Need for affordable housing growing in city
By Lethbridge Herald on August 8, 2023.
A rental sign marks a listing Tuesday afternoon on the city’s northside. Lethbridge Housing Authority CAO Robin James says the current rise in interest rates will put more strain on the rental market.
Herald photo by Steffanie CostiganSteffanie Costigan – LETHBRIDGE HERALD – Local Journalism Initiative Reporter
Increased prices for groceries and the national housing crisis are factors that have increased the demand for low-cost housing in Lethbridge, according to the Lethbridge Housing Authority.
“What we’re seeing is, and what I’m scared that we’ll see, is more of an increase of demand on our housing and on our rent supplements, said LHA chief administrative officer Robin James on Tuesday.
“Interest rates continue to rise, the cost of groceries, and as all of those things continue to rise, we’ll see more and more families not being able to qualify for those stress tests for their mortgages,” said James.
With the rise in interest rates more people will enter the rental market which James said will put more strain on that market.
This will affect people of low income now that people who previously would have passed the mortgage stress test before interest rates increased are staying in the rental market.
James said some people now “can’t pass those stress tests due to rising interest rate costs.”
Lethbridge Housing Authority currently has approximately 650 individuals and families on their waitlist for affordable housing.
“At this point, we definitely need to be building more affordable housing. But we need to make sure that we’re also taking into consideration when we do affordable housing the people that qualify for it have to have income under a certain threshold. And that income level needs to be updated,” James added.
“Because we’re seeing you need to make significantly more money now just to buy groceries, significantly more money to pay rent in our city or to buy a vehicle or, with the carbon tax costs going up to heat your home and that sort of thing. So we need income thresholds to rise so that more individuals can be eligible for affordable housing, and we can build more affordable housing to help that need of people.”
James explained within the city of Lethbridge there are 676 units with rent geared towards tenants’ and client’s income.
When income fluctuates this influences the cost of rent which fluctuates, as well.
LHA has community housing units for which rent is based on 30 per cent of a household’s total gross monthly income. rent includes heat and water. Income limits range from $40,500 for a bachelor unit to $86,000 for a four plus bedroom unit.
Its 200 affordable housing units are rented at 10-20 per cent below current market rental rates.
James voiced concerns with home owners now needing to pass a stress test rate three to four times more than previously, and she says the worst has yet to come.
To qualify for a mortgage, Canadians need to pass this stress test which will prove they can afford payments at a qualifying interest rate that is typically higher than the actual of a mortgage contract, says the Government of Canada. Credit unions and other lenders which aren’t federally regulated don’t need to use the stress test. Banks must use the higher interest rate of 5.25 per cent or the rate a person negotiates with a lender plus two per cent.
According to wowa.ca, the lowest stress test rate on Tuesday for insured mortgages with a downpayment of less than 20 per cent is 7.14 per cent. The lowest stress test rate for uninsured mortgages with a down payment less than 20 per cent is 7.19 per cent.
“So all of a sudden you need to pass a stress test at an interest rate that can be up to, you know, three or four times what it was when you initially qualified. I don’t think we’ve seen the worst of it yet,” said James.
James fears that people will face a financial crunch when they have to renew their mortgages at high rates.
“I think the biggest thing will be, though, I think we’re going to start seeing crunches is when people are trying to renegotiate mortgages, I think you’re going to see more and more people not being able to pass those stress tests,” shared James.
“I think as time progresses, if interest rates continue at this height, and as people’s mortgages come up for renewal, I think we’ll see more strain” and need for affordable housing in our city and throughout the country, she added.
There is also a rent supplement program which is intended to help households in need obtain affordable and suitable rental units by subsidizing rent in the private sector.
James said there is some good news for the market, however with the province working towards combating the housing crisis by providing funding in Alberta for affordable housing.
“There is some capital money the province is putting some significant capital money . . .and our rent supplement got an increase this last year of a million dollars as well,” she said.
“The provincial government has come to the table in a fairly significant way for our city. The government is providing $68 million for innovative and sustainable affordable housing solutions for low-income Albertans.”
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All f which begs the question…who is supposed to pay for all this “affordable” housing? The feds/prov/city all pass the buck and leap on funding one from the other saying ” no cost to taxpayers” yet it is the taxpayers who write the cheques to all these levels of gov’t.
Investors won’t build w/o grants, landlords wont put rentals on the market if rent controls are a factor and those fortunate enough to own a home face the same high costs of food, uutilities , mortgages, insurance ete etc and many are at risk of losing their homes due to these costs. The idea of paying more to let others into the market is laudible but falls flat when you are one paycheck away from default yourself.
The harsh realities of life dictate that just as I cannot afford to live in Vancouver or Toronto some folks may not be able to afford to live in Lethbridge and should perhaps be looking to our smaller neighbours to set down roots.