If you go to a lending institution to ask for a loan, and your application is declined, it is generally because the people with expertise in finance understand that your income cannot support the debt. Alternatively, it may be that you have a bad credit rating.
Why would council assume to have better knowledge than the lenders themselves?
Five years ago, under the Clavert government, Saskatchewan was adverting in Alberta that it had cheap housing and land for the taking. It was the lure used to attract people and business to this province. The question is, how did Saskatoon go from being an affordable city to having the highest cost in Western Canada? Add to the increased housing costs is the ever escalating tax bill, utilities and levies.
Even if you could get young families into housing, can they maintain that household after the purchase? Mortgages are generally five-year terms. If five year from now the interest rates on mortgage double, which they did a few decades past, can this young homeowner support the mortgage?
Will the interest rate charged under this loan program be at least the equivalent to that which the city is paying on its own debt? Or will existing homeowners, along with new homeowners, have to pay additional tax to support this program?
I know there is an affordable housing crisis in Saskatoon. I would have preferred that council work with organizations like Habitat for Humanity that have proven great successes in placing young families in homes. Habitat also trains their families as to how to maintain the homes they get.
Perhaps council should sit back and examine what their role is or the provincial government should look at legislation to limit elected councils from these types of give-a-ways. I am sick and tired of seeing this council trying to fix up one mess by creating another.
Then again, we the taxpaying public should do our job and send that message at the next civic election.
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How to give my money away. Let me count the ways. Here I am trying to figure out how I am going to pay My bills each day to make sure I don't end up on the street and this council is giving My money away without my consent. Wow who knew a civic government had the power to unilaterally pick and chose the winners and loser of our society.
ReplyDeleteI have nothing against "governments" in general providing a helping hand to the needy. But for the City to tax us and turn around and make a deal such as this with one Credit Union they are definitely stepping outside their governance parameters.
To clarify, the city (if approved, it hasn't been yet) is looking to invest $3 million. Affinity Credit Union would administer the program. People who would otherwise qualify for a mortgage except being unable to come up with the 5% downpayment could apply for a low-interest from the City/Affinity (with combined income between 52 and 70K), repayable in 5 years on a monthly schedule.
ReplyDeleteShould there be any losses, Affinity would shoulder 1/3 and the City 2/3. I believe most, if not all, of the accumulated interest payments would go back to the city.
So I don't see it as "giving money away". I think what the debate really should be about is if the City should be in the money lending buisness.
I am jsut flabergasted at how this continues to happen. Have we learned nothing from the past housing crisis that approving people for mortgages that they can't pay isn't a good solution? If people cannot afford to purchase a house then the solution is not to create more avenues and create more debt for them? So now we have them making a high mortgage payment AND a loan repayment for the down payment???? Stupid.
ReplyDeleteSean are you aware if the City will eb registering interests on the house so that they can forclose on the house if the loan repayment is defaulted on? Or is this simply a program where the City hopes people pay it back and if not then so be it?
I agree with the Grizz this is picking and choosing who benefits from taxes. I thought my property taxes were designed for infrastructure and municipakl programs, NOT to fund housing programs.
Good lord, I'm shocked the City now feels compelled to enter into the housing subsidy industry. Also any information if the borrowers must also take a mortgage for their house out with the same Credit Union??? If so that would be a terrible policy being set by the City.
"This isn't bleeding heart socialism. This is the city deciding housing is important"-Coun. Pat Lorje. If comrade Pat thinks this isn't socialism I wonder what would be! While the Federal Government is looking at tightening housing credit our council is contemplating going into the money lending business, what is going on here? If people making $52-7oK can't save enough to get the necessary 5% down they certainly won't be able to pay back the loan from the city, if you save money it collects interest(low as it may be),if you borrow money you pay interest. When the city needs to foreclose on these houses and they will have to, they will be cast as the bad guys. This is one of the stupidest ideas ever from the city and who ever thought it up should be fired and forced to get a job in the real world because they have been in city hall to long!
ReplyDeleteThanks for the support Anon 12:57. I will need all the help I can get could you possibly throw some coin my way as well or should I just wait for a new city handout.
ReplyDeleteInteresting Regina's Mayor has a different approach to giving first time home owners property tax breaks. Although I don't like this artificial propping up, at least it is a bit more on the palatable side.
Anyone remember why the states is in such a bad situation in the first place??? FANNY MAY et al.
When I bought my first home I paid 26% interest on a 5 yr term and needed 10% down and was out of school only 2 yrs and paid my own way through that as well. Today's younger generation have way more opportunities then I did in the early 80's (can anyone say RECESSION) and bought a modest home as a starter home. It wasn't easy but I did qualify for the mortgage and because of those rules I was left with little choice on the value of the home I could afford. At 50-75 thou. if you haven't saved 5% you don't deserve to buy a home. Maybe that brand new car, cell phone, Gaming console, eating out could be sacrificed for providing a basis for saving enough to get qualified.
If people making $52-7oK can't save enough to get the necessary 5% down they certainly won't be able to pay back the loan from the city,
ReplyDelete--
There are plenty of people in this income range that could support a mortage but are paying far more in rent than they would in mort/prop tax etc. Hard to save for a downpayment under those conditions.
This program is not that much different than a similar program the province used to have. Similar parameters. Targeted at the "mid income" who are "too rich" for Habitat for Humanity, have jobs, good credit and the cash flow to support a mortgage but have difficulty saving for a downpayment. Hard to save for a DP when the cost of housing rises substantially faster than your ability to save. Interestingly from what I have heard, the default rates on people in the provincial program were lower than average.
I purchased my first home about a year ago and am furious with this plan. When did owning property become a right? Seriously, the defenders of this program are talking like each and every employed person has a right to be a home owner? Anon 7:08 states that some people "have jobs, good credit and the cash flow to support a mortgage but have difficulty saving for a downpayment." Well maybe if they can't tighten their spending habits for something as important as a house they don't deserve to have the house yet? When the boom hit and our rent started being raised by what felt like the month my wife and I decided to start saving for a starter home. Unfortunately for me that meant cutting my cable package :( , no vacations for a couple years :( , and switching some habits (became more energy conservative, switch from name brand foods to no name). It took a couple year but we saved it up, and in the end it helped make us more responsible and let us properly think about the house purchase (what size and price we needed- not wanted- for example). It was a tough couple years, but it was doable. It just took the commitment to do so and being prepared to make the sacrifices. Now the City is of the view that that commitment is not necessary? Why should renters be expected to buckle down and curb their spending for something so silly as a downpayment?
ReplyDeleteLet's use some practical terms here, an income of 65k will net about 46k after taxes (monthly that's about $3800 give or take). It's not like you must live on welfare in order to set aside a little bit each month. Yes it will take some time and yes you may have to drive your old car a little longer, or not get the fancy new blackberrys as they come out, and not take that trip this winter.
Pat Lorje also said, "This is the city deciding housing is important. Instead of investing in stocks and bonds, we're investing in people." Excuse me? She can't be serious can she? Why is the city raising my property taxes to invest the money? They have started a bazillion capital expenditure projects, have repairs and bills galore to pay for and they are taking my money and investing it in.....people? (on a side note, I'd be equally pissed to hear that a portion of the 4.6 increase I was charged was for money for the city to invest in stocks and bonds). Secondly, if the City is of the view that housing is important and they cite the 42% of income to rent, telephone and utility bills as being higher than the desired 32%. Then lower the utility bills a little bit. This being the same brain trust that asked us to use less water, then when revenues dropped jacked up the rate to recoup the revenues. Where was the City's view of housing being important there? When they helped contribute to the problem they sure didn't care about the problem. Where was the concern about being over 32% when the upped the utility bills to push it into the 40s?
I'm just amazed that the city is green lighting the mantra that saving is no longer important. That everyone has a right to be a property owner, even when they are living paycheque to paycheque (perhaps when you are struggling to make ends meet month to month you aren't ready to take on the responsibility of owning a house and $250,000 worth of debt). Saving for a downpayment in today's Saskatoon isn't easy, but it is doable. The federal treasury just recently cautioned Canadians about their propensity to accumulate debt and how unhealthy it is making us as a population financially. Now the City is just disregarding that message and telling young middle class people "Screw it, why save money for a downpayment when you can just borrow it."
Amazing that people will defend this. Grizz consider me another one of your supporters.
I hope that this is all just a ruse. That when people walk into to apply for one of these loans the Credit Union will just open them a savings account and tell them to deposit whatever the loan payment for the down payment would've been to come back in 5 years and they will have their down payment saved for.
ReplyDeleteLike, let's just call this what it is 'Down Payments on Layaway", are they going to be promoting this program like the mattress commercials that promise no payments for 1 year"
For a $250,000 house the 5% down payment will be about $12,500. With low interest let's generously say it'll mean paying back $15,000 over the 5 years. That'd work out to monthly payments for the down payment loan of about $350. So how is someone who has been unable to save any money because they live month to month going to be able to afford an additional $350 a month for their down payment loan repayment on top of the current expenses (on the premise that what people defending this program are saying is that their current finances remain static in the rent to own switch). If they couldn't afford to curb spending to save money how will they be expected to curb their spending to repay the loan?
If our federal and provincial governments would get their act together and create a housing strategy and put up some resources for local communities... then perhaps our city council wouldn't be left to try and piece things together using the few powers they have available to them.
ReplyDeleteCanada is the only country in the G8 without a national housing strategy. Perhaps the mistress and her fans will join in the lobby for our conservative governments to recognize their role in creating a plan to house their citizens.
The American National Housing Strategy through the Community Reinvestment Act really paid off for the U.S. now didn't it. We should be more like them!
ReplyDeleteAnyone in the market for cheap housing in Phoenix? The most current estimate is that over 70% of the mortgages in Las Vegas are 'underwater.' The money owed on them is more than the market value of the house.
If you can't save for the downpayment, you can't afford a house.
Anon 5:01,
ReplyDeleteAre you suggesting that it is the municipal government's job to step in where they feel the Fed/Prov governments have fell short? There is a reason that different levels of government are charged with different responsibilities. The MRI wait list in Saskatoon is far beyond the national average, should the municipal government now also purchase a new machine and open their own clinic to fill the gap?
The appropriate measure would be for our Mayor to lobby to the governments for such a program, not to hide the problem behind a silly program designed to get people in over their head.
If this is such a major issue for Canada the supporters of such a policy can make it an issue come election time and take action with their vote. That is how a democracy works. If this is such an outrage that we have no National Housing Strategy then bring it to the forefront come election time. I haven't heard one member of the Conservatives, Liberals, or NDP complain about this. Why aren't YOU lobbying the opposition to question the governing party about this during question period?
What I can't stop shaking my head at is the fact that this government this past budget spend hours and hours trying to slash the smallest of spending from the budget only to tell us there was just no more to slash. Now it is revealed that a discretionary poorly conceived loan program to potential home owners for $3 million couldn't have been cut or delayed a year? This City is BROKE, they continue to raise property taxes (which are obviously passed onto renters) then wonder why no one can afford to live anymore.
To the Anon who blames the Feds and Provs for the lack of a National Housing Program, why target the Conservatives and Sask Party who have been in power for less than a decade each.
ReplyDeleteWhere was the national housing program proposed by Liberals (Fed) and NDP (Prov) in the past? Why have none of those more left leaning social governments never advanced such a plan? Think about it.
Sean S.:
ReplyDelete"To clarify, the city (if approved, it hasn't been yet) is looking to invest $3 million. Affinity Credit Union would administer the program. People who would otherwise qualify for a mortgage except being unable to come up with the 5% downpayment could apply for a low-interest from the City/Affinity (with combined income between 52 and 70K), repayable in 5 years on a monthly schedule."
From the Feb. 8 StarPhoenix:
"The $3-million Equity Building Program, run through Affinity Credit Union and approved Monday by city council, will provide a five per cent down payment loan for homebuyers with incomes between $45,000 and $70,000 who are renting in Saskatoon."
Which is it? Was it approved or not? Is it $45,000 to $70,000 or not?
If the city backs 2/3 of a mortgage, and the homeowner defaults, then who pays? The taxpayer. Hence, it can be construed as "giving money away".
"Where was the national housing program proposed by Liberals (Fed) and NDP (Prov) in the past? Why have none of those more left leaning social governments never advanced such a plan? Think about it. "
ReplyDelete---
As mentioned previously, the province had a similar program in the past. But funding for it got cut not long after the Sask Party was elected.
Maybe you should talk to the people who participated in that program and see what the long term results were.
February 9, 2011 5:01 AM
ReplyDeleteAnonymous said...
The American National Housing Strategy through the Community Reinvestment Act really paid off for the U.S. now didn't it. We should be more like them!
---
Let's see. the CRA was about preventing lenders from discriminating against potential borrowers on the basis of race by "redlining" neigbourhoods that tended to be majority black or hispanic, with no consideration of whether the borrower was a good or bad credit risk.
I take it from your comment and the tone that you approve of racial discrimination by lenders.
Anon 8:51
ReplyDeleteWay to play the "racist" card. Nice.
Now, let's see a little deeper. The CRA intended to prevent lenders from discriminating against potential borrowers on the basis of race.
What actually happened was that lenders were encouraged and/or forced to start lending to borrowers with bad credit, which is what they were trying not to do before jerks like you accused them of being racist.
These bad loans weren't good for business, so banks worked with governments to change the rules and make it easier to bundle the bad loans with the good.
A few years later ... bang! Financial meltdown.
This program by the city isn't that far off. It will pay off for the city if -- and only if -- housing prices keep rising.
And, of course, housing prices ALWAYS keep rising.
Anon 8:51, way to bring racism into the debate. When you are defeated in your argument sling mud at the other side.
ReplyDeleteYou clearly don't understand the housing crisis that happened in the States do you?
There are rules established for people who would like to become property owners. Perhaps if our housing market is so out of whack we should consider addressing the core of the issue rather than changing the rules to make it easier for people to buy the overpriced real estate.
I heard yesterday on the VP of Affinity on the radio trying to explain how the money will flow and how the city will get its investment back.
ReplyDeleteWOW what an eye opener. He indicated that although the loan would be provided by Affinity it would be coming out of a special fund set up by the city instead of Affinities own investors/members. Oh and it has to be given WITH OUT any security requirements ie as a gift. Does this constitute the city giving the money away if they have not way of recouping the funds should these home owners fail to pay back the debt??
I haven't liked the idea from the onset and after hearing a bumbling description of the financial aspect I am even less pleased with the City Administration that came up with this idea. For Pat Lorje to say "This isn't bleeding heart socialism" she is right it is more like the saga of Robin Hood. "Steal from the rich and give to the poor".