...Part 1 -- A Recipe for Poverty

...Part 2 -- A Step Towards Better Native Housing

...Part 3 -- Wrapping Native Land in Red Tape

...Part 4 -- Let Natives Choose

Millions of Canadians take the right to buy and sell their own home for
granted. Yet on Canada's reserves, where land is held communally,
aboriginals have been systematically denied this fundamental economic right
for generations. In this second installment of her four-part series, Tanis
Fiss explains the benefits of Certificates of Possession,
a mechanism some reserves have adopted in response to Canada's obsolete
native land-use policy.

Pride of ownership provides a powerful motivation for individuals to
improve their property. It explains why homeowners are willing to spend
their weekends fixing their houses and mowing their lawns. The reason they
do so is because the property is theirs and theirs alone. They own it in
"fee simple" - that is to say, outright. As the well-known expression goes,
no one ever paid money to wash a rented car.

As a visit to a typical Canadian reserve reveals, such pride of ownership
is absent in many native communities. Housing is dilapidated, and there is
little evidence that occupants care much about their properties.

Needless to say, this is not a reflection of aboriginals themselves, but
rather an indictment of our government's native policy: Federal law does not
permit those who live on Indian reserves to own their homes in fee simple.
Since they cannot sell their houses to recover their investments, residents
have no economic incentive to spend money on improvements. For the same
reason, there is no reason for housing developers and other entrepreneurs to
create new building stock for private buyers.

This explains why a 2003 federal Auditor General (AG) report found there was
a shortage of 8,500 houses on Canada's Indian reserves - despite the fact
the federal government spent $3.8-billion over the past decade on native
housing.

As things currently operate, the Department of Indian Affairs and the Canada
Mortgage and Housing Corporation (CMHC) transfer federal housing money
directly to native band councils. From there, it is up to the chief and
council to determine who gets a new house or repairs. As one would expect in
any system in which material benefits are dolled out by unaccountable
leaders, bald-faced favouritism is common. In many cases, reserve residents
complain, one must be connected to the band council in some way in order to
obtain new or improved housing.

Even well-intentioned native leaders have difficulty fulfilling their
oversight responsibilities. For instance, band councils are supposed to
ensure that any new housing meets National Building Code standards. But
bands often have no way to ensure new housing meets these codes, which helps
explain the high percentage of substandard housing.

The average non-native homeowner can walk away from a housing purchase if
the dwelling is poorly constructed: In a free market, he has a thousand
other homes from which to choose. But on reserves, residents have no choice:
Like the citizens of some bygone communist regime, they must take what
their political masters give them, whether its falling apart or not.

Because fee-simple ownership of reserve land is forbidden, systems of what
may be called "quasi-ownership" have emerged. One such system, customary
rights, was discussed in yesterday's column (along with its various flaws).
Another more promising alternative is the allotment of "Certificates of
Possession" (COP). When a band issues a COP, the landholder is deemed to
have an interest in the property he inhabits. This interest may then be used
to apply for mortgage financing, which, as noted yesterday, is otherwise
unavailable to reserve residents.

In return for a loan, a holder of a COP transfers his certificate back to
the issuing band as collateral. The band then enters into an agreement with
CMHC by which it pledges to assume the mortgage in the event of a default.
Since COP holders can be dispossessed if they do not meet their repayment
schedule, they will generally be motivated to comply with the terms of their
loan. Once the mortgage is paid off, the certificate is transferred back to
the individual.

Certificates of Possession are a stronger and more valuable form of property
rights than customary or hereditary ownership: Canadian courts will enforce
the rights and obligations associated with COPs, whereas they typically will
not in the case of customary rights. And since land held under a COP can be
subdivided, left to an heir or sold to another person having a right to
reside on that reserve, certificate holders tend to assume the mindset and
habits of a true property owner.

Many native bands across Canada have been motivated to issue Certificates of
Possession because they are a means to bring more funding to the reserve.
Moreover, the economic value that inheres to COPs provides an enticement for
younger band members to stay on-reserve. In some parts of Canada, internal
real estate markets powered by COPs are thriving. The Six Nations Band in
Ontario, for instance, has issued over 10,000 COPs.

In sum, Certificates of Possession are win-win-win: Bands are able to secure
more income; residents become eligible for mortgage financing; and Canadian
taxpayers are relived of some of the burden associated with the constant
replenishment of native housing stock. One can only hope that more of
Canada's reserves follow the example of the Six Nations band.