Mortgage 101 – Hope in Homeownership

What gives Clinton hope for increasing homeownership in Halifax? Todd Veinotte and Clinton Wilkins are back with innovative solutions for overcoming the affordability crisis in the housing market, advocating for creative approaches, and discussing the potential of prefab homes and densification in shaping Halifax’s housing landscape.

Homeownership challenges for first-time buyers, including down payment and income ratio issues

Todd Veinotte
All right, welcome back to Mortgage 101 your guide to homeownership with myself, Todd Veinotte and Clinton Wilkins, the mortgage guru, Clinton, did you ever want to play the guitar when you were a kid?

Clinton Wilkins
No, I played the piano and I played the alto saxophone in high school band. So, a little bit musical.

Todd Veinotte
Wow. So no guitar?

Clinton Wilkins
No, never. I’ve touched a couple of guitars, but I’ve never played one.

Todd Veinotte
I was gonna make fun of you but I didn’t!

Clinton Wilkins
You can make fun of me for other reasons, whatever. Whatever floats your boat.

Todd Veinotte
Exactly! All right. Again, welcome back to Mortgage 101. A lot of talk about affordable housing. And that, obviously, is something that is on a lot of people’s minds right now. Because a lot of young people, unfortunately, are out or have been shut out of the housing market and feel as though they’ll never obtain that dream of homeownership. First of all, what’s your message to people who feel really disenfranchised by the whole thing and frustrated by the whole thing?

Clinton Wilkins
What I think is don’t give up hope. I think that’s the first thing. You make sure your credit is good. And I think lastly, start saving. Use the first home savings account, huge! Use the RRSP, max it out. Because now you can borrow $60,000 from your RRSP. And every year you can contribute to your first home savings account. I think that’s going to be really important. And the other thing that the federal government is rolling out here in August, is the 30 year amortization for new construction, or newly constructed homes, for first time homebuyers. So I think that things will progressively get better for first time homebuyers. So don’t give up hope, and make the right decisions today. Before the show, we were talking to one of our producers. And I was saying that the first time homebuyers are becoming more creative, in the sense of; I’ve had borrowers where there’s been three of them buy a duplex together. Two are going to live in one unit, and one is going to live in the other unit. None of them could afford to buy anything on their own. But collectively, together with all three, they’re able to make it work. So I think that first time homebuyers are stepping in the right direction in terms of, you know, figuring out a way to get into the property ladder. We’ve said this before, homeowners typically have a higher net worth than renters, because their property appreciates. The challenge is getting into the housing market for the first time. So first-time homebuyers need the most amount of help; whether that’s a family gift, whether it’s multiple borrowers on title, whether it’s ‘save, save, save as much as you can,’ and really make sure your credit is going to be top notch. I think there are challenges. There are challenges, that’s reality. But, we hear the Prime Minister, on social media and on the news saying homeownership is a priority for first-time homebuyers. And that’s why some of these changes are happening.

Todd Veinotte
Can you borrow your downpayment?

Clinton Wilkins
You can certainly borrow your down payment from an unsecured line of credit, or a credit card. You might not want to do that, but you can. There is what we call a ‘flex down program,’ which is part that the insurers offer. It’s a program where you can borrow 5% of your downpayment. And also in Nova Scotia, we have the Nova Scotia downpayment assistance program that is very, very interesting. It is an interest free program. You can borrow your downpayment, which would be 5%. And there are certain caps depending on what region you’re in, and certain pots of money that you’re able to access. But you can borrow your 5% down. And then it basically is a second mortgage on your home. And you have 10 years to pay that back interest free. Great program!

Todd Veinotte
And I’ve heard Claudia Chender, leader of the NDP, and not to make this a political show, but one of her planks is to expand that program; because obviously, there’s a great need for that, right?

Clinton Wilkins
I think there certainly is a need. And I’ll be 100% honest with you, Todd, I think that the downpayment is not the biggest challenge for first time homebuyers. I think the bigger challenge is qualifying based on income, ‘Stress Test,’ is huge, and really having the other pieces, like the credit, and obviously the downpayment. But, I think, really the ratios in terms of the income, is one of the bigger challenges that we’re seeing right now for first time homebuyers. A lot of people that we’re seeing for pre approvals, they have the downpayment, they have it. Maybe from a group RRSP. Maybe they’ve had savings, maybe that family gift. But, the bigger challenge sometimes is getting those ratios in line, just due to the stress test. So I think the 30 year amortization will help.

Todd Veinotte
So when it comes to new housing stock, or new builds, there’s conversation about ‘prefabs’ as being an option, to try to somehow get that price down to $300,000 or $350,000, something reasonable! Is that realistic, or no? What are your thoughts on that?

Clinton Wilkins
I don’t know yet Todd. I think that there needs to be some alignment between the Feds and the Province, and the Municipality, as well as builders. And I think that if we can streamline a design that is going to be acceptable, across all the provinces, then I think there might be some more economies of scale, if you know what I’m saying. I think with building one-offs, it doesn’t work. That’s almost like doing a custom build. But if they can do, hundreds or 1000s of these units at once, it’ll make it a lot more efficient. And I think it will drive the price down, like anything that can be replicated. And I’m totally fine with prefabs, I’ll say that. I think mobile homes are tough, because typically those are more of a depreciating asset, but in terms of a prefab on a foundation, I think there is a market here, and I think it will work in Nova Scotia. You know, I think it’s just about being able to bring them to market in mass. And, I don’t want to discount builders for what they do. You know, we’ve criticized them, we’ve criticized builders a lot over the last three or four years due to some of the things that have happened around pulling out of contracts, increasing the price, inflation; they’re just turning the buck over to consumers. And I think when you’re building a new home, you need to have a little bit of a risk appetite that things can go wrong, right? But I think with these Prefabs, it can be very controlled. And a lot of times I think they’re done in a controlled environment. So, you know what you’re getting, I think the timeframe can certainly be a lot quicker for delivery. But I think they need to be a ‘vanilla’ offering. I think they need to be done in mass, I think they need to be very, very similar. It should be very limited customization; lets just get them to market, and get at an affordable price point. And you know, I really liked this for like off of the 107 highway. There’s so much land. I like this for the area going out towards the airport. Again, there’s so much construction out there already, but a lot of it right now is all custom homes. Or, out towards The Valley way, between here and Windsor. There’s so many regions where we can build subdivisions of 100, 200, 300 plus homes, and bring these to market very, very quickly. Are they going to be the most beautiful homes that we’ve ever seen? No, they’re going to be cookie cutter. That’s what we need. We’ve done this before in wartime, so I know that Canada can do this. But it’s going to definitely take some motivation. It’s probably going to take some tax incentives, it might have the Canadian Mortgage and Housing Corporation turn into an actual bank for some of these builders, and maybe borrowers, I don’t know. But I think it is possible. But now that we’ve rolled out this plan of building nearly 4 million homes, we’re going to need some programs to support the motivation of the federal government.

Todd Veinotte
What are your thoughts on densification? Do you use that term?

Clinton Wilkins
I’m all for it.

Todd Veinotte
Yeah? Tell me why.

Clinton Wilkins
Because in Halifax, we have not been as motivated towards construction as we probably should have been. And now, guess what, we’re dealing with a hangover here. We should have had all sky high towers along Robie Street; along Wyse Road in Dartmouth. They’re starting to come. There’s lots that are ready. But, we should have been fast tracking this construction like 20 years ago. We didn’t have the foresight, because we didn’t think that we were gonna have the population growth. But, the one nice thing here in Halifax and in Nova Scotia, we have a lot of land. We do not have the problem that Toronto has, that Vancouver has, we have land to build on. And I think densification is a lot better for Halifax than urban sprawl. I’m about protecting heritage as well. But you know, the heritage properties that are along Robie Street; a lot of these were like post explosion. We’re not talking the heritage of heritage. We are protecting the real heritage downtown in the North End, and South End, like that, I’m fine with. But, I think along these major thoroughfares where we already have four plus lanes. Let’s build it up, baby! Like come on!

Todd Veinotte
And ofcourse, transit and the use of transit its already there.

Clinton Wilkins
We have the infrastructure!

Todd Veinotte
You don’t have to build it all out. For the sprawl, you would have to build all that out.

Affordable housing options in Halifax, including prefabricated homes and densification

Clinton Wilkins
Let’s double, triple down. Just think about where your radio station is located on the corner of Yonge and Robie, almost; there is so much construction around there. That’s what we need all along Robie Street. It is what we’re seeing there, you know, in Central, North End Halifax.

Todd Veinotte
I do want to get to more of that because, I often hear people saying that nobody can afford these. Obviously, some people are because we’re building them, but we can get into that.

Clinton Wilkins
I’m gonna just stop you right there. We need housing at all price points. So guess what? If there’s more expensive housing being built, it’s going to open up some lower cost housing. It’s going to be a cyclone there, a vacuum.

Todd Veinotte
We’ll get to that. In the last segment, we got a guest coming up. James Dwyer!

Clinton Wilkins
James Dwyer. We’re gonna have him on our show and he’ll be with us. We’ll be back!