Rising Personal Debt Forcing Most Families Out of Rent-to-Own Housing Schemes

Date Published: 29 May 2024

Key Facts

• Increasing levels of personal debt are barring people from rent-to-own housing schemes like those offered by Habitat for Humanity.
• Habitat for Humanity’s affordable housing schemes do not require a deposit and offer interest rates half of those from commercial banks.
• Yet, high personal debt levels are disqualifying many applicants, with over 80% reported to have personal debts over $50,000.
• This issue affects not only people with low income, but also families with incomes up to $150,000.
• According to Habitat for Humanity’s northern branch chief executive Conrad LaPointe, the problem lies not in debt per se, but unmanageable debt.
• A debt consolidation agency, Money Sweet Spot, noted a decline in the approval rate for clients from 35-45% to 9% due to the rise in unmanageable debts.
• Modifications to the Credit Contracts and Consumer Finance Act could worsen the situation by enabling greater access to unaffordable loans and credit cards.
• Rent-to-own housing providers believe there are opportunities to help tens of thousands more families if the government invested more in these models.

Article Summary

Debt is increasingly barring people from owning homes according to Habitat for Humanity. The international charity offers rent-to-own housing schemes targeted at people who cannot afford a home due to low income or lack of cash for a deposit. Yet, even their programmes are becoming unreachable for many due to escalating levels of personal debt, with over 80% of their applicants reported to carry debts exceeding $50,000. This issue is prevalent not just among low-income earners but also among households earning up to $150,000.

The problem lies in the unmanageability of the debt rather than the debt itself. Chief executive Conrad LaPointe of Habitat for Humanity’s northern branch underlined this, highlighting that it would be irresponsible to accept such applicants into their programmes. Debt consolidation agency, Money Sweet Spot, also emphasized this, reporting a sharp decline in their approval rate for clients from between 35-45% to just 9% due to the rise in unmanageable debts.

The state of affairs is expected to worsen still due to revisions to the Credit Contracts and Consumer Finance Act. These changes are projected to lead to increased access to potentially unaffordable credit cards and personal loans. Yet, amid these challenges, rent-to-own housing providers believe there is a potential to assist more families if there were increased government investment in these models.

Despite the challenges, Habitat for Humanity continues to make a difference. They recently helped a family become homeowners, illustrating the potential success of rent-to-own schemes when equipped with the right support. Advocates argue that increased backing from the government could give more families the chance to pursue homeownership despite their crippling debts.

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