One Ontario city’s innovative approach to affordable housing

By buying and renovating derelict properties and arranging forgivable loans, Sault Ste. Marie is aiming to give the working poor a shot at homeownership
By Josh Sherman - Published on Nov 18, 2019
The District of Sault Ste. Marie Social Services Administration Board last March dedicated $300,000 in funding for the Affordable Home Ownership Program. (Justin Tang/CP))

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After losing his 2016 city-council bid, Sault Ste. Marie resident Luke Dufour wanted to find another way to have a positive impact in his community.

So just months after his narrow defeat — Dufour lost the Ward 2 battle to Sandra Hollingsworth by barely 100 votes — in the February byelection that year, the carpenter by trade purchased an income property in desperate need of repair. On the campaign trail, he’d heard landlord-tenant horror stories. He wanted to see whether it was possible to fix up a rundown home and provide safe, affordable housing without taking a financial loss.

The experience, Dufour says, was a success. And, in 2018, after he won a council seat following his third campaign, he channelled it into a new municipal initiative. “Instead of buying another [property], I’m trying to do it on a really big public scale,” says the rookie Ward 2 councillor of the pilot he’s spent the past year fine-tuning.

Through the Affordable Home Ownership Program, the City of Sault Ste. Marie aims to give the working poor a shot at homeownership by purchasing derelict properties, restoring them, and conditionally offering to cover down-payment costs. Its proponents suggest it could spur revitalization in neglected neighbourhoods, end cycles of poverty, and serve as a model for cities across the province.

This March, the District of Sault Ste. Marie Social Services Administration Board dedicated $300,000 in funding for the project, and, with access to capital, the Sault Ste. Marie Housing Corporation began scanning real-estate listings. It has narrowed the search to neighbourhoods where property-tax assessments are either stagnant or declining. Dufour expects to close the first deal by the end of the year.

Given that renovations can be prohibitively expensive, the housing corporation is partnering with Sault College’s Building Maintenance and Construction Certificate program, which helps Ontario Works recipients learn employable skills, such as basic plumbing and carpentry. (Trades will oversee the renos and tackle more complicated tasks, such as electrical work.) The target is to spend about $100,000 per property, including purchase and rehabilitation, in a market that boasts a year-to-date average home-selling price of  $180,303, according to the Sault Ste. Marie Real Estate Board.

“It seems like something that just makes sense from all directions,” says Brian Armstrong, a carpenter and one of the program’s instructors. He anticipates that the pilot will provide his students with the opportunity to spend more time on site and out of the workshop.

Once repaired, homes will be sold to housing-subsidy recipients, who’ll receive a $10,000 forgivable loan from the housing corporation to cover the down payment. The loan will be registered as a lien against the property: $1,000 will be removed from the amount owing each year, a stipulation designed to discourage people from taking advantage of the program via a quick resale. “The barrier has always been the down-payment factor and the factor that, once they do own this home, they don’t have the money, if the home is substandard, to renovate it up to an acceptable standard,” Dufour says.

The city’s goal is eventually to flip six to 10 homes per year, and the DSSMSSAB has asked the province for an additional one-time investment of $900,000. A spokesperson for the Ministry of Community and Social Services told TVO.org via email that the DSSAB has “contacted the ministry regarding their participation in the project” but did not indicate when a decision could be expected. The board is currently in talks with credit unions to provide financing to participants in the program.

One benefit of the Affordable Home Ownership Program, says Mike Nadeau, DSSMSSAB’s chief administrative officer, is that it has the potential to reduce social-housing wait-lists. “We have families that are working poor living in our social-housing communities, so they’re gainfully employed, [but] they’re just not making enough to leave,” he explains. “What we would like to be able to do is to start to identity families within our social-housing communities to take advantage of homeownership — then they start to build some equity.” Nadeau says that such families could have at least one person employed full-time and earning $16 an hour, or about $30,000 annually.

Another plus, Nadeau says, is that, after the initial investment, the program should become self-sustaining; money from property sales will fund future purchases, and so on.

When discussing the initiative, Dufour says, he often shares an anecdote that affirms his belief in this model: before joining council, he encountered a family that had been relying on housing subsidies for generations. “That was the one that just got stuck in my teeth, and it drove me nuts, because, obviously, if there was a program in place, the taxpayer could’ve just bought that house right off the hop and turned these people into homeowners,” says Dufour. “Instead, the taxpayer still bought the house, but they bought it for a private landlord who wasn’t taking care of it — and that family is still on housing subsidy,” the councillor says, referring to the fact that some landlords use the rent they receive to cover mortgage payments.

Sparking an increase in property values would actually be a welcome development for the Affordable Home Ownership Program, Nadeau says, noting that neighbourhoods with rising property values effectively subsidize those in decline. Dufour agrees: “The goal is that, hopefully, we can price ourselves out of our own market.”

Diana Petramala, senior researcher at Ryerson University’s Centre for Urban Research and Land Development, told TVO.org via email that the approach “could potentially work in a market like Sault Ste. Marie where market conditions are balanced and housing is still quite affordable.”

But she suggested that the program isn’t without its risks. “You want to ensure you are not encouraging low income households to take on too much debt,” she wrote, adding that that “could lead to financial stress.”

Petramala also noted that such a program may not be feasible everywhere. “This may work in soft, smaller markets like Sault Ste. Marie,” she said, “but less so in bigger, hotter, and more expensive markets like Toronto. Fixer-uppers are not selling at prices that are affordable in major markets. Also, bidding wars and double digit home price growth would add a lot of uncertainty to these projects.”

Dufour, who says that applicants will go through a financial-screening process, acknowledges that social programs can be a tough sell for other reasons. He’s familiar with the line of thinking that people should pull themselves up by the bootstraps, without government support. But he believes that, if the program can remove down-payment and reno-cost barriers, “these people can pull themselves up by their own bootstraps — they can stand on their own two feet. That’s really the beauty of it.”

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