For many Canadians, their first introduction to home co-ownership might have been through The Golden Girls – the sitcom featuring four friends, living together under one roof while respecting each other’s personal space (for the most part).
Now, home co-ownership is becoming a reality for more Canadians as house prices become increasingly out of reach for some homebuyers. The premise is simple enough – multiple people pool their money to buy a home that would otherwise be unaffordable for them individually.
The process can take a number of different forms such as unrelated people buying a home together, different generations of the same family buying a property, or an agreement where there are multiple owners but only one of them actually lives in the home.
Lesli Gaynor said she co-purchased a home with two friends when she was 25 years old, a move that helped her buy her own house several years later. She said her home purchase wouldn’t have been possible without taking that initial co-owned step onto the property ladder.
She’s such a strong believer in co-ownership that she founded GoCo Solutions, a website that educates people on co-ownership and helps facilitate such transactions.
She has seen co-ownerships increasingly gain in popularity in recent years, especially in hot housing markets like in the Greater Toronto Area where home prices are sitting at all-time highs.
“It's not just the vulnerable anymore,” said Gaynor, who has a background in social work, in an interview. “I'm getting approached now from a much wider range of people wanting to do this.
“Housing is a determinant of health. We know without secure housing and food security, and income security, people are floundering. People are not going to be able to manage the other stressors in their lives as well.”
Aside from the money factor, she said one of the biggest factors in establishing a successful co-habitation plan is finding people that align philosophically on their values and aren’t too fussed about the idea of compromise. Without these basic alignments, co-ownership will not likely be a viable solution, Gaynor added.
“You need to know that you're a person who can live in community. You need to understand that not everything is going to go your way. You need to know that there will be moments of tension, conflict and resolution, and if you aren't a human who understands this or is capable of that work, stay away from co-ownership,” she said.
“It's not for everybody. But people who are competent and capable and are interested in that as a lifestyle, then it is much more likely to be successful. It’s like living with a partner.”
It could serve co-owners well to set out house rules, schedules and a conflict resolution framework ahead of time, according to Scott Ingram, a chartered professional accountant and realtor with Toronto-based Century 21 Regal Realty.
He hasn’t completed a real estate co-ownership transaction as of yet but has discussed the notion previously with a handful of clients.
He said agreements on seemingly mundane aspects of daily life should be sorted out in these agreements. For example: Who will do the dishes and when? Will the residents take turns in taking the trash out? Does everyone have unfettered access to the backyard at all times? Which side of the garage does each person park their car on?
“You’re going to have to set out a bunch of terms with whoever you’ve partnered with on this. So, how is decision making going to happen, and the more parties involved in decision making, the more potential for conflict,” he said in a phone interview.
If a co-owner is reluctant to have a rule framework in place, it could be a red flag, Ingram said.
He gives the analogy of a marriage – no one plans on getting divorced when two people get married, but it happens – it’s better to set up the arrangement when everyone is in a good mood instead of during the height of conflict when emotions are running high.
While co-ownership allows multiple people to combine their financial power, the traditional lending system does not fully recognize these types of “fractional” transactions, and therefore financing can be more expensive.
“The traditional mortgage is one mortgage, one property, one title. So it makes it difficult for people to move out of a coalition. We are working really hard in figuring out how to make a model that will satisfy lenders, given that there's value in the whole - why can't there be value in a part?” Gaynor said.
As it stands, smaller financial institutions like DUCA Credit Union and Luminus Financial offer services for fractional home sales, but it’s still largely unrecognized by Canada’s biggest banks.
DUCA, for example, requires a 35 per cent minimum down payment and an interest rate that is significantly higher than traditional mortgages. It’s currently offering a 5-year fixed closed rate of 4.49 per cent on its website.
In an email to BNN Bloomberg, DUCA said it began offering a co-ownership financing product because it saw this as a niche market that was underserved.
Gaynor said the major offset of the pricier financing is the fact that co-owners could buy a property in a better neighbourhood or buy a bigger house than they would if each individual bought separately.
BECOMING A RESIDENT CO-OWNER
After watching the years-long “spectacle” that’s consumed the Toronto housing market, Joe Minnow said he didn’t like the idea of having all of his money tied up in a house. That’s why the 34-year-old software sales professional decided to proceed with the co-ownership route.
He used Key, a technology company that helps match condo owners with people who want to buy a piece of the home's equity and live in the suite at the same time. For the resident, they are in a co-ownership transaction without having to live with the other owners, and the original property owner gets a tenant that will, in theory, treat the property as if it were their own.
“I was trying to figure out how I could be in a position to feel safe and secure in my housing situation and not fall under the risk of kind of getting kicked out by an actual individual owner, if I were to, let's say, live in a condo in the city,” he said in a phone interview.
If it wasn’t for co-ownership, he said he probably would have continued to rent a unit.
“For me, it's a mentality of [feeling] like an owner and I know I do have an equity stake. If I choose to leave, it’s not like I’m leaving with nothing,” he said.
He also said with the contracts established between himself and the asset holder, there are clear timelines and rules set out between them.
“So I can kind of see the plan a little bit more, and it gives me the opportunity to buy [the unit outright], for example. If I want to take a bigger ownership [stake], I have the flexibility to do that as well, so it gives me a lot of options, which I like,” he said.