Adam Gant is attempting to create a new narrative for affordable housing solutions in Canada, notably through the concept of “shared equity,” which he vividly explores in his novel, A House Shared. We recently sat down with Adam Gant to discuss his vision, his book, and his groundbreaking approach to real estate.
Q: A new report shows that in Vancouver, the average income rose 34 percent over the past 30 years, while the average home price increased 142 percent. What makes you believe you have the solution to such a huge housing affordability problem?
Adam Gant: You hit on an important word there, and that’s belief. For so many Canadians, it’s hard to believe that we can get back to a place where the average citizen is able to purchase a home and pay off a mortgage. The income growth vs home value growth is way out of proportion, but I would qualify that by saying that the average household size has also decreased from 2.6 to 2.4, which would adjust the average household income up by 7.7% due to the reduced size of the family. However, it can still seem hopeless to many because it’s just gotten worse and worse throughout most people’s lifetimes. But we have to look to situations where, in only one or two generations, whole systems and societies have transformed for the better through implementing a few simple changes, or solutions.
Years ago, I set out to find possible solutions to this crisis by traveling around the world and observing different models of homeownership. I analyzed global markets and identified key elements that could be adapted to our markets in Canada and North America. The solution that I most strongly connected to was the concept of “shared equity” being practiced in Singapore. Here’s a country that set out to achieve nearly universal homeownership, and in just two or three decades, their homeownership rate is above 90%. Their Housing Development Board developed a system where the home buyer did not have to re-pay all the financing out of their own pocket – the home itself, and its appreciation in value, covered some of the financing costs. They kept monthly payments at affordable levels and reduced down payments to manageable amounts. The concept of sharing in the value growth with homeowners and funding patient capital has, I believe, the potential to create a revolution in homeownership for Canadians.
Q: I’m inspired by your optimism, but I’m one of those who has only seen things get worse. How do you see this model being implemented?
ADAM GANT: In Canada, we have the Canadian Mortgage and Housing Corporation which provides the lion’s share of the nation’s mortgage and securitized loan portfolio guarantees. Right now, the bar is so high to get approved for a CMHC-insured mortgage, and it’s only getting higher every year. But the CMHC is incredibly profitable from the insurance premiums and application fees it collects – they’re paying $400 million in taxes back to the government each year. They can afford to take on more risk, especially when it comes to providing its citizens with a home. We’re losing young people from our major cities, and we’re losing citizens to other countries, because they can’t afford to put down roots here. We clearly need a new model for our country to remain viable and stable, and for our citizens to feel pride in their nation. You feel a lot more patriotism when you own a piece of land or a home, right? I think we can implement a new cost/risk model that would allow people to start with a smaller down payment, commit to lower monthly payments, and access equity substitutes, similar to REITs for commercial real estate, which would offset the more risky levels of debt.
Q: Can you explain why you chose to explain this concept through a novel, in A House Shared?
Adam Gant: I know these concepts are complicated to understand. I’ve dedicated my life to them and much of it is still Greek to me. So my co-author Patricia Nicholson and I set out to illustrate what it would look like in story form, in a real-life situation with relatable characters. We wanted to show how people would be more incentivized to care for a home, and by extension, their communities and their fellow citizens, by having an ownership stake in their homes. Our characters could enter the market with a 1% down payment, without needing to qualify for a mortgage initially. They paid a manageable monthly amount, and they shared in the property’s equity growth. Right now we’re a nation of renters, of middle-income families who can’t build equity in a home, and we wanted to illustrate the power that equity accumulation can have on the psyches of people who feel there’s no path to homeownership for them.
Q: Can you tell me a little bit about the story?
ADAM GANT: Without spoiling too much, A House Shared depicts a family who’s about to lose their home. They come across a way to possibly maintain an ownership stake through the shared equity model, which reenergizes them and gives them a path to stability and security. We see their emotional struggles, the toil that financial pressures and ever-rising prices and interest rates can have on a family. But ultimately it’s a story of human resilience, which we hope can be transformed into the resilience of a nation and a housing market that’s under the same kinds of pressures. When you combine emotional storytelling with economic theory, I think you can explain a concept and deliver a message more effectively.