Union of British Columbia Municipalities (UBCM) BC Housing’s HousingHub Raymond Kwong September 11, 2018
Role of BC Housing • 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
Budget 2018 made a historic investment of $6.6 billion dollars over the next 10 years to create a range of 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 on-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
Affordable Home Ownership (AHOP): Program Overview 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 2 nd mortgages • Recaptured 2 nd mortgages paid into City’s Affordable Housing Fund for reinvestment into new affordable housing projects Anywhere in British Columbia
Lessons Learned 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 Clear, conventional ownership is key
Affordable Home Ownership Program Interim construction financing 2 nd mortgages recaptured and reinvested into community Partner contributions (density, fees, AHOP affordability secured land etc.) by 2 nd mortgage on title
Home Buyer Eligibility 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 75 th income percentile for families with children ($152,870 for 2018) Units with less than two bedrooms: gross household income does not exceed the 75 th income percentile for families without children ($111,750 for 2018) Home buyer must qualify for a 1 st mortgage from an NHA approved lender
2 nd Mortgages AHOP affordability secured by 2 nd 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) No complicated covenants or restrictions
Repayment 2 nd mortgage is due and payable in full upon: • Sale or change in ownership • Default on 1 st mortgage • Any default on 2 nd mortgage (e.g. principal residence requirement) • End of 25 year term
Affordability 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 No complicated covenants or restrictions
$ 500,000 Market Value Market Purchase 20% below market AHOP Purchaser has $25,000 cash deposit (5%) Market Value $500,000 $500,000 Buyer’s cash deposit $25,000 $25,000 AHOP Mortgage n/a $100,000 1 st Mortgage (base) $475,000 $375,000 Est. Loan Insurance Premium 4% n/a $19,000 Monthly P&I on 1 st mortgage $2,338 $1,775 25 years @ 3% (incl. premium) Savings ($563) Minimum income (stress test 4.6%) $115,000 $90,000 PITH = +$400 (taxes, heat and strata) Income at 25%-26% GDS @ 3% interest $125,000 $97,000 (25.6% = 2016 avg. GDS for CMHC insured)
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 1 st mortgage (320,530) ($257,315) ($0) Less AHOP Mortgage Repayment ($110,408) ($121,899) ($164,061) *20% of market value* 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
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