Providing shared equity mortgages to people who would otherwise not be able to own houses is a proven solution to the home affordability problem, says Joe Deschênes Smith, principal and founder of Trillium Housing.
The proof lies in the popularity of the projects Trillium Housing has completed or has underway in partnership with developers in Toronto, Pickering and Hamilton, he says.
The non-profit social enterprise’s model is “unique in that we partner with developers.”
For its first development, a townhouse complex in west Toronto called The Loop, Trillium teamed up with VanMar Developments. Of the 62 units in the two- and three-bedroom development, 25 offered Trillium mortgages, of which eight went to single-parent-led families.
The “unique” Trillium model and mortgage
Trillium offers eligible buyers a shared-equity mortgage that does not have to be repaid until the homeowner either resells the house or becomes an investor and rents it out. Instead of earning monthly interest, Trillium gets its share of the appreciation in the value.
Owners may also repay the loan earlier if they wish.
Eligible home buyers must have incomes below the local median income and the size of the mortgage is dependent on the need of the family. The home price must also be below the city’s median price.
Under the Trillium Housing mortgage model, eligible buyers can make a down payment as low as five per cent. The Trillium payment-free mortgage covers 25 per cent of the value, while a conventional first mortgage covers the rent. Buyers need a first mortgage approval from a bank, credit union or mortgage broker.
A shared-equity Trillium mortgage helps buyers with down payments, reduces leverage and carrying costs. Mortgage-holders can save several hundreds of dollars monthly in housing costs while building equity. If the Trillium mortgage is worth 25 per cent of the value of the home, Trillium receives that capital plus 25 per cent of any appreciation of the home value, when the owner sells or rents out the property.
The shared-equity approach, a rarity in Canada, provides a path to homeownership to lower-income families who would otherwise have been priced out of the market.
Entry-level housing need is great
Deschênes Smith says the need for entry-level housing is great, given the growing affordability gap – the difference between housing prices and family incomes.
Trillium works with developers building good quality, entry-level priced units. The approach enables developer partners to build better, more inclusive communities, he says.
“For us to help a family earning $70,000 a year, we can’t be involved in projects that are selling $1 million homes,” Deschênes Smith says. “We look for sites where we can work with the developer and design a product at the entry level.”
In Pickering, Trillium has teamed up with VanMar again to build Maxx Urban Towns, a development that consists of 216 stacked townhouses, of which 40 to 50 will be Trillium units. More than 20 of the Trillium units have been sold.
The development at 2635 William Jackson Drive is adjacent to parks and is close to major highways and amenities
Prices start in the low $400,000s for a two-bedroom unit, while a three- bedroom unit sells for about $550,000. Occupancy starts next spring.
The project, which has an overall cost of about $85 million, has obtained $68 million in construction financing from Vancity Community Investment Bank. Vancity also provided construction financing for The Loop.
Peachy projects in Hamilton
In Hamilton, Trillium has teamed up with New Horizon Development Group to develop Peachy Towns in the city’s Winona area, which is slated for completion in spring 2022. Fourteen of the 61 units in the sold-out development are Trillium homes. Units cost $520,000 and $540,000.
A second Hamilton project, dubbed Peachy on the Mountain, is not yet on the market. It will include 73 street townhouse units, of which as many as 40 will be Trillium properties. Prices will be higher for that development as “the market has been crazy in Hamilton.”
Trillium was formed nine years ago when Deschênes Smith, who previously worked at Queen’s Park in Toronto at the Ministry of Municipal Affairs and Housing and at a non-profit, saw an opportunity and a problem.
He noticed he was the only person attending meetings of both the developers’ association for the GTA and the Ontario Non-Profit Housing Association. There had to be a way to get both sides together, thought Deschênes Smith.
Deschênes Smith says units have to be sold for market prices “because people will just flip them. We don’t want to create an opportunity for people who just want to make a quick buck to buy one of our units.”
Deschênes Smith says Trillium has been negotiating with municipalities to obtain more support for its housing affordability model but “we don’t fit in the normal boxes.” Most municipalities, he says, restrict their affordability programs to rentals not ownership.
“My hope is that as more municipalities get to know us, more will be interested in this type of work.”