Co-ownership gains traction as house prices keep rising

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Pooling resources and purchasing a home with others may not be new, but as prices continue to grow out of reach and people seek community over siloed apartment dwellings, realtors say it is becoming more popular.

Long-time friends Debra Faulk and Marilyn Foreman had talked about the idea for years, even though they owned properties separately, and in different cities. But when Ms. Faulk, who is retired and works part-time as a Unitarian Universalist minister, decided to sell off her Calgary house in the spring and relocate to the Victoria region where Ms. Foreman lives, they made it happen. Ms. Foreman’s sister Barbara, another long-time friend of Ms. Faulk’s, joined them. But when they saw the high cost of a house that would give them enough space, they set about finding a fourth party to buy in.

Their realtor, who specializes in facilitating co-ownership arrangements, put them in touch with the younger Heather Nugent. Ms. Nugent is a 38-year-old speech language pathologist who was accustomed to communal living and was looking for co-buyers.

A month ago, they moved into an approximate 3,200-square-foot house that cost $1.3-million, and Ms. Nugent lives in the one-bedroom basement suite. On the two upstairs floors the other three women have their own living quarters with separate bathrooms, and the kitchen is shared. The plan is to get chickens and plant their own vegetable gardens.

“I could never imagine myself living in a $1-million-plus house, and it’s not even a crazy [sized] house,” Ms. Foreman said in a group video call from their Saanich home, which backs onto a park.

“The sale of my house in Calgary would not even get me a condo here,” added Ms. Faulk, who contributed the biggest down payment from the sale of her house, and as a result, pays a smaller monthly mortgage payment.

Each of them own a percentage of the property based on the share they paid upfront. They entered into a co-ownership agreement that outlines potential what-if scenarios that arise in sharing the house, including conflict and mediation, the possibility someone dies, or if someone wants to sell early, or bring in a roommate or partner. After five years, they have the option to sell the house or update the terms and enter into another agreement.

Ms. Nugent is a first-time buyer who’d previously been renting. She’s only known her three boomer-age co-purchasers since July, and says she trusted her gut when she entered into a shared mortgage with them. Today she’s paying about the equivalent of her old rent, but now she’s building equity in a house. Statistically, Ms. Nugent is part of a sizable demographic: according to a recent release from Statistics Canada, 15.3 per cent of first-time home buyers in B.C. purchased properties in groups of three or more.

“I realized rent is about as much as I can afford, and I am never going to be able to buy anything. It was a depressing experience for a long time ... And all of a sudden I was able to think about buying a house and not live in a condo.”

As well, the process of buying a home was far less daunting as part of a group, she adds. And although people are often scared of sharing a mortgage with people they don’t know well, Ms. Nugent argues that because they did such careful due diligence, she thinks it’s not any riskier than going into ownership with a partner.

“I’ve had partners in the past who weren’t good with money and I would be more concerned in that scenario than I am in this scenario,” Ms. Nugent says. “The fact we have a legal agreement where we have already discussed some of the more important things that may happen, and how those may be dealt with, gives me some confidence.”

Realtor Noam Dolgin, an advocate of co-ownership, says smart buyers should indeed be wary when entering into a co-ownership arrangement. Like any business partnership, it requires due diligence. But when entered into properly, he says the benefits outweigh the negatives. Mr. Dolgin started the Collaborative Home Ownership and Development Initiative (COHO) and helped connect Ms. Nugent with the Victoria group, through Victoria realtor David Hale.

“It’s an interesting story, that these women watched themselves get priced out of the market, and they realized they needed [another buyer] to do what they wanted.

“They were able to up their budget by 30 or 40 per cent, and get into the single-family-house market they couldn’t on their own.”

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He’s done other co-ownership agreements, but strangers purchasing together through matchmaking sites such as his own is a newer route to home ownership – particularly in high-priced markets such as Vancouver and Toronto. In Toronto, there’s GoCoSolutions.

Mr. Dolgin says the pandemic accelerated the movement.

“There is definitely more interest since the pandemic started. It’s hard for me to judge, because the movement is growing in general,” Mr. Dolgin says. “There is no question there was a surge of interest around that time because of a couple of factors. Housing became key, community became key, and at the same time, prices went through the roof again, so affordability became a question.

“You can get more space through shared resources, you can afford more as the market goes up around you and you get more for your money.”

Mr. Hale had been advocating for co-ownership as a way to help millennials get into the market, and had started the Shared Home Ownership website four years ago. When the pandemic struck, his plan to stay south for a year was thwarted when the border closed. He and his wife had already rented out their three-level townhouse, so they had no choice but to park their motorhome on a friend’s acreage and camp out for a year to save costs. Because the first months of the pandemic brought the market to a halt, Mr. Hale had to put his mortgage on hold and collect the Canada Emergency Response Benefit (CERB).

They then decided to sell off the top two floors of their townhouse to a young family and keep the legal basement suite, which they rent out for $1,200 a month.

“We refinanced the property and so we were able to pull some money out. We were able to keep the downstairs part, which we have as a rental, plus we were able to invest a bunch of money into great dividend-producing investments. Yeah, so basically our expenses are pretty close to zero every month. And so it put us into a positive cash flow position.”

It’s enabled the part-time realtor to get off CERB and net around $8,000 a month after expenses. They spent the past three and a half months travelling across Canada in their motorhome and are planning to store it and spend the winter in Mexico.

The deal enabled the young family to get into the market and almost triple their square footage, says Mr. Hale, who sold their condo for them.

And for the Hales, who are in their mid-60s, it enabled them to tap into their equity without chipping away at it, as they would with a reverse mortgage.

“We’re all on the same mortgage. We’re all on title. They are on title for two-thirds, we are on title for one third,” Mr. Hale says. “The market has gone up around 25 per cent in the last year, so everybody is in a good position.”

Because financing can be tricky for group ownership, he would like to see the Canada Mortgage and Housing Corporation get behind the idea, as well as lenders, who could loosen up rules. There’s also a public-image problem because it’s unconventional.

“This model is just in its infancy, I think,” he says. “It takes awhile to educate people.

“We are still dealing with this stigma of shared housing in some aspect.”

Ms. Faulk said her brother, a businessman, was against the idea of her throwing her nest egg into co-ownership, but after seeing their legal agreement, she says he’s come around.

Ms. Nugent says she’s never been one to live a traditional life, so she’s used to polarized reactions, although her 30-something friends are showing interest now, too.

“That’s a leap – if you can get over your family and friends telling you that you are crazy.”

Ms. Foreman likens the concept to carshare.

“For my generation of baby boomers, it was all about fierce independence and ‘I will live on my own, I don’t need anybody,’ and I love the shift, to ‘let’s live collaboratively and take all the gifts we each bring to the table and share them.’ I’m inspired by that.”

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