My Prediction: Rent-To-Own Will Transform How Canadians Buy and Sell Homes

According to a recent article in Macleans, Amy Ding, founder and CEO of Requity Homes, discusses the challenges in Canada's housing market and proposes alternative paths to homeownership.

Amy Ding is the founder and CEO of lease-to-own company Requity Homes.

We’re entering 2023 with a broken housing market. Nationwide supply is low, interest rates are rising and inflation is squeezing our bank accounts every day. One recent report showed that 80 per cent of 18-to-28-year-olds are worried they won’t be able to buy a home in the city of their choice. Last year, almost 1.5 million Canadians lived in unsuitable or unaffordable conditions because they couldn’t afford to move. And some people are banking on a lottery win just to afford a home. The Canada Mortgage and Housing Corporation estimates that the country needs to build 5.8 million more homes to make housing more affordable—but that won’t happen overnight, and building more isn’t a solution by itself.

What Canada can do, much faster, is improve mortgage accessibility for the countless Canadians who can afford a mortgage but are barred from the housing market because they can’t qualify for one. Canada’s mortgage rules are antiquated and exclusionary for many groups, but especially for immigrants, gig workers and the self-employed. For example, newcomers to the country, with no Canadian credit history, are rarely granted loans. Self-employed people, meanwhile, have to show at least two years of steady income and operating history. There are more than 2.6 million self-employed people and more than 400,000 newcomers arriving in Canada each year—a number that will increase to half a million by 2025. Because of those exclusionary rules, many have no choice besides renting. It’s inexcusable to erect such barriers to home ownership, especially with rising interest rates hiking the affordability bar even higher.

In 2023, more people will be responding to those challenges by looking for creative paths to paying for a home, beyond renting or traditional mortgages. Soon, we’ll look at real estate more like we do vehicles: you can buy or finance a car, but you can also lease one for a monthly fee and decide later if you want to buy the vehicle at a set price. Why can’t we treat our housing market the same way?

I left my career in the finance industry to start Requity Homes so that I could work to disrupt home ownership this way. Requity is a real estate platform that buys property for clients, who move in and pay rent to us. We then help the client prepare to qualify for a mortgage with personalized credit coaching. When they’re mortgage-ready, they can buy the home from us—it’s a rent-to-own model. It’s also a stepping stone toward diversifying home-purchase methods in Canada. We’ve helped families in Ontario and Saskatchewan so far and plan to expand soon.

These models are common in other countries. The U.S.-based startup Divvy, for example, has helped thousands of people raise an average of US$16,000 for home purchases. And Canada’s federal government is now going ahead with its own $200-million rent-to-own fund. My company is only three years old, but we’re already looking at forming public and private partnerships to scale our model.

Canada is still a few years away from a major shift in how we think about mortgage options. In 2023, I expect that the Canadian housing market will continue to slow in terms of sales activity and price. Before the market turned, there were huge price spikes in the GTA outside of the city core, up to 30 or 40 per cent year over year. That area will likewise lead the decline, because that growth simply isn’t sustainable.

I expect Saskatchewan will buck the downward trend. It has been among the fastest-growing provincial economies in 2022, and that will continue as people move there for work and stay for the affordable cost of living. Its home prices are still among the lowest in the country, but their value increased only eight per cent during the pandemic, four times less than in Ontario. There’s lots of room to grow. Meanwhile, downtown markets in major cities like Toronto, Vancouver and Montreal will remain stable, despite a wider housing correction.

This will be a tale of two kinds of cities, with prices in some on the rise, and in others on the way down. Overall, I don’t expect much change until our thinking around mortgages evolves, and we find out which way interest rates are going to trend.

—As told to Alex Cyr