Liberals say they'll bring in a rent-to-own program. But what will it do for Toronto's housing crisis?

On Tuesday, Liberal leader Justin Trudeau unveiled a multi-billion-dollar housing strategy to help Canadians buy a home at a time when the market is sky high. The plan includes measures to curb the practice of "flipping" homes, the banning of so-called "blind bidding" and a promise to double the first-time homebuyers tax credit.

Part of the plan is to introduce a government-funded rent-to-own program to help renters get on the path to home ownership. The party is promising $1 billion in loans and grants to develop rent-to-own projects with partners from the private, not-for-profit and co-op sectors.

If that sounds familiar to Torontonians — that's because it is.

In 2018, former mayoral candidate Jennifer Keesmaat proposed a similar program for the city.

While some are praising the proposal as a positive initiative that helps renters who are struggling with a down payment, others say it caters to a niche group of constituents, and that housing supply is what all parties need to focus on to make cities like Toronto more affordable.

How it works

"I was actually really pleased when I heard the [Liberals'] announcement," said Keesmaat, a former businesswoman and chief planner for the City of Toronto.

"Because I think what we're beginning to see in this campaign is housing solutions that actually respond to the magnitude of the challenge that we're faced with."

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The magnitude of the challenge Keesmaat is speaking about is enormous. The average price for all home types combined in the Greater Toronto Area as of last month is $1,062,256 — up 12.6 per cent compared to July 2020, according to the latest report from the Toronto Regional Real Estate Board.

At the centre of Keesmaat's 2018 campaign for mayor of Toronto was a municipally run rent-to-own program that involved the city dedicating a certain number of new units. The proposal would have allowed renters to apply to pay monthly instalments that would go toward their down payment on the property at a price set at the start of the agreement.

The funds to support the program would have been generated by a proposed tax on luxury homes.

"Part of why this policy matters is because it's about recognizing that we all have different housing needs and we also have different housing needs at different stages of our lives. And we need lots of options within that entire housing spectrum " said Keesmat.

Keesmat is now the founder of Markee developments — which designs, builds, and runs affordable rental housing — and says she would welcome the opportunity to work with the federal government on a rent-to-own program. But she acknowledges that plan alone won't help address the affordability crisis.

"It means nothing if it isn't tied to a really profound supply initiative that's about driving housing supply."

Real solutions

Other experts agree with Keesmaat that housing supply is what all federal parties should be focusing on when it comes to addressing affordability.

"Given that we have a housing crisis across Canada, we need to think millions of new homes at affordable prices. That would make a dent in bringing housing prices in line with people's incomes," said Murtaza Haider, professor of real estate management and data science at Toronto's Ryerson University.

While Haider says ideas like rent-to-own programs do open up the market for a small group of people, he believes governments need to think bigger. 

"It's much better to have some relief than not. But we have to take much bolder, much bigger, much larger programs to be able to have housing prices and rents much in step with people's incomes."

Others question whether that $1 billion would be better spent on measures to help lower-income individuals or families who can't even get access to affordable rental housing.

"It's really rental housing that's the big problem. That's where the government should focus its effort," said Frank Clayton, senior research fellow at the Centre for Urban Research and Land Development at Ryerson University. 

Clayton said he worries initiatives like a federally run rent-to-own program might increase demand, which would drive up real estate prices if there's no parallel effort to build more housing.

"The focus should be on supply, not demand, because demand will just aggravate what's already happening. And that makes things worse."

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The plan laid out by the Liberal Party of Canada doesn't spell out whether the loans and grants under the proposed program would go to the landlord or to the tenant, or whether the majority of the $1 billion pledged would go to big cities like Toronto or Vancouver where housing prices have continued to soar.

 It also doesn't say how it would work with municipalities — who are responsible for the approval of development projects — to ensure rent-to-own projects would actually be built, or how it would encourage current landlords to take part in it. 

In response to questions from CBC Toronto, the Liberal Party of Canada said: "There are a variety of existing rent-to-own models and the financial structure of each can vary, as will federal support."

The party added that it is "confident that by partnering with municipalities and providing substantial federal funding, we will be able to incentivize the building of new rent-to-own units across the country."

Where the other parties stand

So far, the Liberals are the only party formally pledging a rent-to-own program, but when it comes to supply they're pledging to "build, preserve or repair 1.4 million homes in the next four years" by giving cities tools to speed up construction. The party is also promising to create a $4-billion pool of cash that cities could tap if they help to create "middle-class homes." 

The NDP is pledging to  create at least 500,000 units of affordable housing in the next 10 years, while the Conservatives are pledging to build one million homes over three years, and convert at least 15 per cent of federal government property into housing — among other measures. 

The Greens are calling for an expansion of the government's Rapid housing Initiative — which creates new affordable housing for vulnerable populations — and to build and acquire a minimum of 300,000 units of affordable housing.