Today, the Canada Mortgage and Housing Corporation is best known for insuring mortgages; tomorrow, it may better known for helping catalyze construction of purpose-built rental buildings.
A few programs with steep incentives are on offer for developers, one of which is called Flex Financing in which loans up to 95% can be secured with lower interest rates and premiums, and with amortization stretched to 40 years.
“I would say when we look at multiunit loan insurance programs, it’s quite a wide spectrum,” said Carla Staresina, vice president of client relationship management. “Start at insurance for anyone wanting to build multiunit from the far end of the spectrum and then we go to the multiunit flex insurance loan program, where we have increased loan to value, possibly some decreases in premiums, longer amortization, and the mortgage loan insurance flex financing.
“Then it goes into what we call the Rental Construction Financing Initiative, which is a direct loan, and higher degrees of affordability are needed and higher degrees of accessibility are needed.”
Concluding in 2021, CMHC has up to $3.75bln to finance rental construction with low-cost loans in locales throughout the country that demonstrate dire need.
The National Housing Strategy (NHS), unveiled late last year by the federal government, gives CMHC a central role in financing the construction of much-needed rental units.
“We’ve always been involved with multiunit mortgage loan insurance, but we have more programs available now to the National Housing Strategy, and we’re most definitely trying to increase the supply of purpose-built rentals,” said Steresina. “I want to make this clear: It’s not a shift from homeownership to rental; it’s just making sure both demands are being met and that we have the products to fill those demands, depending on where people live and the affordability needs they have.”
Between 2016 and 2017, CMHC’s bulk portfolio insurance sold to banks declined nearly 80%, and homeowner insurance volumes fell 23%. While socially-minded programs have always been part of the organization’s DNA, the NHS has amplified those efforts.
According to Daniel Johanis of DLC Mortgage Centre, CMHC’s programs for rental construction are excellent products for any broker to have access to.
“CMHC looks like they’re diversifying their portfolio and reducing their exposure,” said Daniel Johanis, a DLC Mortgage Centre broker. “It kind of makes sense if we’re in a squeeze right now, trying to figure out appropriate housing, and the rental market is tight right now. It’s a good way to incentivize developers to build affordable rental housing. Up to 95% is pretty attractive for anybody looking to get into rental apartments.”
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