Assisting a family member through the process of downsizing to a condo, I stumbled across the HeadStart On a Home (HSOH) program. Curious and a bit perplexed, primarily because I couldn’t figure out who was getting the HeadStart, I decided to look into it further.
Here’s what I found.
HeadStart On a Home is a Saskatchewan government program funded wholly by the Saskatchewan Immigrant Investor Fund (SIIF), which was legislated as an arm of Saskatchewan’s Crown Investment Corp (CIC) in late December 2010.
Put simply, SIIF was created as a means for CIC to “invest” funds borrowed by the Saskatchewan government from the federal government, which
blackmailed borrowed the cash from immigrants wanting to get into Canada. SIIF then rolls the cash into the HeadStart On a Home program.
See, the feds used to have a program that allowed immigrants to basically buy a visa for $800,000 CAD. The program, which predictably endured its fair amount of criticism, was scrapped in 2014, but the funds will continue to flow for a few more years.
Eight provinces across Canada have participated in this program. For example, British Columbia has also set up its Immigrant Investor Fund (BCIIF) as a Crown Corp, but that province uses the money to “promote job creation and economic growth” in BC by:
1) “providing funding to provincial builds such as university expansions”;
2) “providing tech-based start-ups access to venture capital funding”; and
3) “short term investing in money markets” to meet the province’s liquidity requirements.
Each province participating in the program has to guarantee the funds they borrow (more on that later) from the federal government, who then pay it back to the immigrants who were kind enough to lend it to them.
Clearly, provinces like BC have decided that their investments in infrastructure and technology, and whatever they earn off the money markets, will return enough reward for their government – their taxpayers – to repay the cash to the federal government.
In Saskatchewan, we’ve taken a rather different approach.
As opposed to investing in infrastructure or economic diversification, Saskatchewan has doled out every penny from SIIF to….private homebuilding companies.
This brings us back to HeadStart On a Home (HSOH), which allows home builders to apply for this cash from SIIF, which is managed by Westcap Fund Management, to cover up to 90 per cent of their new-housing construction costs, including purchasing land, at a 4 per cent interest rate.
*From CIC Payee Disclosure Reports. Amounts lent, and to which companies, since the HeadStart On a Home’s inception in 2011:
(At this point I should stop and point out that it’s Crown Investment Corporation’s JOB to manage funds such as the SIIF, but they’ve farmed it out to another investment management corporation, to which we’ve paid just under $5 million for the privilege. I’m okay with that though, because I’d give Westcap my money any day over a bunch of civil servants.)
Bottom line on HSOH – since 2011, almost half a billion dollars borrowed from immigrants has bankrolled the homebuilding industry in this province, with the Saskatchewan taxpayer on the hook for every penny.
Formally launched in late March of 2011 by the Minister of Social Services (I can’t even), a neatly bundled government media release announcing, amongst other low-income/accessibility programming initiatives, upgrades to government rental properties, and grants to Habitat to Humanity, read:
“Social Services Minister June Draude announced details today of a five-point action plan to add at least 4600 new housing units over the next five years and make it easier for Saskatchewan people with modest incomes to purchase new homes.”
Literally, brand new homes. On “modest incomes”.
“Headstart on a Home will support the creation of a minimum of 1000 new entry-level homes over the next five years, through the creation of a new capital funding pool.”
Because who needs banks when you can borrow money from immigrants and have it guaranteed by Saskatchewan taxpayers?
“The capital pool will provide construction project financing and incentives to municipality approved builders and developers to stimulate the construction of moderately priced entry-level homes.”
Let’s talk about “entry-level” housing.
It doesn’t exist.
All “entry-level housing” is, is a buzzphrase that governments love to use when they’re congratulating themselves for their obligatory housing plans.
Because how much did you spend to “enter” the housing market?
In other words, how much was your first home?
Guarantee it was a lot more than mine.
Or, maybe it was a lot less.
On everything from your savings to student loans to debt ratio to Mom and Dad’s generosity.
In an April 12, 2011 meeting of the Crown and Central Agencies Committee, then Minister of Finance Ken Krawetz was asked by NDP MLA Trent Wotherspoon to define what exactly developers borrowing money through HSOH were actually building.
“…projects may include condominiums, multi-units, single-family dwellings, modular homes, ready-to-move, warehouse conversions, etc. Presale of homes are not required…The range of homes will be in that 180 to $300,000 range,” replied Krawetz.
Any renters out there clamoring to get into a $300 000ish starter condo? Because the Minister of Social Services has got a deal for you.
“So the goal will be of course, if there are homes that are being built across the province in communities, that will take people that are currently renting an apartment or renting a basement suite or whatever and become homeowners, then additional space will become available to deal with the shortage of rental space.”
Let me get this straight. I’m to believe that in 2011 there were a bunch of basement-suite renters in Saskatchewan, with their mortgage-financing ready to go, just chomping at the bit to get into a$250 000 townhouse, but couldn’t because there was nothing to buy?
No. If an individual in 2011 was ready and able to buy a condo, they could. There was no real estate deficit. Even if there was, that’s called the <air quotes> “free market”.
You know, supply and demand and all that?
Letting the market decide?
Instead the SaskParty government got us into the real estate business and drove up supply by lending private developers, many of whom were already well-established, low-interest capital to build for-profit housing, thereby manipulating both pricing and housing starts in Saskatchewan.
In 2012 Doug Kosloski, then Vice President of Sask Crown Investment Corp was a bit more forthcoming when asked the same question about the sales price of the homes being built through SIIF.
And by “forthcoming” I really mean vague, because that’s what the whole thing is:
“The parameters on the program are, it’s categorized as entry level housing. And that will be dependent on the community in which the houses are constructed. The general guideline is that the sale price must be at or below the MLS [multiple listing service] average for that municipality. So the price can range from anywhere, depending on whether you’re in Saskatoon or Humboldt or Swift Current or Assiniboia, it will vary.”
Let’s have a look at some comparables.
In Warman, $325 000 will get you into this HSOH home:
1420 sq. ft., 3 bedrooms including an ensuite, hardwood, walk-in closet, veranda, maple cabinets, granite countertops.
Or, for $10 000 less you could get this house, with a two-car attached garage, 5 bedrooms, two bathrooms, and a fully landscaped front and back yard.
For $100 000 less, you could enter the housing market by snapping up a new pad from Warman’s prolific inventory of townhouses, duplexes or condos.
In Saskatoon, you could enter the housing market by purchasing yourself one of these 677 sq. ft. condos at the downtown Shangri-La, complete with heated underground parking, an exercise room and a rooftop deck,for anywhere from a quarter to half a million dollars.
Do I really need to provide you with an example of what you can get in Saskatoon for a quarter to half a million dollars? Spoiler alert: a hell of a lot more than most people get as their first home.
Want to spend $325 000 on a starter home in Maidstone?
That’s right, $325 000. IN MAIDSTONE.
If you REALLY want to spend that much money to live in Maidstone, do I have a deal for you, at a paltry $269 000.
More a Moose Jaw than Maidstone kind of first-time home buyer?
You could purchase this fine HSOH property for $225 000, or this one, which real estate agents are actually marketing to first time home buyers, for $119 000.
I haven’t checked them all, but I have little doubt that for every brand new HSOH house, condo, duplex, townhouse or apartment on the market, there are comparable dwellings for tens, if not hundreds, of thousands of dollars less.
Yet, the Saskatchewan government and Ministry of Social Services have been continually touting HSOH homes as affordable housing, even including them in graphs like this in its Saskatchewan Housing Corporation annual reports:
It’s so weird that in all the reporting since 2010, not once has the Ministry of Social Services or the Saskatchewan Housing Corporation included reference to granite countertops or walk-in closets.
Okay okay… even if the provincial government did use the SIIF to fund housing starts and private business, instead of to build schools, or to invest in diversifying the economy (as opposed to fuelling one that was already booming), we’re still making money with that 4 per cent interest rate, right?
So that’s a bit disconcerting. Maybe it will even-out in the next few years?
But even if all the money is returned and we make a bit of money for CIC, there’s still a lot of questions to be asked.
Why was cash for a capital pool for private-homebuilders prioritized over literally every other project in this province requiring funding, but especially infrastructure?
I mean, all those new doors certainly added extra oomph to the infinite pile of euphoric government news releases we’ve been fed over the last decade on housing starts, like this one from 2013, boasting that “Saskatchewan saw the most housing starts per capita across Canada in 2012, with Regina and Saskatoon leading the way in starts per capita ahead of all other major Canadian cities.”
No shit, likely because all those other cities didn’t have their governments dumping almost half a billion dollars of stimulus cash into their regional home building industry.
Think about that for a moment – the provincial government’s HSOH program absolutely manipulated the Saskatchewan housing market.
And now, guess what?
You could even call this the very anatomy of a housing bubble (<–read this Maclean’s piece when you’re done here, if you have time).
Many, if not all of the builders who borrowed and benefited from SIIF will hopefully (for our sake, at least) still make money, even on top of paying the taxpayer 4 per cent interest. This is great, but there’s more than enough banks out there to finance these developers, especially in a market as hot as the government claimed it was.
Choosing to back homebuilders, who in turn generated profit, seems to me is yet again the opposite of this government’s assertion that it is not in the business of “picking winners and losers”.
Given Saskatchewan’s outlandishly lenient political-donation rules, one has to wonder why this keeps coming up?
Further, why was this program sold to the province as a Social Services initiative, instead of what it really is – at best, an economic stimulus program?
If it’s so great, why not promote it as a job-creator in the construction industry, instead of some kind of heroic government effort to help the little people – with “modest incomes” – get into their own homes?
Why is HeadStart On a Home also being marketed by homebuilders as a government assisted program aimed at getting first-time home buyers into a home?
I mean, if you were to honestly believe that HSOH is getting people, who otherwise wouldn’t be able to, into their first homes, you’d have to also believe that one of the barriers for first-time Saskatchewan homeowners is not, say, obtaining a mortgage or coming up with enough cash for the down payment – but a lack of available condos and mid-level housing.
Here’s what Saskatchewan’s HeadStart On a Home program is not doing:
- providing any type of housing that is cheaper than the exact same housing on Saskatchewan’s real estate market.
- granting or lending free and clear public money to any first-time homebuyer to put towards their down payment.
- limiting the sales of homes which were constructed with HSOH funding to a specific type of buyer (ie first-time or “modest income”)
Here’s what HSOH is doing:
- financing private homebuilders’ and construction companies development of for-profit product.
- hosting a website on which Saskatchewan Credit Unions are allowed to access a captive audience and market their 0%-down first time mortgage offer, the premise of which is they’ll give you the first five per cent at 5% interest (otherwise known as financing the down payment), and the balance of your mortgage at prime or whatever.
- allowing 25 per cent of the units constructed with HSOH funds to be purchased by landlords as investment rental properties.
- making a lot of companies and individuals a lot of money.
This isn’t the first time the province of Saskatchewan has borrowed funds from new Canadians. A similar program ran in the province from 1989-1999, the difference being that the province did not have to guarantee the funds. In 1999 the federal government changed that parameter, so the Saskatchewan government pulled out of the program so as to avoid exposing the taxpayer to the risk.
In 2008 the SaskParty government seemed content to stay out of the IIP, restating the position that the risk to the taxpayer was just too high.
From the 2008 Saskatchewan Government Growth Fund Management Corporation report:
“Saskatchewan participated in the IIP [Immigrant Investor Program] from 1989 to 1999 to avail itself of this source of investor capital to support employment creation in the province. However, in 1999 the Federal government modified the terms of the IIP such that SGGF MC would be required to guarantee the return of principal to the investors. Because of the risk involved with this guarantee, the Province withdrew from the program and began the process of “winding-up” SGGF MC.”
Then they promptly unwound it.
I don’t know for how many more years Saskatchewan is going to be borrowing money from immigrants to Canada, but if its even one more, perhaps its time for CIC to consider who and where else in this province needs a head start.
We also deserve an update on which homebuilding companies are in arrears or have defaulted on these loans (I personally know of at least one), and how the government plans on liquidating the asset to protect the co-signer (aka the taxpayer).
And personally, I wouldn’t mind hearing the provincial government explain whose idea this was in the first place.