$500 million in new federal financing for 1,100 rental homes in Vancouver

Construction of the MC2 residential towers near SkyTrain Marine Drive Station in South Vancouver. The complex reached completion in 2016. (romakoma/Shutterstock)

Another major infusion of low-cost construction financing for secured purpose-built rental housing from the federal government is on its way to Vancouver.

Last week, Canada Mortgage and Housing Corporation (CMHC) announced it would provide a combined total of $500 million to help deliver 1,100 new purpose-built rental homes within Vancouver towards completion.

This is being funded through the federal government’s Rental Construction Financing Initiative (RCFi), which provides private and non-profit developers with repayable loans at a lower interest rate than what the market, such as banks and investors, would otherwise provide.

This follows CMHC’s announcement in early August about providing $208 million in low-cost construction financing for three projects generating a total of 422 new rental homes.

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However, the latest announcement to support the construction of 1,100 further new rental homes did not provide precise details on the locations of the recipient projects and the construction financing allocations. This will be announced at a later date.

The federal government’s construction financing program for rental housing mainly targets the needs of middle-income working households. Eligible projects must also have an affordable housing component, such as setting aside at least 20% of the units with rents 30% below the median total income of an area or falling under another affordable housing program approved by any level of government.

“We must increase the supply of housing. Doing so requires an all-hands-on-deck commitment from all levels of government,” said Sean Fraser, the federal Minister of Housing, Infrastructure, and Communities, in a statement.

“The federal government will continue to make strategic investments through programs like the RCFi and the Housing Accelerator Fund while working with our provincial and municipal partners so that all Canadians have a safe place they are proud to call home.”

Mayor Ken Sim added: “The City of Vancouver is committed to ensuring Vancouverites have a place to call home. That is why it is encouraging to see the CMHC providing much-needed support to increase rental spaces through investment initiatives like the RCFi to help build the spaces residents need, from rentals and co-ops to supportive housing.”

The Bank of Canada’s consecutive policy interest rate hikes are intended to slow down inflation and the previous heightened real estate market activity, but they have also had the effect of greatly increasing the cost of borrowing for all aspects, including construction financing.

With higher borrowing costs and escalating construction costs for building materials and labour, projects are increasingly at risk of becoming financially unviable, with rental housing being particularly vulnerable.

Secured rental housing vacancies in Metro Vancouver are now hovering at or below 1%, with low new supply, high immigration volumes, a growing number of international students, and poor attainable homeownership opportunities keeping vacancies extremely low and propelling rents.

A recent market update shows the average rent for a one-bedroom unit in Vancouver has now climbed past $3,000 monthly, based on the compiled data for at least one online listing website.

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