Metro Vancouver downplays location-efficient mortgages
From a pure mortgage underwriting perspective, it appears that CMHC would not consider the transportation-linked mortgage to be a viable commercial product
I do not think that CMHC is actually helping Canadians. For a start the need for mortgage underwriting seems to me to be grossly overrated. And before you write to me about the recent US sub-prime problems, they arose from people using the equity in their homes to pay off their credit cards – or finance some more consumer spending – not first time buyers struggling to get in to the market.
CMHC first of all regulates how much you can borrow – but nobody regulates how much you spend on transportation. So it is not surprising that we see people moving out to where they can buy something with what CMHC is prepared to guarantee, where they will spend a lot more on commuting. Secondly in order to get a high ratio mortgage – one where you do not have to have a great wad of cash on hand to slap a big down payment – you pay more in insurance. In fact the last house I bought, I decided to add some money that had been earmarked for some much needed renovations to the house we were buying, just so I could get a lower ratio mortgage: it reduced my monthly payments so much it was worthwhile to defer the new roof and windows a few years. Of course that probably increased our energy consumption too, but I doubt CMHC is interested in energy efficient mortgages either, and in those days hydro was still cheap.
Metro Vancouver did not help its case by examining places like Langley, Port Coquitlam, North Surrey, and Maple Ridge as potential LEM markets. As they remark – there’s no transit there to speak of (ok – the exact quote is “did not have the transportation infrastructure needed to successfully support these initiatives”.) What they should have looked at is how LEMs would have made places like East Vancouver, Burnaby and New Westminster affordable and attractive for the people whom otherwise are going to head out to the suburbs. A bigger mortgage can be handled if your household does not need two cars – forget the gas, just look at the lease payments you are not making. Especially if you can join a car co-op to act as back up to your transit pass.
And exactly what risk has there been in Metro Vancouver lately in terms of mortgage defaults? House prices have been steadily increasing. A house bought seven years ago for under 250k now sells for over $500k. So that $200k mortgage looks like a safe bet to get paid off after transaction costs by year two or three. Not much risk there!
So why do we actually need CMHC? Why is it a federal institution? And anyway, what the heck happened to all those federally funded housing programs that were the centerpiece of so many of the seminars my planning colleagues went to at LSE? (I did the transportation option, but most of them did housing – in the seventies it was the bigger issue for those with a social conscience.) Hard to believe now, but Canada used to be seen as a model in places like Britain.
One of the great tragedies of the right wing’s victory of the last few decades has been the loss of progress that had been made in getting low income citizens out of slums. Now we have homeless people begging on the streets of the world’s most liveable city. And in the suburbs the invisible homeless continue their couch surfing, and hope to find a tiny, illegal and unsafe basement suite they can share with someone.