Canada Increases Annual Limit for Mortgage Bonds, Unlocking Low-Cost Financing for Rental Construction
The annual limit for Canada Mortgage Bonds is set to increase from $40 billion to up to $60 billion, according to an announcement made by the Honourable Chrystia Freeland, Deputy Prime Minister and Minister of Finance. This move is part of the Canadian government’s strategy to accelerate home construction and will provide access to low-cost financing for multi-unit rental projects. By expanding the Canada Mortgage Bond program, the government aims to facilitate the construction of up to 30,000 more rental apartments each year.
The Canada Mortgage and Housing Corporation (CMHC) and the Canada Mortgage Bond program play a crucial role in supporting the financing of affordable rental housing by offering mortgage loan insurance and securitization. However, there is currently a significant demand from developers and builders for low-cost financing, which has been hindering the construction of much-needed rental apartments. The removal of the Goods and Services Tax on new rental housing, as proposed in the Affordable Housing and Groceries Act, is expected to further increase the demand for financing.
To address this issue and ensure that builders have access to the necessary low-cost financing to complete rental projects, the government plans to raise the Canada Mortgage Bond issuance limit by $20 billion per year. Additionally, this increased amount will be exclusively designated for funding mortgage loans on multi-unit rental projects insured by CMHC. To be eligible for financing, rental projects must include a minimum of five rental units and can encompass various types of housing, including apartment buildings, student housing, and senior residences.
By providing builders with a clear signal that they can rely on this additional financing, more projects will be able to move forward and contribute to the growth of Canada’s rental housing supply. The government views housing financing as an integral part of its comprehensive approach to tackling the housing crisis. In addition to the increased Canada Mortgage Bond limit, CMHC will also be engaging in consultations with the housing financing sector to explore potential additional solutions for expanding the country’s rental housing stock.
In conclusion, the Canadian government’s decision to raise the annual limit for Canada Mortgage Bonds will have a profound impact on rental construction in the country. By unlocking low-cost financing options, more rental apartments can be built, meeting the growing demand. This move aligns with the government’s commitment to addressing the housing shortage and increasing the supply of quality homes for Canadians.
