Taking Advantage of a Good Crisis

My latest column in Business in Vancouver:

July 10-16, 2007; issue 924
Housing crises can generate solutions
Having been on city council for 15 years, I’ve been through a housing crisis or two. The housing crisis of ’89 – now that was a good one. I still remember fondly the council meeting in which we pushed through about a half-dozen different initiatives in an afternoon.
That’s the upside of a good crisis: you can do things that otherwise get put off for “further study” and more “public process.”
Sometimes there’s a good reason for putting off action: with a little more time, the crisis goes away. When dealing with a phenomenon dependent on external factors like interest rates and incomes, circumstances can quickly change.
And then you find out that the crisis was exaggerated.
But politically, so what? If people believe that no one can afford to buy a house, politicians must respond creatively. And sure enough, some creative ideas are coming forward.

Take, for instance, Ventura, California – an affluent community where the average house costs 10 times the average household income, according to city councillor Bill Fulton, who also happens to be an urban planning analyst and the author of The Reluctant Metropolis..
His concern: if housing affordability is a problem for families, it’s a problem for employers in business and government.
“If the people who work for you can’t afford to buy a house in the community where you’re located, they’ll probably leave. At best, they’ll commute long distances, creating traffic congestion and environmental damage … and our community isn’t going to be competitive.”
So last week, Ventura City Council responded with the Employee Housing Assistance Program. It is, said Fulton, a simple, low-risk, and inexpensive way for the city to help city employees buy houses..
“The concept is deceptively simple,” he said. “You might call it a ‘not so silent’ second mortgage. An employee qualifies for a mortgage. The employer puts up the collateral for an interest-only second mortgage and then pays the interest. The bottom line: The homebuyer’s monthly payment on a $450,000 mortgage debt is cut from $3,000 to $2,000 a month.
“The employer isn’t really out the cost of the mortgage. It’s only collateral. The employer pays the interest on the second mortgage, but that cost is defrayed by the fact that the employer can still invest the cash. When the house is sold or refinanced, the employer gets the money back – with the interest.”
Ventura City Council approved $2 million for the program – a small fraction of the money Vancouver council made on the sale of the False Creek lands. Fulton points out that it’s money that stays in the city’s investment portfolio, accumulating interest.
“The net annual cost to an employer like the city is estimated to be $3,000,” he said. “And best of all, this program doesn’t have to be limited to city employees. It can be opened up to anybody whose employer is willing to participate in the program.”
Americans have in many ways responded to the problem of affordable housing more creatively than Canadians, perhaps because their local governments have so many more tools available and fewer legal constraints. Nor are they as fearful as we are about being charged with the responsibility of housing so that senior governments can shirk their responsibility.
But if council wants to test out some new ideas, there’s nothing like leveraging a good crisis. •
Gordon Price (pricetags@shaw.ca) is the director of Simon Fraser University’s city program and a former Vancouver city councillor. His column appears monthly.