Chapter 14
Housing choice and government programs

Condominium living was designed originally for those individuals who wanted to experience "maintenance-free, headache-free" home ownership; and for those individuals who enjoyed the amenities and freedom associated with renting but who wished the equity in real property investment. The condominium concept was originally designed with  private streets, private services, private recreational facilities, and its own board of directors to create somewhat of a country club atmosphere. In the late 1960’s and very early 1970's, people purchased a unit in the full awareness that maintenance-free ownership meant higher operating costs, and during these years few complaints were heard.

In 1973, the picture changed substantially. Housing costs had soared. The probability of ownership of single-family housing was dim for many people. As result, the various levels of government initiated programs that either directly assisted individuals with the purchase of their first home, or gave incentive grants to municipalities to allow lower-cost housing within their jurisdictions. Some of these programs are briefly described:

High ratio mortgages
In the early 1970's, the Ontario Housing Corporation (OHC), through its former agency, Housing Corporation Limited (now independent of OHC and named Ontario Mortgage Corporation) provided high ratio mortgage financing for a large number of condominium units. High ratio financing provides a mortgage of up to 95 per cent of the selling price of a unit.

 In many cases, only minimum construction standards were required, with consequent high maintenance costs for purchasers. Contributing to this situation was the fact that OHC limited prices at which the units could be sold by the builder. Also, OHC inspected only for the purpose of calculating the amount of mortgage money to be given to the builder and did not inspect particularly for quality.

As there was no limit on the maximum incomes of purchasers, some purchasers with minimum incomes were inconvenienced or were forced to sell their units because of common expense increases, but, the majority of purchasers were able to absorb increases and, in varying degrees of success, provided competent administration.

OHAP
In the middle 1970's the Ontario Housing Action Program (OHAP), offered the speeding up of government planning processes, per unit grants to municipalities that accepted moderate income housing, and mortgage financing through the Ontario Mortgage Corporation. OHAP is provincially sponsored but not related to OHC. The intention of OHAP was to induce builders to make a certain percentage of their housing units available to persons of moderate income.

Moderate income housing was designed for those families who could not qualify for assisted rental housing, but whose income was below that considered necessary to purchase on the open market. It was calculated that a great proportion of the population desiring housing fell within this category. The OHAP program was successful in certain areas around Metropolitan Toronto and Ottawa. Most moderate income housing built under this program was condominium.

AHOP
The federal government participated, through its Central Mortgage and Housing Corporation (CMHC), in financing condominiums in the province to a much lesser extent than did the Ontario Mortgage Corporation. But, CMHC's reliance on design standards similar to OHC's made apparent similar problems in their condominiums.

The most important federal initiative, however, has been the Assisted Home Ownership Program (AHOP) offered by CMHC.

Under AHOP, a purchaser who buys a previously qualified unit may receive a grant from CMHC, plus a loan to reduce the effective rate of mortgage interest, thus helping many lower income people to purchase a unit. There are price ceilings, which vary by area, on the units to qualify them for eligibility. For example, in Metropolitan Toronto, the 1974 ceiling was approximately $43,000 and in 1976 it was $47,000.

The federal and provincial governments have recently announced a piggy-back program which will further drive down the income requirements to purchase. The same criteria for the AHOP program will determine eligibility. The province will integrate an additional subsidy into the same program.

During its five year course, the subsidy diminishes annually. At the end of the five years, interest begins to run on the loan and the loan must be paid back in installments. If a sale occurs, the balance of the loan becomes due.

The theory behind the program is that income levels will rise, enabling the purchaser to pay back the loan.

The disadvantages of the program for the condominium buyer are several:

The AHOP subsidy is not available to purchasers until after they receive title to their units, and many purchasers may be severely affected by the high occupancy rent they are required to pay until a deed is received.

AHOP piles up a rapid debt at a time when income levels are not rising rapidly in the income ranges being served. A person who was not able to pay a current mortgage rate at the time of purchase, was not only expected to pay that rate in five years but to pay back the loan as well.

AHOP encourages lower income persons to purchase condominium units meeting AHOP qualifications. Consequently, this put people with the least financial flexibility into condominium units.

AHOP ignores the common expense portion of the condominium purchaser's financial obligations. Therefore, the purchaser often winds up exceeding the conventional guideline of 30 per cent of gross income to carry the unit, a fault also shared by other lending institutions in their economic analysis of condominiums. A high risk of default may be the result.

There are also social disadvantages to the program. Both the provincial and federal governments have encouraged home ownership through the claim that equity appreciation is probable. The subsidy imposes unfair competition with owners of similar units not sponsored by government programs who wish to resell their units.

As well, by encouraging large numbers of low income purchasers who will be facing economic problems resulting from increasing common expenses and AHOP loan repayment, the program puts heavy financial pressure on the condominium corporations involved as they try to meet their bills with declining revenues. In the current market, even prior to repayment of the AHOP loans, there have been indications of purchasers surrendering deeds to mortgagees because the purchasers were unable to keep up mortgage and common expense payments.

The foregoing disadvantages of the current program need correcting.

Recommendation No. 122:
The AHOP program be amended:
A. So that the subsidies are available from the time of occupancy.
B. To include common expense payments in the eligibility requirement calculation.

FHAP
The Federal Housing Action Program (FHAP) is designed to provide grants to municipalities as an incentive to allow better residential densities at affordable prices. The AHOP price ceilings apply. Municipalities receive $1,000 for every eligible unit to offset the loss of municipal tax revenue on smaller units. To meet the density and price ceiling requirements, the most eligible forms of development are currently townhouse condominiums. It is expected that this trend will continue.

Municipal government attitudes
Since most of the programs just described imposed unit price ceilings, higher densities became a pre-requisite. Although a number of municipalities in the early 1970's realized their responsibilities for providing affordable housing, many were not receptive to innovative housing development forms which would have required moving away from traditional planning and engineering standards to allow a more flexible approach.

Condominium appeared to be the answer to this dilemma since condominium proposals met the requirements of both the developer and the municipalities, in that high densities and lower service standards could be achieved without the municipality being responsible for maintenance cost. Consequently, condominium developments flourished in 1974, 1975, and 1976, providing home ownership to those who would not otherwise have been able to afford a home (see Chart 8).

Some people are now living in condominiums not because it is their choice but because it is the only home they can afford. To such people, a private road, which must be maintained by them, is not a status symbol, but an expensive headache.

Leasehold condominiums
In 1974, the province attempted to lower the land component of the cost of condominiums by removing the restriction in The Condominium Act that condominiums be built only on freehold land; the government also set up a procedure in Section 26 of the Act whereby a condominium could be registered on a lease-hold interest. It was hoped that a long-term lease would provide a method of spreading land costs over a long time period and thereby lower monthly costs.

The province then commissioned a study to determine exactly what legislative protection was needed to prevent abuse. The study, called The Leasehold Condominium: Problems and Prospects, found that even if abuses were prevented, the problems of financing and deterioration of the buildings near the end of the lease were sufficient to render impractical the concept of condominiums on leasehold land. No action has yet been taken on this report.

Recommendation No. 123:
The Condominium Act be amended to remove the section permitting condominiums on leased land.

Alternative form of housing
A number of alternative housing forms other than condominiums are available to provide a realistic choice for those in the low and moderate-income brackets. Some of these, such as zero lot line development are not new and have proven to be very successful for both municipalities and owners.

Zero lot line developments provide individual homes fronting on public roads. The unit can be placed anywhere on the lot, even against the property line, allowing very economical use of the land and higher densities than in a standard subdivision.

Good co-operation between the developer and the municipality is essential to ensure sensitive and imaginative siting of buildings. Such developments can provide unique and architecturally interesting communities because they deviate from the standard 66-foot road allowances and do not have a uniform streetscape, but, since each site is different, requiring individual attention, many municipalities have not been receptive. There appears to be security for municipalities in rigid standards and a distrust of precedent—setting.

Since the advent of condominium townhouses, a great deal of attention has been given to on-street townhouses, which are not condominiums. Such on-street townhouses can be built on short-length street townhouses can be built on short-length streets with reduced road allowances to provide housing at similar densities and similar prices to condominium townhouses. The difference is that like zero lot line housing, each homeowner receives title to both his land and his unit, and the unit fronts onto a public road. This has some definite advantages.

The first is that no formal community board of directors or organization is necessary. Those not interested in a high level of community involvement can enjoy their own home and maintain it as desired without relying on formalized cooperation.

Another paramount advantage is that the unit fronts onto a public road. Many of the problems raised in the hearings involved private roads. A private road means that certain services, normally provided by the municipality, are provided and paid for by the condominium corporation. These include road maintenance, garbage collection, snow removal and repairs and maintenance of underground services. For a purchaser who did not wish a private street to begin with, a condominium owner can find it difficult to understand why he must pay for these essential services.

The chapter on municipal services provides a more detailed discussion and recommendations relating to the provision of such services. A great number of submissions received by the Study Group emphasized that people would have preferred to pay more initially for a home on a public street rather than buy into a condominium with private streets.

Because of the concern over lack of municipal services, the Borough of Etobicoke has assumed the internal roads of a condominium project.

Some members of the development industry felt that on-street townhouses located on short streets (P-loops or cui-de-sacs) with an allowance of 45 to 50 feet, together with reduced front yard standards, could be placed on the market at from $2,000 to $3,000 per unit above the price of accepted condominium townhouses. The initial extra cost would far outweigh the inflationary spiral of maintenance fees which include property management, bookkeeping and maintenance costs for work that can be done by an individual property owner himself. Amortized over 25 years, this increased cost would be minimal on the mortgage carrying costs. Since 72 per cent of all Ontario registered condominiums are in the townhouse category, this appears to be a workable alternative.

Recommendation No. 124:
Federal and provincial programs, such as AHOP-HOME, be directed towards encouraging alternate forms of housing, such as zero lot line or on-street town housing, and that municipalities be more receptive to innovative housing forms.

Prior to our public hearings, the Ministry of Housing published a report on "Urban Development Standards". This report clearly indicates that there are realistic means to cut down on per unit costs without cutting down on safety standards. The report also lends credibility to the argument that if municipalities are receptive to innovative forms of housing development, then methods exist to keep costs down. Affordable homes could thus be put on the market without the need for a large number of public assistance programs. It is unfortunate that greater support by municipalities has not been given to the conclusions of that report. Alternative housing forms within similar price ranges must be produced.

Recommendation No. 125:
Municipalities endorse the " Urban Development Standards" report published by the Ministry of Housing to assist in the reduction of housing costs, thereby increasing the scope of housing choice.

Adult accommodation
Aside from the assistance programs, another important aspect of housing choice involves adult-only accommodation. In a number of briefs submitted, concern was expressed that there was no legislative provision for all-adult buildings. A number of senior citizens, for example, wanted a choice of accommodation, and wanted to sell their homes and move into all-adult buildings.

Recommendation No. 126:
Legislation be enacted to provide a legislative basis for all-adult buildings.

The Condominium Study Group concluded from its hearings that the condominium concept is, in fact, a preferred choice of housing accommodation for many. But in order to keep it desirable, the unit must be purchased by choice, not necessity.


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