Intent of the Home Equity Assistance (SCONDVA Report)

Standing Committee on National Defence and Veteranís Affairs
(SCONDVA) 1998- Chapter III The Housing Crisis

1. In subject Standing Committee, the need to assist relocating military members ìIf real
estate values in their region are on a downward trend when a posting comes, they may have to
sell their homes at a lossî. The Home Equity Assistance Plan was implemented as a result. The
SCONDVA studies made several conclusions that are extremely relevant to this application:

a. ìMost public servants do not have to move and deal with the vagaries of the real
estate markets as often as military personnel do, so the special requirements of
the latter must be taken into considerationî;

b. ìIt should be sufficient to demonstrate that the local real estate market is
depressed rather than trying to determine as well if the price of homes has
dropped by 10% or notî;

c. ìMilitary personnel who own their homes instead of renting accommodations on
or off military bases also face many problems. Like other Canadian homeowners,
they have to deal with the needs of growing families, the long-term financial
implications of ownership, and the complexities of the real estate market.
However, unlike most Canadians, they also have to move more frequently, have
to sell and buy homes more often, and, not by choice, have to contend with
significant differences in housing prices from one region to another. If real estate
values in their region are on a downward trend when a posting comes, they may
have to sell their homes at a loss. If they move to an area where homes are much
more expensive, they may only be able to afford less expensive and smaller
homes than the one sold at the previous location. Some may even abandon their
dream of homeownership because they lost too much money on the sale of their
home at the old location.î

d. ìThe quality of life of individuals is improved because homeownership remains a
viable option to them despite their frequent moves and because with good
financial planning, they will own a home when they retire from the military.
Some measures are already in place to help homeowners and some improvements
can help make them more effective.î
e. ìThe Home Equity Assistance Program (HEAP) was established to help
homeowners who have to leave an area when the real estate market is depressed.
Ö. To be eligible, homeowners have to demonstrate that the home prices in the
area have declined by 10% or more between the time of purchase and the time of
sale. This is not always easy to do because of conflicting information and other
factors. Delays in determining eligibility for assistance has also been a problem
and revised application procedures were introduced in 1996 to deal with this.
However, given the number of complaints we heard, the way eligibility is
determined still creates problems.î

f. ìSome people suffered significant financial losses when they sold their homes in
a depressed real estate market, but could not get assistance because the price of
houses in their area dropped by only 8 or 9% or because of the way the adjusted
purchase price was determined. Losing assistance because of one or two
percentages is of course disappointing, but it is even more difficult to accept if
people do not have confidence that their eligibility is determined fairly. Some
questions were raised about the way appraisals are carried out to determine the
adjusted purchase price. Two appraisals of a home are usually carried out, but the
Department sometimes orders a third appraisal when there is a significant
difference in the first two. While the way appraisals are carried out should be
reviewed, other factors in determining eligibility also need attention.î

g. ìIt should be sufficient to demonstrate that the local real estate market is
depressed rather than trying to determine as well if the price of homes has
dropped by 10% or not. In short, procedures should be simplified and the 10%
rule should be abandoned. We therefore recommend: 36. That the Home Equity
Assistance Program be revised, notably by eliminating the 10% rule, to ensure
that homeowners have access to fair and equitable assistance when, because of a
new posting, they have to sell their home while the local real estate market is
depressed.î