Credit card debt is growing among Canadian renters. What are the solutions?

For many Canadians, a common financial rule that your rent should not take up more than 30 per cent of your total monthly income has become an impossible guideline to follow. 

“I did some math here, 30 per cent of [my] pay is only $966,” said Jennifer Smith, a renter in Toronto. But in reality, she says her monthly rent is over $3,200.

“[That’s] not including the utilities and hydro and all that fun stuff,” she told The Current’s host Matt Galloway. 

Smith used her line of credit to cover the costs of her rental house, and says she often has to prioritize paying rent and feeding her children over paying off her credit card debt. 

“It’s a scary situation to be in, but I’d rather miss a couple of payments and damage my credit, than not have a house, or fed kids,” said Smith. 

Canadian renters who face the same predicament as Smith are on the rise, according to Bank of Canada governor Tiff Macklem in a speech to the Canadian Bankers Association this past September.

“Over the past year, the share of borrowers without a mortgage who carry a credit card balance of at least 90 per cent of their credit limit has continued to climb. And this share is now above typical historical levels. This is concerning,” he said.

Smith says she’s currently looking for a second job, but also hopes interest rates will go down. 

“It feels like a scam because I have to pay my regular interest payments per month, but then I have to pay additional money elsewhere just to attack the principal,” said Smith.  

“And then in the meantime, I’m trying to cover ridiculous rents, cost of travelling in the city with traffic, daycare, food.”  

‘Life is expensive right now’

Anne Arbour, director of partnerships and education at the not-for-profit Credit Counselling Society says they’ve been getting more calls lately from people asking for advice.

“Life is expensive right now, between groceries and cost of living in general,” she said.

However, Arbour says there’s still a taboo about admitting you have money challenges, with the assumption that “you should just know this stuff” if you’re an adult.

“When people experience financial difficulty like debt … there are a lot of emotions wrapped up with [it]. There’s shame, there’s embarrassment, there’s definitely a feeling of helplessness,” she said.

Accredited organizations like Credit Counselling Society offer services like free credit and budget counselling.

Crucially, Arbour says time is of the essence. “The sooner you reach out for help, the more options there are available.”

The rent is still too high

Ricardo Tranjan, a political economist at the Canadian Centre for Policy Alternatives, says that Smith’s situation is not “particularly surprising” based on what he’s seen.

“There’s a number of factors that make tenants in low income households much more susceptible to inflation and high interest rates and to have less financial security all around,” he said.

Unaffordable rents, for example, are no longer limited to expensive cities like Toronto. “Right now, it’s pretty much everywhere, even places like Halifax have become very unaffordable … or places in the Prairies,” he said.

In his recent study, Tranjan found that minimum wage workers in only nine out of 62 cities across Canada could afford a one-bedroom apartment “without spending more than 30 per cent of their income on housing.”

Tony Irwin, interim president at the Canadian Federation of Apartment Association, attributes the “pressure on housing prices” to factors including population growth and people relocating to different areas in Canada due to the cost of living. 

Irwin says that tenant relief programs issued by landlords and increasing housing supply are among the options for easing the pressure.

“We also need more affordable housing, more co-operative housing, more non-profits being able to build housing,” said Irwin. “We need more of all of it, to be able to support Canadians who have different needs, budgets [and] financial capabilities.”

Irwin said these programs need diverse stakeholders including governments, housing providers and non-profits to work together to accomplish these goals.

Financial literacy

Arbour says that ultimately, financial literacy is important for everyone — no matter your financial situation. 

“It’s not renting versus owning.… even if you took all the renters, they’re all going to have different financial pressures,” she said.

She said there’s “more than just putting money into boxes in a spreadsheet” when it comes to managing your finances.

“Every dollar you have, should have a job to do … whether that’s buying your groceries, paying your rent, saving for your emergency fund, or saving for that trip to Peru,” she said. “Once you’ve set your goals, you can start figuring out where your money goes.” 

Any spending plan must also be flexible, since “things change all the time,” said Arbour. 

Smith, who is renting in Toronto, is a child and youth worker for the Toronto School District. She’s taken the initiative to teach her teenage students about financial literacy. 

“They’ll tell me where they want to move, and we look at the actual costs, and then we look at what jobs, what school requirements they need, to be able to afford that kind of life,” she said.

“It’s very much turning a negative, stressful situation into a teachable moment for the next generation.” 

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