I’m turning 40-years-old this year.
And I’m having a baby literally any day now.
Am I getting old? Am I just stressed-out? Or have I always been as cynical as I find myself to be today?
Maybe I’m in a period of self-reflection right now, but I honestly don’t know if I’m a rational, logical, honest individual, or if I’m bitter and pessimistic. The examination of today’s topic is a prime example.
Under the “Ontario Housing Supply Action Plan,” the Ontario government released a guide to Co-Owning a home, and I think it’s the most insane idea ever hatched by this government. And there’s a long list from which to choose…
Call me a cynic, or call me an old-man, or even call me a pessimist, but I’m sorry; the idea of five 20-somethings pooling their money to buy a house and live problem-free is a pipe-dream, and one that I would expect from a politician. Ordinarily, I might not care, except in this case, I feel as though the taxpayers will be picking up the tab when all these arrangements fall into disarray.
When I was at McMaster University from 1998 to 2002, I lived alone. Even in first-year, when living in a dorm was apparently the best way to make friends, meet girls, party like a rock star, and live the campus lifestyle, I still shunned the idea of sleeping in a 10 x 12 cell with a person I’d never met before. Then in years 2 through 4, I continued to live in a 1-bedroom apartment off campus, and watch all of my friends complain incessantly about their roommates.
My brother and his “best friend” roomed together in first-year university, and upon the conclusion of that last semester, they never spoke again.
Two of my best buddies lived together in fourth-year, and things got so bad that one of them moved out before the year was even over. It affected their relationship for years to come.
We were all young, however. And maturity comes with age.
But two nights ago, when a client told me that three of his 25-year-old friends were pooling their money to buy a house together, I just shook my head.
“I got as far away from that idea as I could,” my client told me.
Maybe I was the loser who lived alone at university, and maybe I’m the 39-year-old going on 79-years-old as we speak, but I can’t help but think that “co-buying” is a great idea in theory, but a miserable one in practice.
Unless the government believes that the legal profession desperately needs help, and is attempting to create more work in the areas of contract and partnership agreements, dispute resolution, mediation, arbitration, and litigation, then I have no idea why the government put out this ridiculous guide.
It’s 14-pages long, read the whole thing – trust me you’ll want to:
This guide is extremely rudimentary, which I believe underscores the exact reason why most people are ill-prepared to co-own! If you know nothing about co-ownership, and need a 14-page PDF to explain how you and a group of people can split the payment of property taxes, then you are far, far from ready to co-own!
Let’s take a look at some of the highlights, shall we?
Co-ownership housing expands the options available to individuals and families and provides a range of benefits, including:
■ affordability: people can pool resources to buy a house, making home ownership more affordable. It also provides a way to build equity and the security that comes with owning your home
■ access to more neighbourhoods: people have more housing location options within their budget (for example, residential communities with predominantly single detached homes)
■ more efficient use of housing stock: smaller households can maximize the space available in larger houses and heritage properties by co-owning them with others
■ community: enables groups of people to voluntarily create a community environment with facilities, indoor and outdoor common spaces and services that meet their needs
I don’t disagree with any of this, but that’s not the point.
The “benefits” are obvious, but with a high potential failure rate, and risks that greatly outweigh the rewards, why tease people with the benefits?
How about an example of who Co-Buying would work for?
Example 2: Access to homeownership
A group of young adults buy a house in a community of single detached homes. By pooling their resources, they can make a 20% down payment on the house allowing them to avoid mortgage insurance. The co-owners contributed different amounts towards the purchase price, so the percentage of the house each owns varies. This co-ownership arrangement will allow each person to build equity and eventually buy houses of their own. If major renovations are made to the house, the costs will be split based on the percentage of ownership. Ongoing operating costs are shared equally, as are basic responsibilities for the care and upkeep of the house.
And this is the photo that accompanied the example:
They look like nice people.
The guy with the blonde mohawk, tuning out the other four as he looks at a photo of his friend’s lunch on Instagram is probably well aware of a “shotgun clause” and how it works, and I’m sure he has the money to buy out the other four owners when a dispute arises.
What could go wrong?
More than half of this guide is teaching people what this arrangement actually is, which as I mentioned above, is problematic.
The last four pages are dedicated to explaining all of the responsibilities, liabilities, and dare I say – potential pitfalls.
I won’t reprint everything in the guide (but again, I do encourage you to read the whole thing), so here are the titles and headings of each section:
Develop A Legal Contract
- Ownership structure and decision-making process
- Use of the property
- Financial and insurance arrangements
- Home operation and upkeep
- Co-owner negligence or misconduct
- Dispute resolution
- Entry/exit provisions
Buy Or Sell A Home
- Get professional services
Finance A Co-Ownership
- Sharing costs
- Joint and several liability
- Corporate ownership
Home Operation And Upkeep
- Ongoing house costs
- Contributing to a bank account
- Ontario Human Rights Code
- Building Code
- Building permits
- Zoning by-laws
- Adding a second unit
- Shared living spaces
These are merely the headlines, folks.
There’s fourteen pages of this stuff, and it makes my eyes bleed just thinking about just how many people are ill-equipped to deal with owning a house with multiple other parties.
Pick ANY one of the bullet points above, and we’ll play a game called, “How could this go wrong?”
The biggest issue will be when to sell the property, no doubt.
What if one person wants out after a year? Does the house get sold? Can the four other owners buy out this one individual? Do they have the means legally, ie. was this thought of in advance? Do they have the means financially, ie. the money to do so, or the ability to get financing?
What if, after five years, one owner wants to buy out the other four? Is there a shotgun clause?
What if one owner wants to build a laneway house, and the other four don’t?
How many times per week does the cleaning lady come, if at all?
Can one of the owners grow weed, since it’s legal now?
Can Hailey watch Hunter’s TV?
Can Hunter have his friends over every night?
What happens when Hunter doesn’t do the dishes?
Jesus, this is like university all over again. Thank god I lived alone…
Imagine five co-owners trying to decide which real estate agent to use when it comes time to sell?
Imagine Bryce’s reaction when Willow starts dating Harper, wow!
And what happens when Willow breaks up with Harper, and then goes back to Bryce?
Get a goddam camera in that house, folks. Because this is like an MTV show, just with higher stakes.
My favourite point from the bullet-list is the “Ontario Human Rights Code.” If that’s not inviting Big Brother into your home, I don’t know what is.
Imagine watching TV in the privacy of your own home; maybe you’re watching hockey and you comment on the amount of elegance and grace that one player took during his dive to the ice. Or maybe you’re watching a movie with a female you fancy, and you make a comment on her level of attractiveness and what you might like to do with her. What if one of your co-ownership partners feels threatened because of your “toxic masculinity” and files a complaint? This is front-cover stuff for the Toronto Star…
There’s just so much that can go wrong here, I honestly have no idea why the Ontario government put this guide together.
Except, that, well, I do.
I do know why they put this guide together, and the reason is worse than the guide itself: they have no other options.
In my mind, improving the deficit left behind by the imbalance of supply and demand has much easier solutions than telling a bunch of people to buy a house together, and then pretending like half of those situations won’t end in litigation.
The Ontario government’s first mistake was trumpeting their “Ontario Housing Supply Action Plan,” since that title ignores demand altogether.
To merely focus on supply, and ignore demand, is irresponsible. Although to be fair to the Ontario government, the federal government have far greater power to address demand, and we do have two different political parties in office.
If you want to decrease demand, and not ruffle the feathers of any Canadians, then finally address foreign ownership and money laundering. I have come to realize over the past two years that money laundering does exist in real estate. I’ve seen it close up. I listed a house last year and watched the buyers massively overpay, and while I’d like to suggest that it was my negotiation skills that got them up in price, I know it was because the price wasn’t as important as the 120-day closing they needed to have the money in Canada. And before you tell me I should have “done something about this,” keep in mind, I was on the sell-side. My duties are to the seller. Without hard evidence, and just an educated guess, what am I going to do?
Besides, it wasn’t until I watched the house sit empty for eight months that I really began to think about the money. After all, it did come from the Middle East.
It’s not my job to sort this out. And while you know I’m not in favour of big government, if we really want to look after our citizens, then this is where the government ought to be spending their time.
As for foreign buyers, I’m tired of seeing the CMHC and other wings of government publish guides with made-up statistics about foreign ownership. I see the names on the listings. I see the buyers at the sales centre. Foreign money is pouring into our country every single day.
The mortgage stress test might have been designed to impact the amount of demand in the real estate market, but it only did so for foot-on-the-ground Canadians. Those buying in cash from the other side of the world weren’t affected.
And what of the supply side?
If China can build a hospital in seven days to address the Coronavirus, maybe we can do a little better job in fast-tracking the building of condominiums?
There’s so much red-tape at all three levels of government, and while I recognize that we, as a society, have accepted this because it creates tens of thousands of jobs, maybe a few less hoops to jump through to build desperately-needed housing is a good thing?
The government needs to re-think existing zoning by-laws, and allow for hyper-density in the downtown core.
If we’re not building on the Greenbelt, then we need to build a hell of a lot more densely downtown.
When it comes to infrastructure, we’re decades behind. You want to increase my property taxes? No problem. Just promise me that money will be spent on subways.
This is the subway map in Tokyo:
Tokyo is also one of the cleanest cities in the world. Go figure.
I’ve been to Tokyo. I’ve riden those trains. You can get anywhere by public transit.
I haven’t been on public transit in a decade, and I probably won’t use it any time soon. But I would gladly pay more in taxes to build subways so this city doesn’t fall apart.
There are so many things that our three levels of government can do to decrease the demand for housing, increase the supply of housing, and allow for easier transportation to and from work for those that live further away, that I wonder why the hell they’ve put out a 14-page guide on how to put yourself into a situation that will end in failure.
Who thinks of this sh!t?
Somebody at Queen’s Park really, truly thought that this was the answer! This is it! This is how we’ll solve the housing crisis!
And then in three years, when domestic disturbance and litigation is through the roof, it will be up to the Liberals to sort out.
These are not the faces of individuals “resolving disputes,” as the Co-Ownership guide would have us believe:
I already know that three or four real estate agents are going to ask me why I wrote this today.
“Why would you talk yourself out of potential business?”
“Why would you crap on an idea that will get more buyers into the market?”
I’m no con-artist. I’m no schill. I’m a proud Canadian, Ontarian, and Torontonian, and the housing market is a mess.
Stupid ideas like this one aren’t going to help anybody, so I’m calling it what it is.
Maybe I’m also a bit groggy and upset from that damn colonoscopy on Thursday. Perhaps when the drugs wear off, I’ll realize that this was just a weird dream too…Back To Top Back To Comments