Seeking Input on Rent-to-Own Arrangements
Bill or Act:
Summary of Decision:
The Ministry of Municipal Affairs and Housing is exploring the role that the "rent-to-own" home financing model may have in supporting housing attainability in Ontario. To support this work, the Ministry posted to the Regulatory Registry on October 25, 2022 to seek feedback on the rent-to-own model and identify barriers and opportunities related to rent-to-own arrangements.
The feedback received was mixed. Some stakeholders raised concerns about protections for rent-to-own clients, while others noted a lack of incentives for landlords/providers to offer rent-to-own arrangements.
Some stakeholders expressed support for the government continuing to explore the rent-to-own model through further consultations, while others encouraged the government to first make improvements to other aspects of the residential tenancy system, including the Landlord and Tenant Board.
The government is considering the feedback received and determining next steps.
Analysis of Regulatory Impact:
October 25, 2022
Summary of Proposal:
The government is committed to building 1.5 million homes over ten years through Annual Housing Supply Action plans to help make life more affordable and housing more attainable for Ontarians.
The proposed cross-government strategy supports the government's priority of Building Ontario and includes initiatives that will unlock more housing, further streamline approvals and reduce barriers, accelerate planning, influence the market and reduce costs.
As part of this work, Ontario is interested in exploring the role that the "rent-to-own" home financing model may have in supporting housing attainability in the province.
Rent-to-own arrangements generally involve a client entering into an agreement with a housing provider (e.g. homeowner/landlord, rent-to-own company, etc) with the intention that the client will rent the home for period of time and eventually purchase it at the end of the rental term.
Although rent-to-own arrangements can vary based on a range of factors, they typically require clients to pay a monthly rental fee, plus an additional amount to be applied towards a down payment of the property. At the end of the rental term, if the client wishes to buy the property, they can leverage the accumulated down payment to try to secure mortgage approval.
Clients and housing providers engaged in a rent-to-own arrangement generally sign two separate contracts.
The first is a rental agreement. In Ontario, this agreement is the same as a standard lease agreement that a typical renter and landlord would sign at the beginning of a rental tenancy.
For the duration of the tenancy that the client is paying rent to the housing provider, they have the rights and responsibilities of a tenant under the Residential Tenancies Act, 2006 (RTA). Likewise, the housing provider has rights and responsibilities as a landlord under the Act. If there is a dispute about rent, damage, maintenance, or any other issue governed by the RTA during the period of the rental agreement, the issue would be adjudicated by the Landlord and Tenant Board.
The second contract that a rent-to-own client and housing provider sign is a rent-to-own agreement. This agreement allows the parties to determine the details of the purchase of the property at the end of the lease term.
The rent-to-own agreement and any dealings between the client and housing provider that take place after the client has transitioned from being a renter to being a homeowner would no longer be governed by the RTA. However, other legislation may provide additional protections to clients transferring into homeownership, such as real estate and lending laws.
1. Do you think that rent-to-own arrangements are a viable way to support housing attainability in Ontario?
2. Are there any barriers with rent-to-own arrangements that you think may be discouraging providers from offering this type of housing?
3. Are there any issues with existing rent-to-own arrangements that make it difficult or unfavourable for clients, such as renters, to engage in them?
4. Are there measures the government could consider to facilitate these agreements, such as making them more viable for housing providers, increasing client protections, raising awareness and public education on this alternate form of home ownership, etc?
December 19, 2022