By KERRY McCUAIG

—A

It's called a quit claim and 8,130

- families who bought a home under the

e

federal government’s Assisted Home

Ownership Program (AHOP) have made
use of its provisions in the past year.

It means you turn in your keys and
walk away from your home of the past
five years. In return your credit rating
doesn’t suffer, you lose your downpay-
ment but if you can prove hardship you
et have to repay your government

In 1974 the federal government intro-

duced AHOP where it subsidized early

mortgage payments on the premise that
annual pay increases would take care of
the later higher mortgage charges and

_ also permit repayment of the thousands

eee... Cle ab

of dollars in subsidies.

In 1974 for many young couples it was
a dream come true. By 1980 it had turned
into a nightmare.

The program was administered by real
estate agents, anxious to cash in on the
seller's market, some never bothered to
tell their perspective buyers that they
had to repay the government subsidy —
until after they signed.

Shrinking Incomes

- Inthe meantime instead of having their
incomes rise, families watched them
shrink during three years of wage con-
trols while inflation galloped. When
mortgage interest rates climbed from
11% in July 1979 to a record high of 18%
this April there was no possibility of
meeting the renegotiated payments
which had jumped up to 40%, and begin
repayment on government loans of
$3,000 to $5,000.

Packing up and leaving was the only
option. But the toll had already been
taken in shattered dreams, broken mar-
riages, health effects and emotional prob-
lems with the children.

Ed and Rose Eaton bought their home
on a quiet Cambridge street shortly after
they married five years ago. “I had a
steady job and Rose really wanted a
fouse because we were expecting
Shannon’, explained the -26-year-old
chemical worker. “‘AHOP seemed the
answer.”

“‘We haven’t taken a vacation in five
years. I bet I can count on two hands the
number of weekends I haven’t worked
overtime. I put in the rec room, a new
bathroom and landscaped this place by
myself. :

“We paid $46,900 for it. It’s been up
for sale now since the middle of March
and the agent says we’ ll be lucky if we get
$35,000.”

Rose is furious that they’ ve built up no
collateral over the period. All their pay-
ments have gone in interest By last year
their principal was reduced by only $234.

“T hate it’’, she says in tears. ““We
went to a meeting at city hall last week
and some guy gets up and tells us that if
we bought our place under AHOP we
shouldn’t be complaining because we
knew we were going to have to repay the
loan. Five years ago we could afford it.

. How were we to know food, gas, cloth-
_ ing, everything was going to go up so

much? I haven’t enrolled Shannon in
kindergarten because I don’t know what
school she’ll be going to. We wanted to
have another baby, but we can forget
that, just like everything else.”

_ Turned to Ghost Towns

_ Hardest hit by the rocketing rates are
the newer developments, the con-
dominiums and townhouses that sprang
up to meet: the demands of AHOP
buyers. Today many are ghost towns. In
Kennedy Green, Brantford, Ontario, 120
“owners of the 161 units have been forced

out. Homes that sold for $46,500 five.
' years ago are now going for $40,000,

undercutting other owners on the
market:
In Mississauga, a residential com-

munity outside Toronto, over 800 own-

Winnipeg homeowners picket conference attended by Bank of Canada governor Gerald
Bouey demanding a roll back in mortgage interest rates. An estimated 35,000 Canadian
families were forced out of their homes during the first three months following the rate

climb which began in July 1979.

Dream turns
to nightmare

ers recently faced representatives from
the three political parties in the legisla-
ture demanding answers.

Reg Holmes bought his two-bedroom
condominium for $41,000 in 1975. It was
recently assessed at $30,000. If he re-
negotiates his loan at 15% he figures he’ ll
pay $300,000 by the time his 25-year
mortgage is paid off.

‘These companies are no better than -

loan sharks,”’ he charged. ‘‘They’re
making huge profits at homeowners’ ex-
pense.

Holmes wasn’t satisfied by the Liber-
als’ proposal to subsidize higher interest
rates. ‘We've already had a taste of how
that works’’, he angrily replied. ‘‘It will
only take money out of the hands of all
taxpayers and put it in the hands of the
money lenders. Canada’s policy should
be homes and families first; money len-
ders next.”

No Relief from Gov’t.

But that’s obviously not what
governments had in mind. Both Ontario
and Ottawa have brought down new
budgets in the past month and neither

touched on increasing interest rates.

Federal finance minister Alan Mac-
Eachen announced in mid-April that the
government would institute a one-year
$300,000 scheme to help ‘‘hardship
cases’’. But it will apply only to those
homeowners whose payments exceed
30% of their total income, about 7,000 to
10,000 families. Others ‘‘should be able
to carry on.”’ ;

In Ontario, treasurer Frank Miller
said his government will table a discus-
sion paper on the subject sometime in
May.. But warned that the government
had to guard against falling for the idea
that the problem was as bad as people
say it is. ;

But it’s not just homeowners who are
complaining; builders warn that the dis-
astrously high mortgage rates threaten to
shut down Canada’s $15-billion housing
industry.

Canada Mortgage and Housing Corpo-
ration went into the red in 1979 for the
first time in 35 years because of the
enormous number of foreclosures and
defaults on loans and guaranteed mort-
gages. The corporation took back over

Insurance companies are pushing
up their mortgage insurance rates to
cover the record number of defaults
on home mortgage payments, they
say.

Two of the three firms insuring
Canadian money lenders have raised
their premiums 25% for most bor-

be ‘‘high risks”’. :

A person who takes out a mort-
gage loan of $50,000 will now pay a
premium of $625 or 1.25% compared
to the $500 or 1% before the rates
went up. :

Defaults push up insurance rates

rowers and 50% for those deemed to.

The premium is added to the loan
and paid off as part of the mortgage
interest rates which have been stead-
ily rising. .

The rate jump will apply to those
who pay less than 10% down, who
refinance their mortgage to pay off
debts, buyers of ‘‘second class’’ run
down or isolated property, con-
dominiums buyers and those who
buy property for rental.

Obviously insurance companies
didn’t want to be left out of the wind-
fall takes being made off the current
housing crisis.

35,000 homes in the first three nionths
following the rate climb last July.

And no new housing is being built.
Normally hundreds of applications for
private and rental housing under the
going mortgage rates would have been
received by this time of year, says the
CMHC Toronto office, but to date it
hasn't received a single application.

In Ontario 78,000 homes were built in
1977 when interest rates were slightly
over 10%, in 1979 they had dropped to
57,000 with the biggest decline coming
after July. :

Housing Starts Plummet

Housing starts for the entire country
aren’t likely to exceed 155,000 units this
year, that’s 40,000 fewer than last year.
It’s the worst steady decline since the
Great Depression. And if the industry is
knocked flat, forcing small builders out
and causing an exodus of skilled work-
ers, it will drive the cost of housing soar-
ing through shortages if the market ever
does recover. -

The effect all this is having on the gen-
eral economy is catastrophic. The drop
in housing starts will translate into a loss
of 30,000 man years of employment in
the housing industry and 20,000 lost man
years in related industries this year.

Unemployment has hovered around
the million mark for the past four years,
the jump in interest rates has pushed it to
50% among building trades workers in
some major centres. The impact of this
loss of employment will be felt in every
community across the country.

Freezing current mortgage rates alone
isn’t the answer either. Even the recent
small reductions aren't sufficient. Real
danger is afoot unless the rates drop
quickly to 12% in the very near future,
economists warn, and that’s unlikely.
The Communist Party is calling for rates
of no more than 8%.

What’s Happening

- Why is this happening? The United
States is in the depths ofits worst depres-
sion since the 30s. It’s still feeling the
inflationary effects of the Vietnam War
that is being further, fueled by a current
yearly arms budget of $161.77-billion. To
“‘tackle’’ inflation the administration is
curbing the spending and borrowing
power of working people by allowing in-
terest rates to rise to 20%. (When Mr.
Holmes of Mississauga talks about loan
sharking he isn’t far off the bat. Some
U.S. states had to alter their loan shark-
ing laws to accommodate the rising
rates.) ;

Bank of Canada chairman Gerald
Bouey says he followed suit by having
Canadian interest rates trail those in the
U.S. to stem the flow of Canadian
investment south where returns would
be higher.

The Canadian economy which is so
highly integrated and dominated by the
U.S. is being victimized by their sky-
rocketing inflation and unemployment.
The crisis in auto is a graphic example.

The Canadian government also has a
hand in creating its own inflation. Our
current $4.2-billion annual arms budget.
will rise 3% a year on top of inflation as
part of our commitment to the U.S. led
North Atlantic Treaty Organization.

And the banks and mortgage com-
panies hiding behind a facade of inno-
cence haven't been able to explain why
their after-tax profits hit all time highs in
the first quarter of the year.

Our only solution is to wrest our
economy out of foreign hands and pursue
an independent economic policy to
utilize the country’s considerable wealth
for all Canadians. This must go hand in
hand with an independent foreign policy
which would free up the billions slated
for the arms budget.

Immediately however working people
must unite to force governments to enact
legislation to prevent evictions and roll
back interest rates.

These would be the first steps in a
comprehensive housing policy which
would take the profit out of a social
necessity and turn it into a public utility.

PACIFIC TRIBUNE—MAY 16, 1980—Page 9