Headstart program explained to council
April 2, 2012 9:04 am
Westcap Management vice-president Wanda Hunchak and Conexus Credit Union Vice-president Jason Bender were at Wednesday's meeting of Moosomin Town Council to explain the "Head Start on a Home" program.
The provincial program is intended to spur housing development across Saskatchewan.
Hunchak explained how the program works, and how it's being applied across the province.
"We (Westcap Management) helped the provincial government design the Headstart for a Home program," she said.
"Headstart is a $200 million commitment. We provide construction financing to build entry-level homes. I don't think I need to tell you about the need for entry-level homes," Hunchak told council. "I think you're probably smack in the middle of the economic hot spots in Saskatchewan."
She said there is a difference between the entry-level homes the new program is intended to bring to the market, and affordable housing usually offered by local housing authorities.
"Affordable housing relates to social programing, and is usually tied to income testing," she said. "There are a lot of families whose family income is too much for social housing, but too little for a mortgage on a $300,000 home. That gap is growing in Saskatchewan. New employees, service industry employees, and some seniors fall into that gap.
"Under the Head Start program there are construction financing incentives for housing that will meet the needs of people in that gap.
"We can provide construction loans at a fixed rate of four per cent. We don't require upfront presales. Normally, if you go to the bank or credit union with a 14-unit project, the bank will say fine, as long as seven are presold. We don't need any presales. We also require only 10 per cent down."
She said the program is intended to get entry-level housing units built as quickly as possible.
"If you have a good project you will get those presales, but it will delay a project by a few months.
"We want to see these units built sooner. In three to five years we will have missed the window.
We need to put roofs over people's heads right now."
Only owner-occupied entry-level housing units qualify under the program.
"To qualify, units must hit the market at or below market price," said Hunchak. "We want to get roofs over people's heads."
She said she expects construction on the projects to move quickly.
"Entry-level housing is a different animal than custom built housing," she said. "In custom home building you're looking at longer build times and 30 per cent margins. In entry level housing, they're making 10 per cent margins but doing a lot of volume. It's a tighter build process"
She said the feasibility of each project is evaluated. "We look at if builders have built similar projects on time and on budget. We look at the needs assessment of the municipality-who are the people who are looking for units, what is it that you actually need? Is it row housing? Is it apartment-style condos? Is the municipality prepared to step up to the plate with some kind of financial commitment?"
She said different municipalities have made different types of financial commitments to the Headstart projects around the province.
The City of Weyburn has provided land for the project at just the cost of servicing it. Some municipalities help with a fund for down payments for people purchasing the Headstart homes, and others offer tax abatements for three to five years.
The city of Yorkton offers $5,000 downpayment assistance for homebuyers under the plan, but takes the money back if they don't stay for five years.
Hunchak said the program has taken off quickly. "So far we've put $42 million into 240 homes around the province," she said. "Right now, we have 18 applications on the table. We wanted to make sure Moosomin is aware of this program."
Saskatchewan Credit Unions are part of the program.
"The down payment can be the biggest hurdle for home ownership, and Credit Unions have come up with a way to make that easier," Hunchak said.
"If people going into these units get mortgages through Conexus, they can get a loan at prime for five years to cover the five per cent down payment."
The program doesn't cost Saskatchewan taxpayers anything. The province's $200 million commitment is coming from a federal immigrant investment pool. Saskatchewan's share of the pool had been untapped until this program was created.
Councillor Garry Beckett said he was worried about contractors taking advantage of the program and not passing the savings on to home buyers.
"What kind of safeguards are there to prevent the contractor from pocketing savings from the program?" he asked.
"There are two ways that we can prevent that," said Hunchak. "First, sales have to be at or below market rate, and secondly, we know what the margins on these projects are. If they're trying to pad the costs, we'll find it."
Mayor Don Bradley had a swift reaction to the presentation. "It's a good idea, but we have no land and we have no cash," he said.
Council accepted offers on five lots in block 99, north of the new hospital, for $28,000 each. It plans to develop 13 lots at the site of the former Moosomin Union Hospital, but three of those are already spoken for.
Bradley commented that the developer taking the three lots at the hospital property likely wouldn't want to be near entry-level housing.
"These are nice brand-new units that people will want to live in," Hunchak replied.
"Just because we say entry level doesn't mean these are not good quality homes. Moosomin needs some entry level housing."
Current projects under the program range from duplexes to apartment-style condos to townhouses through the program.
"Multi unit housing is a lot of what we're financing under this project," Hunchak said.
"In Prince Albert there are 83 apartment style condos under way," she said. "There are four projects under way in Saskatoon. Two projects are going up in Yorkton. One is a duplex project. The first phase is 14 units, it's going up now. The 1,100 square feet units will hit the market at $230,000.
"The other project in Yorkton is townhouses, which will be $233,000. Yorkton has put aside funds for downpayment assistance, and the government has put out a program which matches municipal assistance for downpayments."
Hunchak said she can even help put the town in contact with builders interested in putting up entry-level housing.
Mayor Don Bradley said he believes the program is a good thing, but he doesn't see how the town could participate.
"It's the right thing," he said. "I wish we had lots of money and lots of land, but we don't."