City staff say loan program to help low-income Londoners buy a home should return

City staff are recommending the relaunch of a program that provided lower income Londoners with a 20-year forgivable loan to put a down payment on their first home.

In a report going to the community and protective services committee on Monday, staff say the return of an affordable homeownership program that London ran from 2008 to 2013 will help low and middle-income households buy their first homes and ease demand for rental housing.

"Although the market has stabilized, the average home price does not match the average income, which results in a major barrier for many households in our community," Scott Mathers, the city's deputy manager of housing and community growth, said in a statement.

The program was shut down due to limited funding to sustain it amid rising house prices at the time. In the five years it was active, the city issued 270 loans amounting to $2.3 million and received more than $2.4 million in repayments, according to the report.

The city has $3.1 million in funds to restart the program which it estimates could support up to 124 households. The money was acquired through a revolving loan fund, part of the original program, along with the 173 loans that were paid back, plus interest accrued on them, the report said, adding the subsidy will have no impact on the multi-year budget.

"The purpose of the fund is to ensure that repayments from previous loans are reinvested to provide new loans, which creates a sustainable mechanism to support ongoing homeownership opportunities in the City of London and Middlesex County," said Mathers.

If council agrees to reinstate the program, applicants must have the following to qualify:

• Be first-time buyers
• Have a maximum income of $95,000 for a single person and $115,000 for a family
• Live in London-Middlesex
• Agree not to lease the property and live there for the loan's duration
• Be eligible for a mortgage and have a home inspection
• The fund will support a maximum house price of $500,000.

Those eligible will be offered an interest-free forgivable loan over 20 years, covering up to five per cent of a home's purchase price, to a maximum of $25,000. The homeowner will be required to pay closing costs.

If a home is sold before the 20-year term, the owner would pay back the loan, plus five per cent of the capital gains — the difference between the home's purchase price and what it was sold for, the report said. Other municipalities such as Niagara and Chatham-Kent have similar programs.

"I think it's something that's needed because it's specifically focused to help people who are looking to move from rental into buying their own house and that's something people are asking for," said Coun. David Ferreira, the committee's chair.

According to realtor.ca, more than 2,200 homes are for sale in London and Middlesex County and roughly 450 homes available in the price range of $320,000 to $500,000, with options including single-detached homes, townhouses and apartment condos, the report said.

While the subsidy can be helpful, the threshold of a maximum house price should be at least $550,000 because it's hard to find older houses that don't require additional repairs which can cost thousands of dollars, said Harinder Kumar, a salesperson with the Realty Firm.

Although the housing market is relatively steady, house prices did rise to upwards of $650,000 in May and June, said Kumar.

"A lot of people are struggling because they do have some funds but it's not exactly their down payment, so people are on the fence but they're scared to make that move. If he government steps in, they will definitely be ready to do this transition," he said.

"But what if the home inspection says the house is $500,000 but there is another $25,000 of fixes, are the buyers going to take care of that or is the city? Those are big ticket expenses for somebody who is struggling to have a down payment."

Ferreira echoes that concern but said this fund is meant to reduce the biggest barrier to home ownership and can allow people to save up for repairs if needed.

"It doesn't reduce all the barriers that exist, but it is something that I know people will use," Ferreira said. "A little bit of pressure relief in one area will help pressures in other areas."