raymond Kwong September 11, 2018

BC Housing’s HousingHub

Union of British Columbia Municipalities (UBCM)

• Facilitate the creation of new affordable rental housing across the

housing spectrum in communities across British Columbia

• Working with Partners to create developments that are financially

and environmentally sustainable

• Consistency with regional and community priorities
• Project partners are expected to maximize their equity contributions

to projects

• Transparent and accountable operations

Role of BC Housing

Budget 2018 made a historic investment of $6.6 billion dollars over the next 10 years to create a range

• f safe affordable housing in communities across the

Province.

HousingHub

• Created this year, the HousingHub has a mandate to increase the

supply of affordable housing for middle-income earners

• This new office within BC Housing works to identify and advance

innovative approaches to create affordable homes—both for rent and for purchase

• Compliments the 25,000 new subsidized rental homes announced in

budget 2018 for low to moderate income households

§ Division within BC Housing – focus on partnerships § Program targeted towards middle income households § Facilitates new opportunities - private sector, local government, non-profit societies by providing expertise and a centre for collaboration with partners interested in developing new construction or redeveloping existing sites for affordable housing purposes § Intent is to leverage BC Housing’s ability to provide low cost financing to help create new affordable housing that does not require capital funding or

• n-going operational funding.

§ Affordable rental housing § Owner purchase housing § Support individuals and families in moving out of rental units to affordable owner purchase product § Low cost financing § Access to land § Increase the new housing supply

The HousingHub is delivering AHOP to support the development of new, affordable homes for purchase by eligible middle income families and individuals

• By providing interim construction financing at reduced rates and leveraging land

and other contributions from project partners, units will be made available below market value for eligible home buyers

• Difference between sale price and market value is secured through 2nd

mortgages

• Recaptured 2nd mortgages paid into City’s Affordable Housing Fund for

reinvestment into new affordable housing projects

Affordable Home Ownership (AHOP): Program Overview Anywhere in British Columbia

BC Housing has explored and piloted a variety of homeownership options.

• Resale restrictions are complicated, difficult to explain and reduce uptake
• Shared ownership is not practical in BC; mortgage challenges, complex legal

structures

• Overall, non-conventional ownership options:
• Limit autonomy and erode benefits of ownership
• Increase costs with complex legal structures
• Reduce home owner incentive to maintain/repair home
• Deter potential buyers

Lessons Learned Clear, conventional ownership is key

Interim construction financing AHOP affordability secured by 2nd mortgage on title Partner contributions (density, fees, land etc.)

2nd mortgages recaptured and reinvested into community

Affordable Home Ownership Program

All individuals with a registered interest on title must:

• Be a Canadian citizen or permanent resident
• Have resided in BC for the past 12 months
• Be living in rental housing or other non-ownership tenure prior to purchase
• Combined gross income must not exceed the applicable Middle Income Limit

Units with two or more bedrooms: gross household income does not exceed the

75th income percentile for families with children ($152,870 for 2018) Units with less than two bedrooms: gross household income does not exceed the 75th income percentile for families without children ($111,750 for 2018)

Home Buyer Eligibility Home buyer must qualify for a 1st mortgage from an NHA approved lender

AHOP affordability secured by 2nd mortgage on title

• Participating mortgage – shares in both the upside and downside
• 25 year term, interest and payment free
• 5 year principal residence requirement enshrined in mortgage
• Homeowner can:
• prepay at any time
• sell on the open market at any time (repayment required on sale)

2nd Mortgages No complicated covenants or restrictions

2nd mortgage is due and payable in full upon:

• Sale or change in ownership
• Default on 1st mortgage
• Any default on 2nd mortgage (e.g. principal residence requirement)
• End of 25 year term

Repayment

Targets the intended population and secures affordability

ü Program design attracts target client group, deters others ü Partner contribution value is protected long term ü No repayment for 25 years or upon sale (other than default) ü Reduce or eliminate loan insurance costs ü Gives purchasers a buffer against interest rate and market fluctuations

Affordability No complicated covenants or restrictions

$ 500,000 Market Value Purchaser has $25,000 cash deposit (5%) Market Purchase 20% below market AHOP Market Value $500,000 $500,000 Buyer’s cash deposit $25,000 $25,000 AHOP Mortgage n/a $100,000 1st Mortgage (base) $475,000 $375,000

• Est. Loan Insurance Premium

4% $19,000 n/a Monthly P&I on 1st mortgage 25 years @ 3% (incl. premium) Savings $2,338 $1,775 ($563) Minimum income (stress test 4.6%) PITH = +$400 (taxes, heat and strata) $115,000 $90,000 Income at 25%-26% GDS @ 3% interest (25.6% = 2016 avg. GDS for CMHC insured) $125,000 $97,000

Repayment examples

* $500K, 5% down + 20% AHOP Mtg, (with premium first mortgage = $375K) market value increases at 2%/year 5 Years 10 years 25 years Market Value $552,040 $609,497 $820,303 Less Outstanding 1st mortgage (320,530) ($257,315) ($0) Less AHOP Mortgage Repayment *20% of market value* ($110,408) ($121,899) ($164,061) Total Homeowner Equity $121,102 $230,283 $656,242

Questions?

Contact Us:

Raymond Kwong Provincial Director, HousingHub E: rkwong@bchousing.org T: 604.456.8587