Homeownership presents a difficult hill to climb for many.
But as Michael Geller explains, that ascent doesn’t always mean having to do it in one go.
The summit can be reached by what the Vancouver-based architect, urban planner, and housing and development expert describes as “staircasing”.
“You can climb up the stairs as you go from a 20 percent ownership to 50 percent, and then, eventually, you own the whole thing,” Geller told the Straight in a phone interview.
It’s a concept based on what is referred to as shared-equity homeownership.
The way this works is that a buyer purchases a share in a residence and pays rent on the rest.
It’s done in the U.K., where some homes are partly owned by housing associations and banks provide the mortgage.
As English bank Barclays explains online, one can buy between 25 percent and 75 percent of a property that is managed by a housing association.
Geller said that this is an idea worth exploring locally.
Housing is a passion of Geller’s, who has done it all with the many hats he has worn over the years.
He started as an architect in Toronto, went on to work with the Canada Mortgage and Housing Corporation, managed developments for a private company, led the SFU Community Trust, and formed his own Geller Group. In addition to his current consulting work, Geller is also part of the adjunct faculty of SFU’s Centre for Sustainable Development.
With an experience spanning more than four decades, he has studied many different ways of reducing housing and development costs.
This is why Geller says with confidence that affordable housing is achievable. He likes delivering talks on this subject.
He noted that one way of getting housing within the means of people is to look at alternative financing, saying that one example is shared equity. He also calls it a “shared-appreciation mortgage”.
To illustrate, let’s say someone approaches Geller and the person wants to buy a home but does not have the required down payment of $300,000.
Geller then lends the money. There will be interest on the loan. When the person sells the home, Geller gets back his $300,000 plus interest; on top of this, he receives a 50 percent share in the appreciation of the home’s value.
“Now, some people would say, ‘Well, why I would agree to that?’” Geller noted. “And the answer is, ‘Because if I don’t lend you the $300,000, you can’t buy that house.’ ”
He said that this can work well with relatives and even trusted friends. But there’s no reason why financial institutions like credit unions cannot do it as well. Geller mentioned the Vancouver City Savings Credit Union, or Vancity.
“What Vancity could do is say, in theory, ‘We’ll give you a 100 percent loan provided we get interest on the loan, and because we’re giving such a high-ratio loan, we’re going to share in the appreciation when you sell it,’ ” he said.
Geller said that the scheme makes sense, although he doesn’t know whether financial institutions are thinking of things like this.
The federal government introduced as part of its 2019 budget a program called First-Time Home Buyer Incentive. Under the FTHBI, the Canada Mortgage and Housing Corporation provides homebuyers with a loan. The money covers 10 percent of the cost of a newly constructed home or five percent of the cost of an existing home.
The loan comes in exchange for an equity stake in the property. It’s a shared-equity mortgage, or a shared investment.
“As a result, the government shares in both the upside and downside of the property value,” CMHC explains online.
A home buyer doesn’t have to save as much for a down payment. As well, a bigger down payment means a smaller mortgage, hence, lower monthly payments.
The homeowner will have to repay the loan based on the property’s fair market value at the time of repayment, which is after 25 years or when the property is sold.
Based on latest numbers available online as of April 12, CMHC has approved more than 10,600 applications, representing $193.4 million in shared-equity mortgages.
Here’s the regional breakdown of these mortgages: 355, B.C.; 2,975, Alberta; 1,307, Prairies and the North; 810, Ontario; 4,284, Quebec; and 917, Atlantic.
If shared homeownership or equity or mortgages are such good ideas, Geller noted, some people may ask why it is taking so long to do these things.
“The answer is, ‘Think about how long it took before they started putting wheels on luggage,’ ” Geller said.