INAC uses First Nation housing dollars to guarantee mortages for homes
Guaranteed mortgages a good start
By JOSEPH QUESNEL, April 21, 2007
The federal government's decision to guarantee mortgages for aboriginals living on reserves is quite significant, but it is only one step towards full empowerment.
Real change will come through changes to the Indian Act and attitudes surrounding First Nations private property rights.
The initiative will see $300 million earmarked for aboriginal housing go towards an independent fund. Indian Affairs Minister Jim Prentice said this money will be used to leverage up to seven times that amount from banks. This will free up $2 billion for natives wanting mortgages. If a native borrower defaults, the banks will be paid from the fund and the government can then go after the defaulter, so this is not a money-losing scheme.
Banks, under the Indian Act, cannot enforce defaulted loans on First Nations. Bands own land, not individuals. As a result, band members cannot get mortgages.
This decision will ensure that individual home ownership increases on reserves, a move Prentice correctly points out will improve aboriginal communities. "This will allow people on reserves to build up their own equity and be able to draw on a mortgage to start a business," he said.
"I'm under no illusions that this is an answer to all the social housing needs of all First Nation communities, but clearly we are trying to empower First Nation citizens to have the same access to education and job opportunities as other Canadians."
I would gladly take this bold move over the Kelowna Accord any day. That agreement was about dumping more money into a problem that required systemic change. More reserve housing is not the solution because it is owned by band council. Individual home ownership provides much more of an incentive for responsible stewardship (i.e., if a home belongs to you, you take better care of it).
While I am very pleased, I hope it is the start of a gradual opening of aboriginal communities to private property rights. For that, legislative changes to the Indian Act are needed. Of course, this is easier said than done with any issue. Under the Chretien government, there were positive steps with the First Nations Governance Act, but these stopped when Martin listened to aboriginal vested interests more than band members.
Aboriginals must be convinced that private ownership is central to self-government, as private ownership will bring taxes to communities dependent on government transfers. This will allow natives to create their own wealth.
The most important dragon to be slain is the "romantic" mythology that aboriginal societies have always been collectively-minded and have no history of private property. Even natives have been misled. In Self-Determination: The Other Path for Native Americans, a group of scholars dispels this myth by demonstrating that aboriginal individuals used land enclosures and accepted personal rights over many things before colonization. It was the colonial Indian Act which imposed collective tenure. Metis communities have always enjoyed fee simple property rights.
While natives lacked central land registries and the degree of individual rights varied across tribes, this myth needs to be re-examined as it misdirects public policy.
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Ottawa to guarantee native mortgages - $300-million plan
John Ivison, National Post, April 20, 2007
OTTAWA - The Conservative government will today reveal details of a plan that will enable Aboriginal Canadians living on reserves to buy their own homes for the first time in what Jim Prentice, the Indian Affairs Minister, asserts is "one of the most important structural changes in a generation."
At the moment, banks are reluctant to lend to First Nations individuals because the Indian Act prevents them from launching enforcement proceedings in event of default. Individual bands own the land on reserves and Section 86 of the Act was inserted to prevent banks from taking over Indian land piecemeal. However, it has meant that home ownership is all but nonexistent on reserves.
The new initiative will take $300-million earmarked for Aboriginal housing in last month's budget and create a "default fund" administered by a board of independent trustees.
Mr. Prentice said the money will be used to leverage up to seven times that amount from banks that have signed up for the initiative. This will free up as much as $2-billion for First Nations borrowers who want to take out mortgages. If a borrower defaults on the loan, the banks will be repaid from the default fund and the government will in turn seek payment from First Nations that sign up for the program.
The scheme is being tested in a pilot project at the Kamloops Indian Band in British Columbia and Mr. Prentice said he is confident there will be demand in Aboriginal communities.
Kamloops band members could not be reached to discuss the trial.
The new plan is evidence of Mr. Prentice's alternative to the $5-billion Kelowna Accord signed by former prime minister Paul Martin, the provinces and a number of Aboriginal groups shortly before the 2006 election.
It envisaged spending hundreds of millions of dollars on new housing to address the growing shortage of between 20,000 to 35,000 units.
Mr. Prentice said this would simply "pour more money in the top of the funnel" in the form of fiscal transfers from the federal government.
The Indian Affairs Minister has made a number of structural reforms, such as moves to grant matrimonial property rights to women on reserves, that he believes are necessary as pre-conditions for true First Nations self-government.
"This will allow people on reserves to build up their own equity and be able to draw on a mortgage to start a business. I'm under no illusions that this is an answer to all the social housing needs of all First Nations communities.
"But clearly we are trying to empower First Nations citizens to have the same access to education and job opportunities as other Canadians," he said in an interview yesterday.
"The ultimate goal is to have strong, self-governing First Nation communities."
Mr. Prentice said Aboriginal communities have to build their own tax base to pay for services. "The capacity to raise your own money is part of self-government. Part of the challenge we face today is that there are many First Nation communities that receive a disproportionate amount of their finances as direct transfers from the government of Canada.
Over time, these communities will have to emerge as communities with property ownership, where people pay taxes or collect rents to contribute to the cost of running their communities," he said.
"My observation from what I've seen over the years is that those communities who are poorest are those communities that depend on government for transfers.
"We cannot eradicate poverty amongst Aboriginal people simply by transferring dollars from the federal treasury. We have to empower individuals to create wealth in their communities. This, for all of us as Canadians, is a core thing."