Cautious optimism greets P.E.I.'s new rent-to-own home program

A housing advocate says P.E.I.'s new rent-to-own program will help some Islanders, but warns that easing the path to home ownership shouldn't be the only government priority when it comes to ensuring people have a decent place to live.

Fleshing out a program announced in the province's latest budget, the King government said last week that Finance P.E.I. will buy eligible homes and rent them back to Islanders as part of a program with a total value of $17.5 million this fiscal year.

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The government is touting it as a way to bring buying a home within reach of people who can't make a down payment due to the rising cost of acquiring a property on P.E.I. 

Ryan MacRae is with the P.E.I. Fight for Affordable Housing. He said while the rent-to-own plan is a fine program, the government is "missing the mark" when it comes to what most renters actually want.

"This type of policies are really only going to help support a few of the Islanders who are actually going to qualify with some of the rigid qualifications of the program," he said.

"I think a lot of people think that the be-all, end-all of the housing spectrum is to get people homes. But there's a lot of people in P.E.I. who ... don't have the capacity to become homeowners and also don't want to become homeowners."

Part of 'rent' becomes equity

Finance P.E.I. will spend up to $350,000 on each home procured under the program, excluding taxes and legal fees. 

To be eligible for the program, a household with one earner must have an annual income of less than $65,000. That becomes less than $100,000 if more than one person in the household is employed.

I think this program is a creative approach to get people into homes ... We're curious to see the uptake on it and see how it goes.— James Marjerrison

Successful applicants must not have owned a home before, and must be able to meet a monthly "rent" equivalent to a loan payment if they were getting a five per cent interest rate on a five-year mortgage amortized over 25 years. 

They must prove that they have a satisfactory credit rating, that they don't have outstanding debts, and that they've been declined by a financial institution for mortgage financing within the last six months.

Outside the 'stereotypical box'

P.E.I. Real Estate Association president James Marjerrison said the program seems to be catered to people who don't fit the "stereotypical box" of who gets a mortgage.

"The younger generation ... they seem to be getting income from all sorts of different streams," he said. "They might have a side hustle here, a side hustle there, and you know in the course of the year, they might make a pretty good income. But as far as the bank's concerned, they might only be looking at, you know, their actual T4 income."

The current benchmark price for a single-storey detached house on P.E.I. is $362,900.

Marjerrison said that, with a budget that could benefit up to 50 Islanders if they all purchased houses worth $350,000, the program may be able to help a decent number of people.

Forty per cent of the equivalent interest portion in rent will go toward the down payment for the home if the residents decide to buy it within the first five years of the program, to a maximum of $33,117, or 9.4 per cent of the cost.

"It's hard for those first-time home buyers to save up for that down payment. So I think a program like this might might be really good," Marjerrison said. "I think this program is a creative approach to get people into homes ... We're curious to see the uptake on it and see how it goes."

A separate Down Payment Assistance Program helps eligible Islanders receive an interest-free loan of up to 5 per cent of the purchase price of a home, to a maximum of $17,500.