MaRS Library Case Studies in Social Innovation: Home Ownership Alternatives
Though affordable housing is vital to the creation of healthy communities and breaking the cycle of poverty is essential to the attainment of equity, many Ontario families still face a significant gap between their income and the cost of suitable housing. In fact, access to land and affordable housing remains two of Ontario’s greatest challenges.
Part of this complex situation is that developers of affordable housing have to compete for often scarce and expensive parcels of land. It is not unusual for good-quality land to be used for other development interests.
Making home ownership possible for families with low and moderate incomes
In response to this challenge, the Home Ownership Alternatives (HOA) was established with a mission of equalizing home ownership in the province of Ontario.
This non-profit financial corporation makes home ownership possible for families with low and moderate incomes, and it supports development partners. Since its inception, the HOA has built almost 3,000 units. The goal is to build 1,000 units each year, a goal HOA feels must keep increasing to meet the growing needs in southern Ontario.
Each development that HOA supports fulfills unique local needs and requirements and is designed to reduce ownership costs. This ensures they’re affordable to Canadians with low and moderate incomes. HOA believes that home ownership is one of the most effective ways for families to build equity and escape the cycle of poverty. The organization also strives to build mixed-income communities, ensuring every development has diversity at its core.
By creating a permanent, long-term fund, HOA enables affordable housing in three ways:
- HOA lends its development partners early-stage funding to assist with feasibility studies, land acquisition, building design and early marketing and sales. Once construction begins on new housing projects, the corporation offers the financial guarantees that are necessary to finance construction from conventional sources. In this way, HOA ensures affordability by supporting housing developments that target a cost per unit that is 10% to 15% below local market prices.
- With a strong commitment to sustainability and qualitative solutions, HOA leverages efficient design, low overhead and savvy land acquisition to uphold low costs.
- HOA provides its homebuyers—those with an average annual household income below $50,000—with a second mortgage that reduces how much they need for a down payment. This effectively enables families with lower income levels to purchase a home. HOA’s second mortgage requires no scheduled repayments of principal or interest, nor does it bear a specific rate of interest. It is repayable upon resale, upon the unit no longer being occupied by the purchaser, or upon the home owner choosing to repay it.
The same approval process applies to every prospective buyer; this involves qualifying for a first mortgage and being able to offer a down payment of at least 5% of the purchase price.
As advocates, HOA attempts to change government policies and programs to encourage a greater supply of affordable housing.
Spreading the word about unique developments with diverse populations
The greatest challenges for HOA at the moment are spreading the word and attracting target groups to their developments. The diversity of the population in its housing units, which represents a wide range of professions and incomes, is what makes these housing developments unique. The population mix ensures there is no “ghettoizing” of any one area, says mortgage manager Gregory Banfield. He points out that every buyer is subject to the same process of qualifying for a first mortgage and of being able to pay a down payment of (at least) 5% of the purchase price.
Continuing to serve the community
In 2007, with an initial $2.5 million, HOA established the June Callwood Home Ownership Fund to better assist lower income families with children. In 2012, HOA used its financial and management clout to help Options for Homes, a non-profit developer, embark on its large, 643-home Kintyre development. Determined to continue serving those least able to afford a home, HOA aims to expand to a national level.