 Nova Scotia’s NDP have announced their plans for a rent-to-own starter home program ahead of the provincial election
In a press release on Tuesday, Nov 12, NSNDP leader Claudia Chender announced the program, saying it would increase the number of families able to buy their first home by 10% in the first year.
While most of their housing plan so far has been focused on renters, this program would see around 500 new homes constructed in the first year and would be available to Nova Scotians who make less than $100,000 annually.
“For the hundreds of thousands of families who rent in this province the pathway to homeownership is nearly impossible,” says Chender. “Our plan will fix that.”
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According to RE/MAX Canada, paying rent towards ownership is becoming a more common practice as it helps provide a route to homeownership without paying a down payment upfront—rather, the monthly rent is allocated towards their down payment. When their lease is up, the tenants have the option to buy the home and take out a mortgage with their rent paid going towards their down payment.
The leases for rent-to-own homes usually range from terms of three to five years. If a tenant chooses not to purchase the home after the lease is up, they lose the chance to do so.
To acquire a rent-to-own lease, tenants will most likely require a good credit score, steady income and enough funds for an initial deposit—albeit a deposit smaller than the minimum 5%-of-the-purchase-price down payment required to get a mortgage. Rent-to-own homes also usually have higher-than-market rent payments to accumulate money for the down deposit.
For the province’s purposes, this could alienate some renters who are unable to meet these requirements. Only those renters who have managed to keep their credit clean and their bank account from going dry would be able to take advantage of a typical rent-to-own lease. The NDP did not say whether or not these factors would apply to their program.
The supply of around 500 homes the NDP promises in the first year would help put a minor dent in the housing shortage, and along with their other plans to help renters—by eliminating fixed-term leases and reducing the annual rent cap to 2.5%—this would certainly help renters who are interested in purchasing a home but may not have enough for a down payment. Assuming these homes would be managed by the provincial government, it is also likely the conditions for the rent-to-own lease would be in the tenant’s favour.
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While more details are needed on how much rent would be required for these homes and what criteria must be met to apply, this would likely help some renters become homeowners over time, although more is needed to curb the housing shortage. The Provincial Housing Needs Assessment finds that the province could have a shortfall of 71,600 units over the next few years.
Nova Scotia’s provincial election is set to take place on Nov 26.
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This article appears in Nov 7-30, 2024.
