As the federal government proposes tying on-time rent payments to credit scores as part of efforts aimed at helping renters break into the housing market, some advocates are cautioning that with high home prices and climbing rent, the measures are only one piece of the puzzle.
Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland announced last week the measures would aim to amend the Canadian Mortgage Charter in an effort to make it more fair for renters.
“Renters deserve credit for the money they spend on rent today and that they have spent on rent over the years,” Freeland said on March 27.
A credit score comes from information in a person’s credit report and shows how well people can manage their credit and whether it would be risky for a lender to loan you money, according to the Government of Canada.
Equifax President and CEO Sue Hutchison said it doesn’t make sense that paying a monthly mortgage of $2,500 can enhance your score, yet renting a home for the same amount does not contribute.
“It’s a little bit illogical that it’s not included, because it’s certainly a major part of shelter expenses in this country,” she told Global News.
The 2021 Census found there are five million renter households — translating to roughly one-third of Canadians renting a home — which is why Hutchison said such a measure could be considered “fairness” for residents.
Tom Davidoff, associate professor at the University of British Columbia’s Sauder School of Business, added reporting of rent could provide more information on who is a landlord, such as “mom and pop” landlords who may not always be as known to credit bureaus compared to large corporations.
“Generally, having rental contracts out in the open is probably a healthy thing,” he said. “I think it’s important that whatever this effort is, if it moves forward, you try to make the universe of renters whose rental information is going to credit agencies as broad as possible.”
Rent reporting is not a foreign concept – companies like FrontLobby make it available and provide information to credit bureaus, including Equifax with which it has an agreement with for rent reporting. However, bureaus are still working to incorporate it on a much larger scale.
TransUnion, in a statement to Global News, said it is assessing rental data to help consumers build their credit profiles. While Equifax says it collects data in “small volumes,” and will be working with landlords, lenders and government to make rental reporting widely available.
While there is praise for the proposed measures, rental advocates and experts have concerns about those struggling under a “housing crisis.”
Canadian Centre for Housing Rights director of policy Dale Whitmore said with more renters struggling to pay their rent already, he’s concerned tying rent payments to credit score could hurt some people.
“If someone isn’t always able to pay their rent on time, is that going to hurt their credit, because that could have hugely negative consequences for renters,” he said.
Add on to that the high rents that some Canadians are paying, Toronto Metropolitan University urban and regional planning professor Nemoy Lewis said. Though such a measure could help those on the “cusp” of purchasing their first home, home ownership could be difficult for others.
“We have to be cognizant of the fact that how is one able to save for a down payment and paying $3,500 a month for rent,” he said in an interview with Global News.
With full details to potentially come from the federal budget, Whitmore said he wants the government to work with stakeholders, including the provinces and territories, to ensure renters remain protected from that credit information being used against them.
He added he wants those most impacted, including renters themselves, consulted so that concerns they have are directly communicated to the government.
“I think the takeaway is it needs thought and if it’s something they want to explore, great, but they need to think through exactly how it should work,” Whitmore said.
Speaking on background, a government official told Global News in an email that last week’s announcement is to support renters in building their credit scores and assist younger Canadians to have a “good middle class life,” including homeownership. The source went on to say the government would not implement measures “that would hinder them achieving that goal.”
— with files from Global News’ Naomi Barghiel
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