Will the proposal work in a pricey market like Vancouver?
A joint federal-provincial government plan to buy unsold condos in British Columbia has drawn sharp criticism from parts of the mortgage industry – and a prominent mortgage broker based in the province has questioned the mechanics of the rent-to-own model, which authorities plan to use when they convert the units.
Ottawa and the BC government announced their intention last month to convert more than 2,200 unsold or distressed condo units into affordable housing, with roughly $1.45 billion earmarked for the program.
But Eitan Pinsky (pictured top) of Pinsky Mortgages told Canadian Mortgage Professional while the rent-to-own concept could genuinely help buyers in lower-priced markets, it starts to make less sense closer to Vancouver where values remain sky-high despite a recent decline.
“A rent-to-own might work in a $400,000 property market where you’re renting and you’re putting a 5% downpayment. That would be $20,000,” he said. “You could build up a sizable equity to allow you to purchase that property.
“But it’s very difficult to do a rent-to-own for people at an $800,000 or $900,000 property, because they need to build up quite a lot more in downpayment. It would take far too many years of renting for it to work.”
Questions persist about how federal-provincial plan will unfold
For now, it remains unclear which units the program will target, or in which specific markets rent-to-own terms would actually apply. Further details are expected to emerge in the weeks ahead, possibly through a full breakdown of eligible regions and financing terms from BC Housing or Build Canada Homes directly.
Pinsky, though, said he’s skeptical that the program addresses the underlying tension between a market correction and outright intervention. “There’s too much of this plan that’s up in the air at this point,” he said. “So because it’s opaque, just the headlines make it worse.”
One of the main criticisms levelled at the program is that it essentially bails out developers who gambled on condo projects but were burned by the slowdown that gripped the market after interest rates began to rise in 2022.
While Pinsky said those developers didn’t necessarily behave in a malicious way, he views their approach as highly opportunistic. “I don’t think that developers were selfish – but greedy,” he said. “I think that developers built because there was a market and everything was going like hotcakes.
“I don’t think that the economy and shocks to the economy were expected in the way that they had occurred.”
Much of the scheme’s success will depend on the next steps taken by federal and provincial authorities. To date, details are thin on the ground about the program and the form it will ultimately take.
‘The government has to do a better job in explaining’
So far, the government has left too many basic questions unanswered, according to Pinsky – including which units qualify, how they’ll be marketed, and what happens to the value of comparable units purchased at full price shortly before a government-backed sale.
“I think that before people make their decisions about this – which a lot of them [already] have – the government has to do a better job in explaining how this will work,” he said.
One of the biggest unanswered questions is which condos the government will buy up, and whether they will include some of the smaller units built specifically for rental whose popularity has cratered amid a wider pullback from the market in recent years.
It remains to be seen whether rental demand for those properties would increase if the government put them on the market – or how far rental prices would have to fall before their popularity returned.
There’s also been little clarity on whether the feds and provincial government will focus solely on Vancouver, or whether the plan will extend to other BC regions.
“I’d like to know: Where are these condos? What market is it serving? How are they going to rent them out?” Pinsky said. So far, he added, the rollout seems to be focused more on messaging than policy. “I think that the announcement in and of itself is a publicity stunt,” he said, “and they’ll figure out the rest later.”
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