The latest in the Liberal federal government’s pre-budget policy offensive will do little to help renters.
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Following the federal Liberal government's significant changes to its non-permanent resident policies last month, I was hopeful that we would see equally meaningful housing policy announcements in its upcoming spring budget to be released later this month.
Last week, the Liberals announced one of the policies we can expect to see: a Renters' Bill of Rights, which they argue will make renting fairer for Canadians. Unfortunately, it does nothing to make renting fairer and could end up costing taxpayers hundreds of millions of dollars if the federal government proceeds with it.
Prime Minister Justin Trudeau described his proposed policies as follows:
"Our upcoming budget is going to make renting fairer. That means making sure you can see what previous tenants of your apartment paid so you can negotiate a fair deal. It means making sure that your rent payments are counted by the bank towards your credit score. It doesn't make any sense for someone who pays $2,000 a month in mortgage payments to get credit for it, but not someone who is paying $2,000 in rent."
Negotiating a Better Rent?
Knowing what a previous tenant paid for a given unit several years ago will not help a tenant negotiate their rent today — something we can already see in the resale home market. The price a home sold for three years ago, or even ten years ago, is completely irrelevant when determining the market value of that same home today.
The market value of a rental today is driven by the current market dynamics and the most recent comparable units that have been rented. With Canada's vacancy rate hitting a record low of 1.5% in 2023 and rent growth a record high of 8%/yr amidst record-high population growth, it should go without saying that these conditions do not empower renters to negotiate their rent, when they are competing for scarce rental units.
Achieving the Liberal's promise of making historical rent prices available would involve developing a national database of rental transactions, similar to the MLS system that real estate agents use, but far more extensive because it would include private rentals as well.
Leaving aside the exorbitant cost of such a system (and questions about whether we want to embark on such a project so quickly after the ArriveCan tech debacle), I'm not sure how policymakers will force private landlords to register their rentals on a national database.
This potentially costly initiative has no meaningful upside for the average tenant.
Including Rent Payments in Credit Score Reports
The proposal to include rent payments in the credit score report of renters is a solution in search of a non-existent problem as no tenant has been prevented from buying their first home for this reason.
The real barrier to buying a home is that, through Canada, home prices and rents are way too high, making it harder for renters to save for that ever-bigger down payment.
Most first-time buyers have good credit and some have bad credit, but very few have no credit history, which includes credit card, car loans and other such history.
In addition, building system requiring private landlords to record how timely tenants are with their monthly rent payments would be incredibly complex and expensive; many private landlords are small mom-and-pop investors who would have to record this information each month manually.
Rather than wasting hundreds of millions of dollars on building a national database of rental listings and price history and a system to record rent payments for credit scoring, the federal government should be spending our money on building non-market affordable rentals for Canadians — a measure that would truly be a game changer for renters.
I hope you found today's post helpful. If you have any questions, please email me at askjohn@movesmartly.com.
If you are considering buying or selling a property and would like to speak with me and my agents in more detail, you can schedule an appointment here.
John Pasalis is President of Realosophy Realty. A specialist in real estate data analysis, John’s research focuses on unlocking micro trends in the Greater Toronto Area real estate market. His research has been utilized by the Bank of Canada, the Canadian Mortgage and Housing Corporation (CMHC) and the International Monetary Fund (IMF).
