Affordable housing is a fundamental right in any decent society. Yet affordability is getting more and more problematic for a great many people. In some places, even professionals like teachers and nurses cannot find housing that costs less than 30% of their monthly income.
Solutions are far from simple and straightforward. Many so-called “solutions” fail to preserve affordability over the long term.
There are three key factors that need to be addressed to achieve real solutions to housing affordability.
First, there is the value of land. It constitutes up to 50% of the value of shelter in many settings. The positive results achieved by land tenure options such as community land trusts, that remove land from the market, protect long-term affordability.
Second, the application of compound interest to mortgages is a big problem. Fee-based approaches to financing shelter have demonstrated in Sweden the potential to keep finance annual costs at an average of 2.5% of the mortgage value.
Third, ownership that is structured to unite individual with collective interests (the “I and the We”) needs to become much more common.
Private ownership (the “I”) of buildings encourages individuals to care for their dwellings as a means of increasing personal equity. Collective ownership (the “We”) of land stops the transfer of unearned equity to individuals or to speculative investments. It also protects individuals, whether renters or owners, from an escalation in costs. By uniting the I and the We, long-term affordability can be maintained and taxpayer investments in low and moderate-incomes housing minimized over the long term.
Approaches that combine these principles are well advanced and rapidly expanding in some jurisdictions, particularly the U.S and to a lesser extent in the U.K. While in Canada interest is growing in approaches that address these key factors, there needs to be more progress on the ground.
For example, Canadians have talked about but never piloted fee-based approaches to financing mortgages. Credit unions could well become centres for innovation and experimentation based on the co-operative approaches to fee-based finance that have proved so successful in Sweden.
CCCR is currently focussing its efforts in two main areas.
We also are monitoring approaches to address fuel poverty, a problem well-recognized in Europe but not so far advanced in North America. Escalating fuel prices will soon bring this problem sharply into focus. CCCR is keenly interested to learn how conservation and energy efficiency investments targeted at low and moderate income households can serve both to improve affordability and reduce carbon emissions.