Home ownership.
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Developer's Simple Idea Could End Housing Woes

August 6, 2003

John Barber
The Globe & Mail

If developer Mike Labbé were a better salesman, he wouldn't bury the most compelling slide in the presentation he is working up to market his latest brainwave - a fund that will invest in Toronto's still hot housing market.

It's the one that shows how much the buildings he has already built have appreciated in value, in every case smartly outperforming the average increase in residential real estate in Toronto. Mr. Labbé not only buries the best evidence of his past success way down in the PowerPoint pile, he has doctored it to exclude his most successful project to date, a condominium building on Lawrence Avenue West. The new Shermount is appreciating in value so quickly, he said, it would look "ridiculous" on the graph.

Instead of dwelling on his successful track record as a developer, Mr. Labbé focuses on another slide with a message that's closer to his heart. It's the one that shows there are 5,000 children living in homeless shelters in Toronto. Doing something about that - not making money - is the real purpose of his new fund.

"The goal here is to solve the housing problem," Mr. Labbé said yesterday in his Queen Street East office. "I'm bound and determined to do that and this is an excellent way of getting there."

This entrepreneur is not just touting another real-estate scheme on Bay Street; more importantly, he's planting the seeds of what he confidently expects will become a social revolution.

The revolution is already apparent in buildings such as the Shermount, where people of modest means have been able to buy two-bedroom, 800-square-foot apartments for $1,140 a month in all - almost exactly what it costs to rent similar accommodation in Toronto. No other builder in Toronto, with or without government aid, has been able to make housing so affordable.

According to the traditional government programs currently being implemented, a new rental building would need subsidies of $50,000 a unit - amounting to $21-million for a building the size of the Shermount - to achieve the same level of affordability.

However, the Shermount would never qualify because its residents are owners, not tenants. And instead of government largesse, the benefited from low-cost marketing, basic design and highly attractive financing from Mr. Labbé's non-profit company, Options for Homes.

Another key difference between Mr. Labbé's projects and their subsidized equivalents (which currently exist more in theory than fact) is that every time his customers make their mortgage payments, they contribute directly to a Home Ownership Alternatives, a fund that uses the money to build more affordable housing on the same model in new locations.

Unwilling to change and "undermine" his successful system by
accepting government grants, Mr. Labbé is counting on corporate Canada to provide the additional capital Home Ownership Alternatives needs to make a real difference - in effect to build Shermount's across the country.

The idea, he said, was inspired by an Ursuline nun and fleshed out with the help of Dino Chiesa, a former housing bureaucrat who is now president of Resreit, one of the largest real-estate income trusts in Canada.

The fund is structured to give investors a guaranteed 3-per-cent return over a period of 10 years, plus a prorated share of any appreciation in a project's property values. At the same time they will be contributing directly to the rapid construction of some of the most truly affordable housing in Canada - not just units but new homes that people buy. And if they want to accept a lower return, their money can be used to help families with commensurately lower incomes.

"Investors will have to care about housing, because this doesn't have any history to it," Mr. Labbé allowed. But for investors with a smidgeon of social conscience, the fund should prove irresistible. He figures even governments will see the light eventually.

"All we're saying is, 'Give us a loan and we'll repay you on an agreed-upon basis,' "Mr. Labbé said. And, in the meantime, you will help fundamentally to improve the ability of working people to own their own homes.

"Who's going to be the first through the door?" Mr. Labbé wondered. "That's the big challenge."

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