There seems to be some fairly strong evidence that the price of an average home is higher than what the average person can afford. However, this isn’t the case around Toronto, Canada if you’re buying a home from Options for Homes, a nonprofit that’s already built 1500 attainably-priced homes for people with household salaries as low as $32,000… without government subsidy.
How are they doing it?
Lowering the cost of land – Options for Homes may spend $10,000 per unit on land otherwise costing $30,000 to $50,000 by working with public interest-minded land owners that are willing to provide a one-and-a-half year options on the land (ie no obligations to pay for one and a half years).
Lowering the cost of construction – Parking is unbundled and sold apart from units for $25,000 to $30,000. Buyers are allowed to choose less expensive appliances. Units have more repetitive floor plans, which as a homeowner, doesn’t matter so much on the inside as on the outside (ie cookie cutter subdivisions). Community amenities are kept to a minimum, which is fine if the homes are already located in a natural cultural district filled with such amenities around the block.
Innovative financing – All buyers pay only 13% down. Rather than sell a home for 26% above cost at a price qualified by a bank (say $260,000 for a $200,000 cost), Option for Homes sells them for 13% ($30,000) above cost and provides the buyer with a loan for the other 13% ($30,000), which can is recognized by the bank as a down payment. If the home’s value falls below the qualifying value ($260,000), the difference is matched in a forgiving of the loan, up to $30,000.
Crowdsourcing – Rather than spending $10,000 to $20,000 in sales and marketing costs per unit, Options for Homes spends less than $2000 by crowdsourcing it to people in the buying community. A pre-buyer (aka beta community) meeting will attract 100 people, of which typically a third put a $100 deposit down, a third of which eventually buy a home.
Read more in this Canadian article, Homes that Cost Less than Rental