National Housing Act
residential construction by private enterprise. However, the pattern which we are now suggesting will provide an opportunity for public investment in this field should it be considered desirable. To illustrate my point, I can think of no better example than slum clearance and redevelopment of the site. If for no other reason than inability to rehouse families, slum clearance and redevelopment projects are not appropriate everywhere today. However, the time may come when effective demand for new housing will have dropped to a point where redevelopment of areas containing substandard housing will have not only social but economic benefit. The pattern of this legislation provides the machinery by which such steps can be taken.
I should like now to make some comments upon the bill itself. It contains four major changes, as well as a number of minor amendments. The major changes are:
(a) The reduction of the down payment required from people who wish to own their houses.
(b) Enabling the federal government to join with the provinces in desirable housing developments of all forms, including the assembly of land.
(c) An increase in the maximum amounts which may be made available for home improvement and home extension purposes.
(d) Changes in the co-operative section of the National Housing Act so that its facilities will be more readily available.
The bill changes the definition of a builder so as not to exclude a builder who holds a long-term lease or other satisfactory interest in the land. The previous limitation of ownership has caused difficulty in areas where long-term leases are customary. A continuation of the limitation of ownership would be inappropriate for Newfoundland, where ground leases are more general than land held in fee simple.
The bill provides that a basic loan of 80 per cent of the lending value shall be made available to a builder or to a home owner. The amortization may be for a period as long as thirty years. Provided that the purchase price to the home owner is a fair and reasonable one, provision is made for an additional advance in amount of one-sixth of the basic loan. This change provides considerably higher mortgage financing than the act in its present form. Depending upon the price at which the house is sold by the builder to the home owner, the down payment requirements will range between one-sixth and one-tenth of the purchase price.
The fair and reasonable price provision is included because previous experience under the National Housing Act, as well as our understanding of experience under the
[Mr. Winters.l
Ontario second mortgage legislation, indicate that increased mortgage financing tends to increase sale prices. Little purpose would be served if, by providing an extra mortgage loan of $1,000, the sale price of the house went up a part or all of this amount. The majority of present houses under the National Housing Act will, within the present range of sale prices, qualify under the fair and reasonable provision. Houses upon which the builder is taking a very long profit will not qualify.
I should like to make it perfectly clear that the fair and reasonable provision is not a limitation upon the sale price of houses to be financed under the National Housing Act. A house with a lending value of $6,000 will qualify for a basic loan of $4,800, and for a further advance of $800 to a home owner who has purchased the house at a price not exceeding $6,720, which is the total loan of $5,600 plus 20 per cent, and would be considered the fair and reasonable price. The builder may sell the house at any price he desires. If, however, the price is above the fair and reasonable price, the basic loan of 80 per cent will be made, but the additional advance to the home owner is not available. During the last few weeks I have had a number of representations that the fair and reasonable price requirement is unreasonable, and that the legislation should be brought down without this provision. I can only say that these representations in many ways point up the very reason for the limitation.
The bill also provides for revisions to the co-operative section of the act. During the past year or two there have been a number of representations from co-operatives that the act, in its present form, is unsuitable. With this we agree. Representations have been made that the rate of interest payable by co-operatives or by individuals who have built their houses under co-operative schemes should be less than the rate of interest available to home owners. As will be clear to hon. members, this point of view cannot be accepted. Therefore amendments are now being proposed to improve the mechanics, and indeed the terms, of loans to co-operatives, but no change is being made in the interest rate.
It has been suggested to us that there is a similarity between the purpose of section £ and the co-operative part of the act. This of course, is far from being the case, because section 9 contemplates rental housing with nc proprietary interest by the occupant. It is also definite in its provision that continued occupancy is dependent upon family income being below a certain level. An examinatior of section 9 will show clearly the reasons why a co-operative is not a limited dividend rental housing project.
It does not seem reasonable to us that individuals with a proprietary interest in the house in which they live should be afforded better terms under a co-operative than if they arranged the financing of their houses on an individual basis. The government deems it unwise to create such differential.
In our experience we find that there are two kinds of co-operatives. There is the genuine co-operative formed by a group of people interested in producing houses for their mutual benefit. The legislation is being revised to suit their needs.
The other type of co-operative is one developed by a promoter for the purpose of finding a lucrative method by which to market bis construction. This is the type of co-operative in which we believe Canadians would not wish the government to be interested. It will be noticed than an application will not ae approved from a co-operative unless the corporation is satisfied that 80 per cent of the family housing units will be occupied by co-operators. In other words the genuine nature of the co-operative must be evident at the time of the application. I may say that this limitation carries the judgment of several afficials experienced in the co-operative movement as it relates to house building. They are as anxious as we to avoid the use of the co-operative principle for purposes for which it was not intended.
There are two distinct kinds of housing projects for which the legislation makes provision. In the province of Quebec, especially, co-operative housing maintains the co-operative principle until the completion of the unit, at which time full ownership is transferred to the individual. Hon. members will aotice that the legislation contemplates loans to such a co-operative in amount of 80 per cent of the lending value, and an additional advance of one-sixth of the joint loan at the time the member of the co-operative takes title to his home. The arrangements give advantage of blanket loans to the co-operative, together with the full advantages of the borne ownership provision of the act to the co-operator after he has full ownership of ais house.
The other form of co-operative contemplates the co-operative principle continuing after the completion and occupancy of the lousing unit. Of necessity this must be the condition in the case of a multi-family unit. But where a multi-family unit or a group af houses maintain the co-operative principle after completion, provision is made for the additional advance comparable to that afforded to a home owner.
Under the present co-operative legislation, where the co-operative principles extend
National Housing Act
beyond completion, there is a requirement of joint and several covenants. During the past few years a number of genuine and worthy co-operatives have been unable to finance under the National Housing Act because the solicitors of the co-operators have recommended to their clients that they do not participate in a joint and several covenant. In order to meet this difficulty the legislation before the house now provides for a several covenant only. In other words, if the cooperative gets into trouble and the mortgagee must realize on his security, each co-operator is personally liable only for his share of the loss suffered by the mortgagee. Although this removes one of the main limitations of the legislation as it now exists, there is no manner in which the equity of the nondefaulting co-operator can be protected against the default of a large enough number of co-operators to occasion default and foreclosure of the mortgage. This is an unfavourable but inherent feature of co-operative ownership.
There is provision for an increase in the maximum amount of loans for home improvement and home extension purposes. The present maximum limits were established in 1944. Since then building costs have increased, and the limits are being increased by 25 per cent.
Authority is being sought so that the corporation shall have the power to deal with properties acquired by it. The present act limits such powers to housing projects. Because the corporation now manages properties such as Ajax near Oshawa and Laurentian Terrace in Ottawa, like powers are needed to deal with all classes of property.
On September 21, and again on October 28, I outlined the nature of the proposed dominion-provincial arrangements and the general reasons why enabling legislation is being sought. During the last ten years, in the construction of both war workers' and veterans' rental units, experience has shown that governmental operations in the housing field require participation by the provinces. Neither the provinces nor the dominion are happy with arrangements whereby the dominion enters directly into agreements with municipalities. It is quite true that most of the provinces passed enabling legislation to allow their municipalities to enter into such contracts. However, in my conversations with the provinces there was general agreement in principle that longterm arrangements and contracts between the dominion and the municipalities were not desirable.
The provincial governments are familiar with local conditions, and their direct participation is required to develop housing
