[belsarius]

Originally Posted by opendoor

This program has little in common with either of those. Those plans just gave homebuyers a bigger loan to buy anything on the market, effectively introducing more money into the system without encouraging any construction.

The NDP plan is to finance specific developments/units of affordable housing. Based on declining housing starts, there is latent labor and capital supply to construct housing, so this program will use that to produce new units.

Basically, here's my understanding of how it works; imagine a 100-unit development that costs $100M to build (including builders' profits) with the following breakdown:

$10M land
$15M pre-construction
$60M construction
$15M builders' profits

Currently, the builder needs to be confident that they can sell enough units to make it viable, but there's only so much demand for $1M units. So unless they sell out pre-sales, construction doesn't go ahead, housing starts drop, and existing supply becomes more squeezed, raising prices.

So the government comes in and provides the land and $30M for pre-construction and construction costs. So now the builder has had much of the risk removed, and they just need to be able to sell $1M units for $600K to make it all viable, which shouldn't be a tall order. So the end result is, 100 units that wouldn't otherwise exist get built.

Now I doubt it'll be a strict 1:1 ratio where it simply adds 5,000 housing starts a year, but it'll definitely inflate them without introducing a whole lot of cost or risk to taxpayers.

These are the details that was lacking and now totally makes this whole concept make a lot more sense.