HeadStart on a Home (HeadStart) is a major economic program announced by the Government of Saskatchewan in 2011 to increase the availability of entry-level housing across the province of Saskatchewan. The objective of the program is to increase the available supply of entry-level homes by a minimum of 1,500 new homes in the first five years of the program by financing the construction of entry-level homes in Saskatchewan.
Due to the prosperity and growth of the province, growing population, and increased immigration to Saskatchewan, many companies and Municipalities have expressed a need for more entry-level housing to help accommodate this growth and attract workers.
As a result, the Government of Saskatchewan has conducted independent reports on the housing supply, and held stakeholder meetings that confirmed the need for the Program. Generally, Municipalities view housing as a priority and an urgent need. The issue of housing was confirmed by the remarks at the SUMA Conference in February 2011. The increase in the province’s population has made the availability of entry-level homes a priority to help those looking to exit the rental market and purchase a home.
On March 28, 2011, the Honourable June Draude, Minister of Social Services, announced the Saskatchewan Advantage Housing Plan, a suite of programs to increase the availability of affordable housing in the province. HeadStart on a Home was one of these programs. The design of the program has been completed through public consultation with stakeholders across the province.
Through the Saskatchewan Immigrant Investor Fund Inc. (SIIF), the Government of Saskatchewan has committed federal funding of over $200 million to this program. Funding repayment will begin after the first five years. SIIF is a subsidiary of Crown Investments Corporation. The government will not administer the Program or select Municipalities or projects to which the funds will be allocated.
- Fixed rate of 4%
- Minimum 10% equity requirement
- No pre-sales required
- Target price at or below the average MLS sale price in community
- Minimum 75% of homes must be owner-occupied, with the balance made available for rental purposes
- The Program will provide secured loans to finance the construction cost of entry‐level housing units for sale in communities across Saskatchewan
- No upfront pre‐sale of housing units will be required from Developers/Builders
- Loans to Developers/Builders will be subject to an annual 4% fixed rate of interest
- There will be a 10% minimum equity requirement
- New entry-level housing units will have a target sale price at or below the MLS average sale price for that municipality in which the construction project is located, currently expected to be in the range of $180,000 ‐ $300,000
‘Entry-level’ is defined as homes included in the gap between social/affordable housing and market priced housing.
HeadStart provides secured loans to finance the construction cost of entry-level homes across Saskatchewan, offering an attractive loan program for Developers/Builders. The 10% equity requirement allows Developers/Builders to leverage their available equity capital to build more units then what they would be able to if the builder was subject to the traditional equity requirement. The reduction in pre‐sales will reduce upfront costs and delays in construction, keeping the new homes more affordable. Allowing up to 25% of the project to be sold for rental purposes provides flexibility necessary for projects to meet housing needs in high-growth communities with a need for multi-purpose projects.
As the Program has matured over the first two years of activity, the need for multi-purpose projects in some communities was identified. While HeadStart on a Home was initially intended to only finance the construction of owner-occupied units, in October 2013, the Government of Saskatchewan broadened the lending parameters and expanded the owner-occupied clause to allow developers to construct projects with a minimum of 75% owner-occupied units, thereby allowing rental units to be included in the project as well. This change will also apply to previously approved HeadStart on a Home projects.
Expanding HeadStart to include multi-purpose projects will allow more entry-level homes to be constructed in a timely manner, as well as increase HeadStart’s impact in high growth communities with low vacancy rates and the need for both rental and owner-occupied housing. The expansion of the mandate also means that HeadStart has increased its initial goal of constructing 1,000 units over the Program’s first fiveyears to a new goal of 1,500 units by the end of 2016, including units sold to investors.
All Municipalities in the province are eligible to apply in support of construction financing loans to proven Builders and Developers.
The funding comes from the Federal Government’s Federal Immigrant Investment Program over the first five years of the program and must be repaid to the Federal Government five years after it is received, during years 6-10 of the program. The Provincial Government has established the Saskatchewan Immigrant Investor Fund Inc. (SIIF) to receive and administer the federal funding.
Westcap Mgt. Ltd. is Saskatchewan‘s venture capital and private equity Fund Manager, specializing in the development, launch, and fund management of niche funds that address capital funding gaps in Saskatchewan. Westcap’s history and experience in delivering new funds and programs such as Golden Opportunities Fund Inc. throughout Saskatchewan, working with immigrant investment funds, and specialized investment acumen is important to the success of the program.
The Government of Saskatchewan held a request for proposal deliver the HeadStart on a Home Program, providing the loans to Developers and Builders. Westcap was awarded the agreement to manage the business affairs of the Program.
Westcap submitted its RFP to the Government of Saskatchewan in strategic partnership with participating Credit Unions including Affinity, Conexus, Innovation, Cornerstone, Synergy, and Spectra.
Westcap and HeadStart’s participating Credit Union ‘Community Champions’ have formed a strategic partnership to deliver this major economic program throughout all of Saskatchewan, engaging Municipalities, and Builders and Developers. Collectively working together these two Saskatchewan financial institutions will ensure the success of the Program and impact thousands of new home owners.
The number of participating Credit Unions has since grown, and a current list is available at headstartonahome.ca
HeadStart’s Credit Union ‘Community Champions’ have committed up to $10 million to offer down payment loans for purchasers, called the HeadStart Equity Builder ProgramTM:
Loans are available for up to 5% of the purchase price
Repayable over 5 years
Attractive rate of Credit Union prime
Applicant must qualify under individual Credit Union guidelines
Applicant must intend to occupy the home
The HeadStart Equity Builder ProgramTM is a major commitment by Saskatchewan’s leading Credit Unions, of up to $10 million, toward down payment assistance for purchasers of new homes constructed by the HeadStart on a Home Program.
The Credit Unions will provide loans for down payment assistance to a maximum of 5% of the purchase price of a HeadStart Home. The loan is repayable over 5 years at the floating interest rate at Credit Union prime. This program has been approved by mortgage insurers CMHC (Canada Mortgage and Housing Corporation) and Genworth under their non-traditional down payment guidelines.
Why is this program important?
This program is complementary to and enhances the objectives of the HeadStart on a Home Program because it allows entry-level home purchasers to access down payment funding to move into home ownership. The ability to provide a down payment is the most significant barrier to home ownership for those currently in the rental market. This flexible program fills gaps left by other down payment assistance programs.
Who is eligible to apply?
Any purchaser of a home constructed under the HeadStart on a Home Program will be eligible to apply for a down payment loan through the HeadStart Equity Builder ProgramTM. HeadStart homes can be owner-occupied or up to 25% of units can be for the purpose of rental. Applicants must also qualify under individual Credit Union guidelines.
If the credit union is not providing the purchaser’s principle mortgage, are we still able to offer a down payment loan through the HeadStart Equity Builder ProgramTM?
No, down payment assistance through the HeadStart Equity Builder ProgramTM is only available if the Credit Union is providing the purchaser’s principle mortgage as well.
Do other institutions have access to the HeadStart Equity Builder ProgramTM?
The HeadStart Equity Builder ProgramTM is only available through HeadStart’s Credit Union partners.
What if the purchaser decides to sell their HeadStart home after purchase?
We are not able to force a person to live somewhere. Each purchaser will sign a declaration which states that he/she is purchasing the unit as their primary residence, and that he/she will be the first occupant of the unit following its substantial completion.
When the HeadStart home is eventually sold by the original purchaser, the new purchaser will not be eligible for the HeadStart Equity Builder ProgramTM.
Do any application fees apply?
No, there is no application fee for the down payment assistance loan. However, applicants will be responsible for the cost associated with second mortgage or caveat registration.
Municipalities must apply to the Program in support/cooperation with the potential Builder and Developer seeking financing for a new development that will expand the entry level housing units in the community or Municipality. They can contact Westcap, the fund manager, directly or contact the local participating Credit Union who will discuss the project and eligibility before referring the project to Westcap.
Municipalities must apply for the loans on behalf of Builders and Developers as the primary beneficiary of increased entry‐level housing, but the construction loan will be with the Builder or Developer. One of the assessment criteria will be the level of engagement by the Municipality to make the project a success. Developers/Builders and Municipalities are encouraged to work together to develop creative and flexible plans that involve municipal support, and adaptive financial arrangements.
The following is a list of the basic assessment criteria on which each project will be evaluated:
- Capacity of Developer/Builder – previous projects completed, financial condition of the developer, etc.
- Overall feasibility of the project – site plan, project description, overview cost of development, proposed sales pricing, sales strategy, etc.
- Municipality engagement – the support, involvement and incentive provided by the local Municipality
- Sales strategy – Developers/Builders must provide a sales plan
- Needs analysis – identify how the project is meeting a gap in the entry-level housing market
HeadStart is designed to be a catalyst for entry-level housing construction. As such, the lending parameters are less restrictive than typical traditional lenders in order to encourage Developers/Builders to allocate increased resources and capital to the entry-level home market. Traditional lenders would not typically fund under these terms.
No, this is a made-in-Saskatchewan solution to increase the availability of entry-level housing and there is no other Program similar to this in Canada.
Are there specific requirements for who will be eligible to buy HeadStart homes, e.g. income level restrictions?
No, homes constructed under the HeadStart Program are available for purchase by anyone seeking entry level housing options.
In its budget released Tuesday February 11, 2014, the Federal Government announced the termination of the Federal Immigrant Investor Program (“FIIP”) which is the source of capital for the Saskatchewan Immigrant Investor Program and ultimately, HeadStart on a Home. HeadStart on a Home will continue to operate as it has sufficient capital on hand, and its model provides for regular return of capital to HeadStart as homes are constructed and sold. The only anticipated implication of the Budget announcement is a reduction in the Program’s lifespan, from 10 years (which consisted of 5 years of capitalization and returning these funds to the FIIP over the subsequent 5 years) to 8 years (the past 3 years of capitalization and returning these funds to the Federal Government over the next 5 years).