Home equity Allowance http://mgerc-ceegm.gc.ca/documents/perspectives-201105-eng.pdf
“In the last year, the Board has reviewed four grievances from Canadian Forces (CF) members who had suffered very significant financial losses when they were posted and sold their residences for much less than they had paid to acquire them. The grievors had all applied for relief under the Home Equity Allowance (HEA) program. In the three cases completed to date, the Board was critical of the program but, as explained further below, could only recommend relief in one case which, according to the Board, met the eligibility criteria for HEA in a “depressed market.” The Chief of the Defence Staff (CDS), as Final Authority (FA), recognized the damage done to
the grievors but had to acknowledge that his authority in providing redress was limited by the policy.
The number of grievances may seem insignificant, but three factors combine to make HEA worthy of examination and comment. The first is the severity of the losses suffered by the grievors; the second is the inability of the CF to provide relief; and the third is the prospect of further similar grievances due to the current trends in the real estate market.HEA is part of an overall relocation policy intended to move CF members efficiently and with minimum disruption but at a reasonable cost to the public. This allowance has been in place for well over ten years, although its governing parameters and process changed significantly with the introduction of the CF Integrated Relocation Program (CFIRP). The present HEA program provides compensation to a CF member who suffers a loss on the sale of a residence. In most cases,
the maximum compensation is $15,000, unless the Treasury Board Secretariat (TBS) makes a determination that the sale occurred in a “depressed market” – a
designation for a “community” in which the housing market has dropped more than 20% since purchase.
Where such a designation is made, the member may be compensated for 100% of the loss.Significantly, the key numbers – $15,000 maximum compensation and 20% drop in a given housing market to make it “depressed” – have not changed in ten years. Over the same period, average house prices in Canada have more than doubled. This means that the potential loss suffered by a CF member before the “depressed market” designation is engaged has significantly increased. Further, Treasury
Board (TB) apparently takes the position that “community” means a broad metropolitan area as a whole, not a smaller area which may be subject to significant local influences on market prices.As a result, and as noted by the CDS in one recent decision, CF members are exposed to a “potentially devastating financial loss.” This is certainly borne out by the fact situations presented to the Board, involving losses ranging from $30,000 up to $73,000 after the payment of the maximum compensation under the existing program. In these cases, postings, often unforeseen but driven by “the exigencies of the service” have caused catastrophic financial
consequences for CF families.
Three factors combine to make the Home Equity Allowance worthy of examination and comment.
The first is the severity of the losses suffered by the grievors; the second is the inability of the Canadian Forces to provide relief; and the third is the prospect
of further similar grievances due to the current trends in the real estate market
It also appears to the Board that some HEA claims may not have been addressed in a helpful or proper way by the CF authority responsible to administer the policy. While the CF has no power to change the HEA program, it is required under the CFIRP to forward individual submissions for the “depressed market” designation to TBS. In a case where the grievor had provided evidence of a market depression of 30%, the Board noted that his claim for extended HEA and the resulting grievance have been denied without sending a TB submission forward. This decision is said to be based on an email notification provided by a staff officer at TB in May 2009 to the effect that there are no “depressed markets” in Canada.
It was later explained to the Board that the matter had not been pursued “given other more pressing priorities and TBS conviction that there simply isn’t
a big enough problem to justify a submission for a policy change.”In the view of the Board, that is just not good enough. In its latest findings and recommendations
on this issue, the Board noted:According to the Canadian Real Estate Association, the national average resale home value in Canada was $342,662 in June 2010 (p.197). Under these circumstances, a 19 percent drop in the market would result in a loss of $65,105.78, which would only be reimbursed up to $15,000 under the current policy. For these reasons, [the Board] finds that HEA under the CFIRP is not reasonable or modern and does not achieve the aim of relocating members with a minimum detrimental effect, and therefore, remedial action should be taken in regard to this issue.The Board was pleased to see that the CDS agreed.
In two cases where the CDS could not provide relief, he nonetheless directed a review of the HEA policy with TB with a view to minimizing the negative effect on CF members. In the one “depressed market” case referred to above, the CDS directed that a TB submission be prepared as required by the CFIRP.
The Board has recommended, and the Chief of the Defence Staff has agreed, that the Canadian Forces work with Treasury Board to revise the Canadian Forces Integrated Relocation Program such that members are relocated at a reasonable cost to the public without a detrimental impact on their financial well-being.
In summation, the devastating impact of this type of loss on the family is best described by the spouse of a grievor in a letter to the CDS:
You work your whole life to save for your family and relocation from your employer puts you into a bankruptcy position, destroys all savings and puts you into great debt. Why do we have to lose so much because of a posting?
It must also be said that, in each of the cases the Board has reviewed to date, the CF member had acted prudently in a difficult situation, buying a modest home for the area to which he or she was posted. Being posted wherever and whenever the CF needs one’s service is accepted as a requirement of a military career. On the other side of the bargain, CF families, while accepting that they must be moved at a reasonable cost to the public, rightfully expect no detrimental impact on their financial well-being. The Board has recommended (and the CDS has agreed) that the CF work with TBS to revise the CFIRP such that it accomplishes both goals and better supports CF families”.
Currently, Major Brauer is fundraising to resolve this injustice and needs help with your fundraining.