Is the rent-to-own a housing program or a confession of a broken mortgage lending system?
The federal government has spent the better part of a decade funding programs to help people who can carry a mortgage get a mortgage. It has been reluctant to asked why those people need help in the first place.
The promise that keeps getting made
Since 2021, Ottawa has committed or pledged billions across programs designed to work around its own mortgage qualification rules. As the Liberal Party’s 2021 platform, “A Home. For Everyone,” set out, the party committed $1 billion in loans and grants to develop and scale up rent-to-own projects with private, not-for-profit, and co-op partners, promising a pathway to home ownership for renters in five years or less. A Prime Minister’s Office news release dated August 30, 2022 announced a $200 million rent-to-own stream under CMHC’s Affordable Housing Innovation Fund. The First-Time Home Buyer Incentive spent hundreds of millions on a shared equity model that was undersubscribed and later discontinued.
None of these initiatives has yet produced a documented, publicly reported conversion of a renter to a homeowner through a government-operated rent-to-own program anywhere in Canada. Yet the Federal and BC governments announced proposed spending roughly $1.45 billion to acquire up to 2,200 unsold condo units to convert them to rent-to-own housing.
Fortunately, the concept is not the problem. The premise of rent-to-own is reasonable in theory that a household that can sustain housing payments should be able to convert that record into ownership over time. The failure comes at the end of the rental period, when the tenant applies for a mortgage and discovers that the payments, credits, and discipline they demonstrated during the lease continue to remain invisible to a qualification system. Instead, the base requirement remains solely on the expectation that the renter will have saved enough for the down payment for a mortgage.
The record so far
The Government of Prince Edward Island launched a government-operated rent-to-own program in Canadian in November 2023. Under the program, Finance PEI purchases a home worth up to $350,000 on behalf of an approved participant, who then enters a five-year agreement paying rent calculated as a five-year mortgage at 5% amortized over 25 years, with 40% of the interest paid refunded as a down payment credit at the end of the term.
The province committed a $17.5 million budget to the pilot. As CBC Prince Edward Island reported on March 8, 2024, of 107 applications processed by early 2024, 73 were declined and only 34 were pre-approved or conditionally pre-approved. Approved applicants struggled to find homes within their qualification caps even in Canada’s most affordable provincial market. No conversion data has been published, and the first cohort will not complete its five-year terms until 2028 at the earliest.
Port Moody, BC is the cleanest illustration of where the failure sits. Marcon Development’s Hue project included ten rent-to-own units as a condition of development approval. As Western Investor reported on February 13, 2025, only one of 190 applicants was able to take advantage of the program, council was told it had proved to do just the opposite of helping first-time buyers, and the mayor called the outcome unfortunate given that rent-to-own was a major reason the project had been approved.
The reason it collapsed is documented precisely. As the Tri-Cities Dispatch reported in February 2025, the program was tied to CMHC’s First-Time Home Buyer Incentive, which was discontinued in 2024 and whose income thresholds CMHC never adjusted to match rising prices. The cheapest unit required a minimum income of roughly $160,000 to carry the mortgage, but the incentive only allowed households earning under $150,000 to qualify. The eligible band was mathematically empty. No one could earn enough to carry the mortgage and little enough to qualify for the program at the same time. That is not a failure of the rent-to-own concept. It is CMHC’s own parameters closing the gate.
The private market shows what rent-to-own can and cannot do. Clover Properties in Ontario, possibly one of the longest-running private operator in Canada, reports helping more than 900 families over 15 years with a success rate above 90%, where success means the family completed the program and qualified for a mortgage. It gets those results by screening hard at the front end, qualifying each family before finding a property and admitting only applicants with a realistic path to approval within the term, then providing credit coaching throughout. By its own account it has counselled over 10,000 families to place fewer than 1,000. The model has worked, but struggles to scale, because success depends on intensive per-family screening and support that caps even the best operator at well under 100 families a year. The rent-to-own succeeds when a private operator has incentives to manually walk each household across the qualification line CMHC’s rules draw, and government programs that try to scale it without that handholding face potentially higher levels of defaults.
What CMHC started out as and what it became
To understand how CMHC has evolved into a blockage to affordable lending we have to explore the policy history and origins of the Crown Corporation. It was incorporated in December 1945, taking effect January 1, 1946. As documented in the Canadian Encyclopedia and CMHC’s corporate history, its founding purpose was to house returning war veterans and to lead the nation’s housing programs under the National Housing Act, 1944. For decades it operated as an access tool but in 1954 it introduced mortgage loan insurance, opening homeownership to Canadians who could not meet conventional lending requirements.
CMHC introduced the Assisted Home Ownership Program (AHOP) in 1971, subsidizing mortgage interest for income-tested first-time buyers on homes below a set price, and at its most generous it added down payment grants and 95% insured loans on top. A federal review called AHOP and its rental counterpart the government’s major housing instruments of the 1970s. It ended badly. The subsidies tapered on the assumption that incomes and home values would rise, but when interest rates passed 20% in the early 1980s, families saw their payments double on rollover and many walked away, leaving CMHC holding more than 40,000 foreclosed homes and an insurance fund so depleted the government had to backstop it. That is the obvious objection to any scheme that helps marginal buyers. It is also the difference. AHOP manufactured affordability with a subsidy that tapered and left buyers exposed when rates rose. Recognizing rent payment history does the opposite. It lowers no one’s payment and bets on no future income. It credits a fixed cost the borrower is already carrying.
After the 2008 financial crisis, the federal government walked maximum amortization back from 40 years to 25 between 2008 and 2012. The federal government introduced the mortgage stress test between 2016 and 2018, extended to uninsured mortgages through Office of the Superintendent of Financial Institutions (OSFI) B-20 guideline, requiring applicants to qualify at the contract rate plus 2% or 5.25%, whichever is higher. These were presented as prudent measures, and completed CMHC’s transformation from an agency that helped people buy homes into an agency whose primary function is protecting its insured portfolio from losses.
A revealing moment came in 2020. In response to COVID, CMHC unilaterally tightened its underwriting, raising the minimum credit score from 600 to 680, compressing gross debt service ratios from 39% to 35% and total debt service ratios from 44% to 42%, and banning non-traditional down payment sources. CMHC framed the changes as protecting buyers and reducing taxpayer risk. But the two private mortgage insurers refused to follow, and one of them, Canada Guaranty, stated that it “does not anticipate borrower debt service ratios at time of origination to be a significant predictor of mortgage defaults.” Two insurers under the same federal guarantee, opposite views on whether the barrier CMHC imposes predicts anything. Either the barrier is unjustified, or the private market is underpricing risk on the taxpayer’s backstop.
Lenders voted with their volume. As the Globe and Mail reported on July 6, 2021, CMHC’s market share fell from between 45% and 50% before the pandemic to 23% by early 2021, and the agency reversed its tightening in July 2021 in what was characterized as an admission that the changes had been a mistake. The tightening did not reduce systemic risk. It redirected volume to private insurers operating under the same federal guarantee. The prudential purpose was defeated by the structure of the market it was supposed to protect.
Who the rules actually serve
Today, CMHC insures hundreds of billions in mortgages. Its risk management framework is designed for portfolio-level stability, not individual fairness. The stress test does not ask whether a particular person can afford a particular house. It asks whether, if that person defaults, the insured lender’s loss exposure falls within CMHC’s portfolio risk tolerance. The qualification rules are statistical instruments applied to populations.
The insurance premium is paid by the borrower to protect the lender, if the borrower defaults, CMHC makes the lender whole while the borrower loses the home, credit standing, and any equity. CMHC’s own eligibility requirements set a hard architecture around every applicant as at least one borrower must clear a minimum credit score of 600, housing costs cannot exceed a gross debt service ratio of 39%, total debt cannot exceed a total debt service ratio of 44%, and both ratios must be calculated at the greater of the contract rate plus 2% or 5.25%. A credit score floor of 600 is not a meaningful statement about whether a specific person will default on a specific mortgage. It is a threshold that produces an acceptable loss rate across the insured book.
The insured mortgage cap is the clearest example of CMHC’s price-shaping power. When the cap was $1 million, properties above that threshold were effectively walled off from insured buyers. When the Department of Finance raised it to $1.5 million effective December 15, 2024, a cap that had not moved since 2012, new demand entered that price segment. CMHC does not set housing prices directly. It creates the demand conditions that move prices in predictable directions.
The rules constrain the people with the least market power, meaning first-time buyers with modest incomes and thin credit files. They do not constrain repeat buyers, investors with 20% down, or cash purchasers. The system stabilizes prices by rationing access at the bottom, not by dampening speculation at the top.
By funding rent-to-own, the federal government is acknowledging that a population exists that can reliably make monthly housing payments at or above mortgage-equivalent levels but cannot clear CMHC’s qualification threshold. That population is large enough to justify billions in spending commitments across multiple programs.
The reason that population exists is CMHC’s own rules. The stress test, the credit score floor, the down payment source restrictions, the debt service ratio caps. All of them are federal policy instruments administered by a federal Crown corporation. The government is not correcting a market failure. It is working around a regulatory barrier it created and maintains.
What already works, and what it teaches
The programs that have produced results in Canada share one feature. They get the buyer past CMHC’s qualification threshold on day one rather than deferring it into the future.
One example is Attainable Homes Calgary, which is a non-profit wholly owned by the City of Calgary, created in 2009 to deliver below-market homeownership to moderate-income Calgarians. The mechanics are the opposite of rent-to-own. The buyer contributes a minimum of $2,000, receives a loan covering the rest of the 5% down payment, and purchases at a below-market price on land the program has assembled. The buyer qualifies for a conventional mortgage and owns from day one. To keep the unit permanently affordable, the owner agrees to sell it back to AHC at the original purchase price, so the equity comes from paying down the mortgage rather than from appreciation. The program states it delivers these homes without subsidy, funding affordability through low-cost land and efficient design. It is still operating and expanding as in 2025 it completed 70 below-market rental units downtown and 84 modular units, and it is currently building 230 townhomes.
Langford, BC ran another model that worked. From 2004 to 2012, the City’s Affordable Housing Program used inclusionary zoning to require developers to build one affordable home for every fifteen lots rezoned, with homes sold at set below-market prices to qualifying local residents. It won CMHC’s own Housing Award in 2008. As The Discourse reported on December 13, 2023, the program produced 39 single-family homes and 8 condo units before council introduced a $1,000 per lot cash-in-lieu option in 2012 that was far cheaper than building units, and a 2016 CMHC National Office report concluded the program could no longer be considered an inclusionary housing program. The City still maintains the original stock on a resale waitlist.
Both models worked because they solved the problem at the point of mortgage origination. They delivered the buyer to the bank with a price they could qualify for and a down payment that met the threshold on the day they applied. They treated CMHC’s rules as a fixed constraint and engineered the transaction to clear them.
Three changes that would matter
The following adjustments sit within CMHC’s existing authority under the National Housing Act, whose stated purpose is to promote housing affordability and choice and facilitate access to housing finance. They do not require legislation as they are underwriting policy decisions that CMHC could implement by revising its own eligibility rules.
1. Recognize verified rent payment history as a qualification factor.
If a borrower can document 24 months of on-time payments at or above the projected mortgage payment, that record should be admissible in underwriting alongside the stress test. This does not replace the stress test but supplements it’s modeled capacity with demonstrated capacity. CMHC already permits alternative methods of establishing creditworthiness for borrowers without a credit history, and its own fact sheets already list confirmation of rent payments over the preceding 12 months as one such alternative. Extending that principle to borrowers with a strong rent payment record is a small step, and it removes the exact barrier that has stalled the provincial programs.
2. Formally classify documented rent credits from registered rent-to-own agreements as an acceptable down payment source.
If the credits are held in trust, verified by the lender, and traceable through the lease, they are functionally equivalent to savings. CMHC’s own Affordable Housing Innovation Fund pays providers to build these very arrangements. The least CMHC can do is confirm the credits those arrangements generate will be accepted at the mortgage application stage.
3. Allow a modest debt service ratio override for borrowers with verified rental payment records.
Someone paying 35% of gross income on housing for three years without arrears has already proven they can carry that cost, yet CMHC’s gross debt service cap of 39% can still exclude them. A two to three percentage point override for borrowers with long-term demonstrated capacity would expand access without materially changing the risk profile of the insured book.
These changes would not just help conventional buyers. They would make rent-to-own function as designed. The rental period would finally become what its advocates have always claimed it is, a proving ground that counts. Under several current programs, it proves nothing to the only institution whose judgment matters at the point of purchase.
If these changes sit within CMHC’s existing authority, require no legislation, and carry minimal portfolio risk, what is the argument for not making them?
Final Thoughts
The relevant question is whether the qualification rules attached to that insurance are calibrated to serve borrowers or to serve lenders. The National Housing Act frames CMHC’s purpose as promoting housing affordability and access to housing finance, but the mortgage loan insurance itself exists to indemnify lenders when borrowers default, and the qualification rules are written to protect that guarantee, but currently they serve lenders.
The rent-to-own programs, the $200 million Innovation Fund stream, and the $1.45 billion BC condo acquisition scheme are all downstream of a system built to make banks whole rather than to make homeownership accessible. Every dollar spent on rent-to-own under the current rules is a dollar spent avoiding the regulatory conversation that would make rent-to-own work. And that conversation is not a legislative one. The insured mortgage cap moved from $1 million to $1.5 million by ministerial decision, not an act of Parliament, which is proof that the levers here can be pulled quickly when the will exists.
Rent-to-own has not failed because tenants cannot pay. It has failed because it is forced to operate under CMHC’s conventional qualification rules, which ignore the very payment record the rental period is designed to build. Change those rules, and the concept Ottawa keeps funding might finally deliver what it keeps promising.
Ramsgate Policy Group is a boutique policy research, strategy, and public affairs firm. We turn complex regulatory and political questions into clear, defensible actions for the people who have to act on them. Reach out if you’d like to talk about how we might help.