Feds add $20B to mortgage bonds program to spur rental construction
The federal government has added $20 billion to its annual Canada Mortgage Bonds program in an effort to make more low-cost financing available for companies that want to build multi-unit residential rental construction.
Finance Minister Chrystia Freeland announced the expansion on September 26. The funding increase sees the annual bond limit rise from $40 billion to $60 billion. The government expects the move will spur the construction of as many as 30,000 more rental apartments annually.
“Today’s announcement to unlock up to $20 billion in low-cost financing for rental construction is the next step in our plan to do exactly that—and we will continue working to help make housing more affordable for Canadians from coast to coast to coast,” Freeland said.
Canada Mortgage and Housing Corporation (CMHC) and the Canada Mortgage Bond program support the low-cost financing of new rental housing by providing mortgage loan insurance and securitization.
There is currently unmet demand from developers and builders to access low-cost financing, which is preventing them from building much-needed rental apartments. With the federal government announcing earlier this month that it would removing the Goods and Services Tax on new rental housing, the demand for financing is expected to further increase.
Indeed, according to data on the CHMC website, the Crown corporation has hit or come close to the $40 billion cap in mortgage bond sales in every year since 2007. Demand in 2020 exceeded $53 billion.
To be eligible for bond financing, rental projects must have at least five rental units and can include apartment buildings, student housing, and senior residences.
“If you are a home builder, we want you to build,” said Housing Minister Sean Fraser. “We are going to help by changing the financial equation. Given the cost pressures home builders are facing, this will ensure projects go ahead that otherwise would have sat on the shelf. Today’s announcement is a signal to the market. If you’re in the business of building homes, it’s time to get shovels in the ground.”
The government also announced that CMHC will launch consultations with the housing financing sector in order to inform potential additional solutions to increase Canada’s rental housing supply.
Those consultations are expected to help determine the best use of mortgage insurance and securitization policy levers in order to support the rental housing sector in the medium- to long-term.
This includes how to best increase Canada’s supply of housing, promote efficiency and competition in the housing finance market, and contribute to the stability of the financial system.