Making Housing Affordable
Jim Taylor — August 31, 2010
As a spin off from another post on this blog, I put the following on my blog this morning. It will require some adjustment to how we presently do things, but is quite workable if there is the will.
The will would have to come from the grass roots level as the current ‘lords’ have no intention of changing anything.
Sweat Equity + 0% Mortgages + 0 Taxes
= Affordable Housing
The recent meltdown of the world financial systems will not be explained or understood by this humble fellow. In fact after listening to and observing all those ‘not-so humble’ fellows explaining what is going on, I have concluded that they don’t know either. The other conclusion, is that regardless of the positive talk coming from some leaders about how good the Canadian economy is, if the other shoe drops in the USA and we do get a ‘double dip’ recession, things might not be as rosy as we would like to think.
In the meantime, back on point. The housing craziness which ripped through Canada and the US in recent times is no doubt a serious component in the recent fiasco that is still shaking things up. Housing prices simply were outrageous, driven by human greed and fueled by a herd mentality and facilitated by a banking system also consumed with greed.
Making Housing Affordable
When my father and my wife’s father were young men with young families, they rolled up their sleeves and actually built their homes with their own hands! Neither were carpenters by trade and both relied on the help of skilled people for some parts of their construction. However, for the most part, they cut the lumber and drove the nails to create their own homes. They also did this , I might say while holding down full time jobs by working in the evening ( no four hours in front of the telly ) and on weekends.
“But they were different back then” you might say, and you would be right, however there is no reason that today’s generation could not be equipped with the same skills if our educators valued those skills as highly as inputting data into a computer or any number of other jobs which don’t really need doing.
So, the first step in providing affordable housing is equipping people with skills which would allow them to roll up their sleeves, get dirty and tired and sore and actually contribute something to their home except the promise to make mortgage payments. Getting this current generation off the couch and away from their video games, pc’s or cellphones long enough to break a sweat is a challenge for someone else, I am just offering a valid answer to the cost of housing.
Zero % Mortgages
Now before you say it can’t be done you need to understand something about where the money comes from the bank puts out at 5-7% which gives you the privilege of being their slave for 30 or 40 years.
When they issue a mortgage for $200,000 at 6% for 35 years, they do not take the money from the savings accounts of their customers, whom they are paying nearly 0% interest. No sir, they have the right to issue the money to cover the mortgage with the stroke of a pen. So in effect they get to collect all that interest from YOU on money which was never theirs in the first place. How in the world can the banks not be making money? Of course they are, just take a look at some of those executive bonuses sometime, but take a Valium first.
Applying 0% to a mortgage of $250,000.00 if repaid over a 30 year term would mean a monthly mortgage payment of $695.00, now compare that with the $1500.00 the same mortgage would cost with 6.5% interest amortized over 35 years.
These figures are not precise but are close enough for a good comparison of the difference in funds that would be left in YOUR pocket if the bank did not charge you interest for money which does not exist.
Foreclosures would be a thing of the past as clearly keeping up a $695 house payment is far easier than paying $1500 for the same house. You simply have removed the money the banks suck out of your pocket over the 30 years or so. Ever wonder why they are called ‘MORT’ gages? Mort refers to death, which is how long you can expect to be paying the lenders under the current system.
All that extra money you have to spend should have a tremendous spin off on the rest of the economy as you would be able to spread your extra money around instead of stuffing bank coffers every month.
Zero Taxes On Housing
Of course I am not talking about municipal taxes which are required for roads, water, sewer and the like, I am talking about ALL taxes that are levied on ANYTHING associated with the construction of residential housing … period!
That means NO PST, NO GST, NO HST and NO BST either. Anything associated with the construction of providing shelter in the form of residential housing would be tax exempt from the get go. The number of dollars that are built into and hidden in the final cost of housing in the present form is beyond my ability to calculate, however I am sure it is considerable.
Think Outside The Box
That is a common expression bandied about these days and certainly would have to be applied before the above suggestions will ever see the light of day in the real world.
It would require some real political will to shake up the current banking system, change the way people view manual labour and force governments to give up some of their appetite for more and more taxes.
It would however put ‘affordable’ housing well within the reach of most healthy people with average intelligence who are willing to roll up their sleeves, get off the couch and do something for themselves instead of relying on someone else.
It would also take massive amounts of YOUR money out of the hands of the banks and move it into the general economy where it should create all sorts of jobs for everyone, doing something actually productive.
Before becoming reality it will also take a HUGE paradigm shift on the part of Canadian society, which as near as I can tell would be a good thing. It would also have to start at the grass roots level as neither our politicians or banks or big business want to upset the status quo.