Habitat HM Supports Mississauga’s Housing GAP and the “Missing Middle”

GAP housing is Habitat HM's new housing model.

Individuals who fall just beyond the criteria for affordable housing are often neglected in the discussion of housing and the city of Mississauga recognizes them as the “missing middle” within the housing continuum. This represents an individual who falls into “GAP”: someone making a moderate income and who still can’t afford to own a home. 

Here at Habitat HM, we prioritize making homeownership accessible and affordable for all. This is why we’ll be supporting the city of Mississauga’s affordable housing program, specifically GAP housing. We’re a prominent housing provider for affordable homes within the city and we’re using this model as a way to help bridge the gap of this “missing middle.”

GAP homeownership falls within the affordable housing continuum and that’s where Habitat comes in. 

What is affordable housing?

The benchmark in Canada for affordable housing is accommodation that costs less than 30 per cent of the household’s before-tax income. Housing types that are considered affordable lie along a continuum. 

Social housing 

Social housing, also referred to as subsidized housing, is government-owned (or privately-owned) housing for individuals who simply cannot afford a place to live. Usually, this type of accommodation operates on a rent-geared-to-income monthly payment. This means that you will not be paying more than 30 per cent of your monthly income on rent. The remainder of the rent is subsidized by the government. 

Rental housing

Of all households within the province, 30 per cent are renting. Rental housing is an accommodation that is occupied by someone other than the owner. The individual or family occupying the home (also known as the tenant) pays periodic rent to the owner. 

Market homeownership

Market homeownership is the long term goal of many Canadians and the most significant investment most people will make in their lifetime. Owning a home means that you have an asset that will increase in value over time. This allows you to either sell it later in life to support your retirement or it allows you to keep the home within your family to benefit coming generations. 

Habitat’s housing models 

With Habitat HM’s housing models, our mission is to make homeownership attainable. We like to think of ourselves as the bridge between social or rental housing and homeownership. We work to bridge the gap between renting and owning, a gap that many view as insurmountable, to assist them in attaining their goal. 

Challenges of first-time homeownership

Down payment

One of the most significant obstacles to first-time homeownership is the down payment. With house prices within the province (and specifically within the GTA) skyrocketing, and most individuals not making enough revenue to afford these prices, buying a home might seem like an unattainable goal.

The minimum amount of down payment needed for a home worth $500,000 or less is 5 per cent. For homes worth more, the down payment can range from 10 to 20 per cent of the purchase price.

The average cost to own a home in Toronto is $838,540, according to the Toronto Real Estate Board. Using a minimum down payment amount of 10 per cent, a homebuyer would need to pay $83,854 upfront to purchase the home.

The median household income in Toronto is $70,366, according to the city’s 2016 census on income.

Unaffordable payments

Using the above scenario, the homeowner would be expected to make monthly mortgage payments of $4,389 (calculated using a 5 per cent interest rate and an amortization period of 25 years).

In one year, this would mean $52,668 spent on mortgage payments alone. Along with the cost of transportation, food, clothing and other necessary expenses, an average Toronto income would not support owning a home. Not to mention other expenses that disproportionately impact young adults, like paying off student debt.

What is GAP housing?

GAP housing aims to make homeownership accessible to families and individuals making a moderate income that doesn’t support owning a home in today’s market. They don’t qualify for subsidized housing, but they’re still in need of a hand-up to purchase a house. Essentially, it’s filling the “gap” that currently exists within the homeownership market. 

GAP housing comes from the city of Mississauga’s housing strategy: Making Room for the Middle. Habitat HM will be introducing this option as a way to facilitate the city’s vision where middle-income households are able to move into homes that meet both their budget and lifestyle needs.

We acknowledge that there are several barriers that make it challenging for buyers to enter the housing market and that we have traditionally focused on helping those within the low-income market (making less than $60,000 in household income annually). 

As Habitat HM continues to expand, we’re always looking for ways that we can help more people. GAP housing is our solution to overcoming the aforementioned obstacles of homeownership and our way of expanding the scope of our support to the moderate-income market. Because after all, we’re all human and we believe that every human deserves a decent place to live and the opportunity for a better future. 

Who is GAP housing for?

GAP housing is specifically targeting families and individuals making a moderate income that doesn’t support owning a home in today’s market. This includes those making between $60,000 to $120,000 household income annually.

Interested applicants must be able to qualify for a minimum $400,000* traditional mortgage with a mortgage broker. Their ability to qualify for this mortgage depends on their personal financial condition, including their income, current debts and credit score.  

Habitat HM will then take out a second, non-paying mortgage for the remaining fair market value (market price for the house) beyond the minimum $400,000* mortgage**. For example, if the fair market value of the home is $710,000, the homeowner will take out a minimum of a $400,000* mortgage and Habitat will carry a $310,000 non-paying mortgage; the second mortgage will have no interest and it will be payable only on the sale and title transfer of the home**.

This means that if the homebuyer decides to sell, they would owe Habitat HM the value of the second mortgage. This is to prevent homeowners from “flipping” Habitat homes to make money. It will also help ensure that the property remains affordable.

How does GAP tackle these challenges?

Within our GAP housing model (which also operates within the parameters of Canada’s First-Time Home Buyer Incentive for those applicants who are purchasing a home for the first time), only a 5 per cent down payment on the home is needed, even if its market value significantly exceeds $500,000. This payment also includes closing costs for the sale. 

The home payments are also made much more affordable with GAP, because the homeowner is only required to make payments on a minimum $400,000* mortgage, rather than having to make payments based on the entire value of the home**.

When will Habitat HM roll out this model?

Habitat HM is very excited to announce that we’re rolling out our GAP housing model very soon, as we’re currently looking into including this model in upcoming projects and properties. Keep your eyes peeled for updates! 

*may change based on individual debt circumstances

**program and mortgage details subject to change at the discretion of Habitat for Humanity Halton-Mississauga

To read more about the city of Mississauga’s commitment to affordable housing, click here

Habitat for Humanity Halton-Mississauga is a proud member of our national organization Habitat Canada and is one of 54 local Habitat affiliates across our country. Habitat for Humanity brings communities together to help families build strength, stability, and independence through affordable homeownership. We provide a solid foundation for better, healthier lives in Canada and around the world. You can find out more about Habitat Canada at habitat.ca.

By: Olivia Kabelin

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