Ottawa says rent should factor into credit score
But officials say they won’t yet enforce practice
The federal government is calling on banks, credit bureaus, landlords and financial technology firms to include rent payments in credit scores in a bid to help Canadians secure better mortgage rates. But officials say they won’t yet enforce the practice, and one critic expects the move will have little impact on affordability.
In a pair of announcements on Wednesday in advance of April’s budget, federal officials introduced the new clause to their “mortgage charter” — which was first introduced in the fall — as well as other supports for renters.
Along with the previously announced clauses — such as homeowners being contacted four to six months ahead of mortgage renewals — federal officials say the charter will now include the expectation that monthly rent payments can be used to raise a person’s credit rating.
The idea, officials said, was that the move could eventually help them secure a better mortgage rate.
“We’re going to help you make your rent count toward you becoming a homeowner,” Prime Minister Justin Trudeau vowed in Vancouver.
But later in Toronto, housing minister Sean Fraser confirmed the government would not immediately enforce the practice, and would focus initially on making it easier for tenants to voluntarily share their rental history with credit bureaus.
“Should these measures not prove to be successful, the minister of finance has the residual authority to put regulations in place to make it happen,” said Fraser. “The signal that we’re trying to send today is not to bully another level of government to get their house in order, I wish all would do more. It’s to help people who are calling us desperately saying life is too expensive.”
It’s a move that David Hulchanski, a housing expert at the University of Toronto, sees as relatively toothless. Along with the voluntary nature of implementation, he noted that credit scores were less pervasive of a barrier to homeownership than the sheer cost of homes today compared with income levels.
In Toronto, the average rental listing has soared to $3,312 for a twobedroom, according to rentals.ca — a cost that gnaws at renters’ ability to save for a purchase. To put down 20 per cent on the average GTA condo — at $710,124 — would require more than $140,000. Even at what would currently be a low rate of five per cent, that would mean a bill of around $3,300 monthly.
Wednesday’s news came alongside other announcements aimed at tenants, including $15 million to provide legal aid to renters and advocacy groups, a national standard lease — as exists in Ontario — and a promise to create a “bill of rights” for renters.
Should these measures not prove to be successful, the minister of finance has the residual authority to put regulations in place to make it happen.
SEAN FRASER FEDERAL HOUSING MINISTER