A new announcement from the provincial government is hoping to counter a looming housing affordability crisis for young first-time homeowners across the province.
Premier Christy Clark unveiled a new policy, the BC Home Owner Mortgage and Equity Partnership (HOME) Program earlier this month, which will help buyers with a down payment.
The initiative contributes to the amount prospective homebuyers have already saved for a down payment, and then provides up to $37,500, or five per cent, of the purchase price with a 25-year loan that is interest and payment-free for the first five years.
The government estimates that the HOME program will help roughly 42,000 buyers enter the housing market over the next three years, with an investment of $703 million.
Tom Shypitka, who is running in Kootenay East as the candidate for the BC Liberals, lauded the announcement and encouraged any prospective first-time homebuyer to talk with a financial consultant about the program.
“I think it’s going to have a positive affect on the area,” he said. “I think we can all relate to the fact that when we were first starting out buying homes — and some of us haven’t bought our first homes yet — it’s really hard to get over that first little hurdle of getting a down payment and this is one way the B.C. Liberal government is going to afford some of those people the opportunity to get their first home.”
Under the program, during the first five years, no monthly interest or principal payments are required as long as the home remains the homeowners primary residence.
After the first five years is up, homebuyers begin making monthly payments at current interest rates. The loan will be paid over 20 years and home owners can make extra payments to repay it in full at any time.
The loan must be repaid in full if the house is sold.
Randal Macnair, who is running for the NDP in Kootenay East, cited economists from UBC Sauder School of Business and Vancouver School of Economics who take issue with the policy, and said it will create conditions similar to those before the U.S. subprime housing crash.
“Ironically, the announcement came on the same day that the Financial Post headline was about Canadians’ rising household debt being a key risk to the economy,” said Macnair. “First-time homebuyers need help, but what they need is more affordable homes to buy, not more access to debt.
“At the end of the day, who’s going to pay for the $700 million the program will cost? The taxpayers of B.C., that’s who. The BC Liberals Homebuyers Plan puts homebuyers at risk with more debt, exposes taxpayers to underwriting bad debt, and according to economists, may make houses even more expensive.”
Shypitka notes that prospective homebuyers under the HOME program must be pre-approved and that the government isn’t just throwing money away at people who can’t afford a mortgage.
“This will help lower debt, if anything, because people will actually be able to get into their first home, get that equity that they’ll have instead of saving, saving and saving and never getting there,” Shypitka said.
“This is the way to get more equity in your home and get you up and on your way to getting lower mortgage payments down the road for sure.”
Macnair, who spent 15 years in municipal politics in Fernie, said the $700 million would go a long way to creating affordable housing across the province and that government working directly with communities and the development industry will lead to affordability solutions.