Depending on the city you live in, affordable rental housing can be difficult to find, let alone ‘rent to own’ housing. However, any housing wrinkle may be worth a look during an affordability crisis.
Consider this rent-to-own project on Vancouver Island in British Columbia, where housing prices are . . . well, if you need to ask, you can’t afford them! Read more in CHEK NEWS: First ‘Rent-To-Own’ Development On The South Island Opens Housing Market For First Time Buyers
Some thoughts on pros and cons of rent-to-own:
Affordable Ownership: In the ‘missing middle’ — where it is difficult to scrape together a down payment on ‘workforce’ incomes (e.g. from teaching, policing), rent-to-own housing is a method of enforced saving.
If no subsidies are involved, a profit-conscious (aren’t they all?) developer and/or manager could rent at above-market rates to make their necessary profit and put ‘something in the bank’ toward the rent-to-owner’s eventual down payment.
Nothing wrong with this, of course, but if a renter sets aside money for a down payment on their own, there will be more choices when the time comes to buy.
However, where government is spending public money to help buyers onto the housing ladder, as in the example profiled above, the developer achieves targeted profits and the government ‘puts something in the bank’ for the renter. That’s a win all around, except maybe for the taxpayers who pony up the subsidy.
One possible ‘con’: The developer and/or manager owns and rents the unit while it is shiny and new. With a rent-to-own scheme, the unit and its upkeep, can be offloaded somewhere down the line.
So . . . if the project skimped on the quality of the original construction, it could be even more profitable. That could leave the once-renter-but-now-owner grappling with the upkeep costs while the developer/manager laughs all the way to the bank.
Is there any consumer and/or subsidizer protection against such understandable free-market profit-taking? Doubtful. We are probably looking at a buyer-beware and government-subsizer-beware situation here.
Affordable Renting: Rent-to-own housing does little to help — and indeed may well hinder — the development of truly affordable rental units needed by those with the lowest incomes.
Firstly, they will be offered at or around market rates, which are by and large no longer affordable anywhere for the lowest income renters. Further, they may add to the rental housing market in the short term, but they will disappear from the rental market eventually.
The folly of allowing rental accommodation to be taken off the market has been demonstrated dramatically in the United Kingdom and Ireland, where ‘Right to Buy’ policies have over the last few decades absolutely gutted the supply of social housing for rent, greatly contributing to those nations’ affordable housing crisis. Try: Right-To-Buy Program At Risk. Well Duh! What Would You Expect, If Only 1/3 Selling Price Stays in Housing
and Indigestion And The ‘Irish Dream’: Not So Different From The One You’ve Swallowed
