Potential construction of affordable rental housing has received a $1.25-billion boost over the next three years in the 2018 Canadian federal budget.
“To help more people find an affordable place to call home, we are working on innovative solutions, like the Rental Construction Financing Initiative that will build 14,000 new rental units across the country,” said Bill Morneau, Canada’s finance minister, during his budget speech.
“This builds on our National Housing Strategy, which will create 100,000 new housing units and repair 300,000 housing units.”
In April 2017, the Canada Mortgage and Housing Corporation (CMHC) launched the Rental Construction Financing Initiative, which is designed to provide $2.5 billion in low-cost loans to “support the construction of new rental housing, relieving pressure in rental markets that are experiencing low vacancy rates.” Budget 2018 commits to increase the amount of the loans available to $3.75 billion until 2021.
While patterns will vary across cities, future demand for affordable rental housing is expected to rise as the population ages, young professionals migrate to larger cities, and immigration continues to grow our communities — Budget 2018.
“This new funding is intended to support projects that address the needs of modest- and middle-income households struggling in expensive housing markets,” budget 2018 reported.
To be eligible, borrowers must demonstrate that their projects are financially viable without ongoing operating subsidies. The initiative prioritizes projects that demonstrate “greater social outcomes and may offer a loan for up to 100 per cent of the cost of these projects,” according to the budget. Borrowers must meet minimum requirements for affordability, energy efficiency and accessibility.
“Lower-cost loans will be provided for terms of up to 10 years, making costs more predictable during the earliest and most challenging phases of development,” it noted.
The government also proposes to provide $113.6 million over the next five years to the CMHC to help expand the Rental Construction Financing Initiative.
“Approximately 30 per cent of Canadians rely on the rental market for housing. While patterns will vary across cities, future demand for affordable rental housing is expected to rise as the population ages, young professionals migrate to larger cities, and immigration continues to grow our communities,” stated budget 2018.
“Unfortunately, high demand for rental housing has not translated into an increase in supply. Vacancy rates remain low in large urban centres such as Toronto and Vancouver—at 1.0 per cent and 0.9 per cent, respectively.”