Federal government adds $20 billion annually for financing to build new rental housing
With growing real construction costs due to inflationary prices on equipment, labour, and materials, coupled with high borrowing costs, the federal government has increased the annual limit for its Canada Mortgage Bonds program by 50%.
This is an increase of $20 billion from $40 billion to $60 billion annually, which will provide low-cost, repayable construction financing for new multi-family, secured purpose-built rental housing. It is estimated the move will help catalyze up to 30,000 more rental homes per year.
To be eligible, such projects must have at least five rental homes, which can include apartment buildings, student housing, and senior residences.
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“If you are a home builder, we want you to build. 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,” said Sean Fraser, the federal Minister of Housing, Infrastructure, and Communities, in a statement.
“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.”
With the cost of borrowing growing for construction financing needs, more secured rental housing projects are increasingly at risk of being delayed, cancelled, or even being converted to more lucrative development opportunities such as ownership condominiums.
It is noted that the annual limit increase for the program will have no fiscal impact on the federal government, and will not increase Canada Mortgage and Housing Corporation’s (CMHC) Multi-Unit Mortgage Loan Insurance premiums.
“CMHC Multi-Unit Mortgage Loan Insurance supports the construction, purchase, and refinancing of residential properties by protecting lenders against loss from mortgage default, helping to lower borrowing costs for builders, and facilitating access to capital. CMHC securitization programs offer lenders inexpensive and reliable access to funding, which results in competitive rates charged to builders,” reads the program details.
As another measure to help rental housing projects reach the realm of financial viability, earlier this month the federal government announced its decision to expand the GST rebate on secured purpose-built rental housing construction costs to 100%.
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- Federal government to remove GST from construction cost of rental homes
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- Developer announces plan to build 5,000 rental homes after federal decision to drop GST on construction costs
- $108 million in federal financing for new Oakridge rental housing in Vancouver
- $500 million in new federal financing for 1,100 rental homes in Vancouver