Amid tightened qualifications and successive changes, Canadian mortgage regulatory standards are still not nearly equipped enough to address the realities of the gig economy, Neighbourhood Holdings CEO Taylor Little argued in a recent contribution to The Globe and Mail.
Little emphasized that this is a crucial, yet overlooked, segment, as the “non-traditional” workforce – which covers consultants, freelancers, independent contractors, and self-employed individuals among others – represents an estimated 20% to 30% cent of the national working population.
“Non-traditional workers in Canada are facing a harsh reality when it comes to applying for a home mortgage: rejection,” Little wrote.
A large part of this stems from the fact that most of the current regulatory regime is predicated upon standards established decades ago, in an era where the vast majority of the Canadian working class was made up of full-time professionals with regular salaries.
“Without regular paychecks or access to financial statements such as the T4 [tax form], gig workers have found themselves on the wrong side of conventional mortgage lenders,” Little explained.
“Unfortunately for gig workers, the issue of not having a steady income stream presents itself as a significant obstacle to becoming a homeowner. In the eyes of the conventional mortgage lender, having a good credit score or an annual income from multiple sources that’s comparable to a salaried worker in aggregate is often still not enough to close the deal on a mortgage.”
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“Conventional mortgage lenders haven’t been able to effectively adapt to the changing labour market, therefore increasing the demand for alternative financing options for this next generation of workers,” he added.
Little warned that the trend shown by the additions to mortgage regulations is representative of an ongoing failure “to adapt to the changing face of today’s work force.”
“Layer in the fact that many of the assets generally acquired through financing – leisure goods and services, and, in particular, housing – are increasing in value, and we get a clear image of an economy in which tens of thousands of potential borrowers are being left on the sidelines. In short, conventional mortgage lenders and their regulations are systematically undervaluing a gig worker’s hustle.”