Will a rent-to-own program improve housing affordability in Toronto?

Mayoral candidate Jennifer Keesmaat introduced a rent-to-own program to address housing affordability in Toronto. Will it work? I feel like it might.  

I remember when Daniels had a rent-to-own program at NY2 and Cinema Tower in Toronto. I believe it was successful, so I’m already intrigued by Keesmaat’s plan.   

The City’s rent-to-own program would be financed by a property tax surtax on luxury homes, which is any home valued at $4 million or above. The surtax would be 0.4%, generating an estimated $80 million a year in revenue (based on approximately 3,000 luxury homes in Toronto).

That $80 million annually would support 10,000 families in the rent-to-own program over the next 10 years.

How it works: While renting, part of your monthly payments would go towards your down payment. At the end of your term, you would be responsible for qualifying for the mortgage and you’d purchase the home based on a fixed price.

There is also the option of shared ownership, which means you’d share ownership with the City or a non-profit housing partner to lower the price of the home to 80% of market value.

“Toronto has become the most expensive city in Canada in which to rent, and housing prices are beyond the reach of most people,” says Keesmaat in her outline of the program. “People are moving out of our city because it has become too expensive. That’s a problem we are going to address. It’s time to give people a real path to owning a place they can call home in the city they love.”

“There is an entire generation of people who are being priced out of this city,” she adds. “They are struggling with debt, have little saved for retirement, and have seen the home ownership ladder kicked out from under them. The Rent-to-Own home ownership program will help.”

She’s definitely not wrong when she says rent is getting out of control in Toronto. I came across this post yesterday about a 200 square foot unit available for rent for just over $1,400 a month. The studio unit has an open living space, a wall with kitchen appliances, and a bathroom. Looks like there’s a bathtub, so that’s good, I guess.

To be considered affordable, your monthly shelter costs must not exceed 30% of your monthly income before taxes. Even if rent was your only shelter cost (which it’s most definitely not), you’d have to make around $56,400 a year to consider this 200 square foot affordable.

Is that what Toronto has come to? Double income would make this somewhat attainable, but then there are two people living in this tiny space! Believe me, I’m all for a minimalist and efficient lifestyle when it comes to downtown living, but I feel like this price point is pushing it. Someone making a healthy salary like this should be able to afford at least a one-bedroom.

I think Keesmaat’s rent-to-own program makes sense, but I don’t feel like it will fully address the housing affordability issues we have in Toronto. She does have a plan that calls for 100,000 new affordable rental apartments to be built over the next decade, so the rent-to-own program complements this.

Since it looks like demand isn’t waning, I’m open to exploring any ideas that will help young professionals afford to call the city home.