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The affordable housing crisis is hurting many Canadians, from the country’s most vulnerable populations to middle-class people who can no longer afford to live in the communities they work in.
In the nation’s two most expensive real estate cities, the rental vacancy rate is extremely low, nearing 1 per cent in both Vancouver and Toronto, according to the most recent Rental Market Survey by the Canada Mortgage and Housing Corp. (CMHC). The average monthly rent there for a two-bedroom unit was $1,552 and $1,404, respectively. But, this affordability crunch is not limited to Canada’s two largest cities. Victoria and Kelowna in B.C. and Kingston, Ont., all face similar problems.
“Currently, around 1.7 million Canadian families don’t have a home that meets their basic needs or that they can afford,” says Robyn Adamache, CMHC’s client relations manager for multi-unit insurance in B.C. “Renting can be a good housing option, but only if there are units available in the right places and price ranges. A stable supply of rental housing is critical to meet Canadian’s housing needs.”
A new federal program is addressing this lack of affordable rental housing for middle-class Canadians in cities where a growing population is pushing vacancy rates lower and rents higher.
The Rental Construction Financing initiative (RCFi) — part of the federal government’s $40-billion National Housing Strategy (NHS) — will create 14,000 new rental units across Canada with $3.75-billion in financing available to municipalities, developers and not-for-profit organizations.
“This initiative supports the construction of sustainable apartment projects in areas where there’s a need for additional rental supply,” says Adamache.
The RCFi, which is administered by CMHC, has received over 150 applications since it began in April 2017. Of those applications, 14 construction projects are underway and another 50 are in various stages of approval.
“This particular program is more geared toward affordable housing for middle-class Canadians,” says Adamache. “Trying to make it so that middle-class people in larger centres are able to work and live in the same community, increase their quality of life and spend more time with their family.”
The RCFi is managed separately from other NHS programs, such as the $15.2-billion National Co-Investment Fund aimed at Canada’s more vulnerable populations, including women and children fleeing violence, seniors, Indigenous peoples and veterans.
Adamache says the RCFi, which ends in March 2021, has attracted a great deal of interest from developers and non-profit organizations.
“I’ve had some proponents say to me, ‘This is amazing. This actually makes building rentals viable again.’”
To date, 14 rental construction projects have shovels in the ground after receiving low-cost loans from the RCFi. For example, Urban Core Ventures received $21.1-million in financing to build a five-storey, 47-unit building in Victoria, where the vacancy rate was 0.7 per cent.
Adamache says the head of Urban Core Ventures was initially planning to build condos at the site in Victoria, but he was able to “pivot to much-needed new rental supply thanks to being able to secure low-cost financing that made the project work for him.”
In Ottawa, where the vacancy rate is 1.7 per cent, Claridge Homes is building a 27-storey building with 227 units after securing $70.8-million in financing. In addition, Centretown Citizens Ottawa Corp., also located in Ottawa, is constructing a 16-rental unit passive building (a building that meets rigorous energy efficiency standards) after getting a $3.9-million loan.
“The [RCFi] loan from CMHC made this project viable and helps us provide more affordable housing,” said Bill Rooney, president of Centretown Citizens Ottawa, in a statement announcing the project last month.
The federal government has also invested $13.6-million in a 161-unit project in Calgary and $2.1-million in a 22-unit building in Kitchener, Ont.
Every project must meet the minimum eligibility requirement and will be prioritized based on exceeding RCFi’s criteria on viability, affordability, accessibility and energy efficiency, Adamache says.
Each one is expected to achieve at least a 15 per cent decrease in energy intensity and greenhouse gas emissions modelled against the 2015 national codes (NECB or NBC), she says. A minimum of 10 per cent of rental units in each project must meet or exceed the local accessibility standards, as well as have barrier-free common areas.
A minimum of 20 per cent of units must have rents at or below 30 per cent of the median household income for that area plus the proponent must show that the total residential rental income of the building is 10 per cent below what it could potentially earn at market rates (via an accredited appraisal), and the affordable rents have to be maintained for a minimum of 10 years, Adamache says. Alternatively, the affordability requirement may be met if the proposal has been approved under another government’s housing program/initiative that provides support for the development of affordable rental housing such as capital grants, municipal concessions, etc. Affordability must be maintained for a minimum of 10 years.
Through CMHC, the Government of Canada is helping create a supply of rental housing where there is a demonstrated need for additional units by providing low-cost loans during the earliest phases of development including construction, lease-up and the early stages of property operations. They expect these loans will help create more than 14,000 new rental-housing units across Canada. The RCFi loans offer low-cost, 10-year fixed rate terms, up to 50-year amortizations and flexibilities in its underwriting requirements. In addition, the approval of each loan includes a CMHC mortgage loan insurance coverage which will lower the cost of borrower over the life of the project.
The project in Victoria, which is walking distance to downtown, will achieve energy efficiency savings of 18 per cent, have five fully accessible units and up to 21 units will rent well below 30 per cent of the median household income for 15 years.
“The government’s strategy is more than just building new rental units,” Adamache says. “We’re also trying to create homes that are affordable, energy efficient and accessible. And we want communities where people can live close to jobs, schools, public transit and other services.”
A stable supply of rental housing is critical to ensure that more Canadians have access to housing that meet their needs. There’s still time and money to submit an application for the construction of new affordable rental housing. Learn more about the RCFi, its eligibility requirements and how to apply online at cmhc.ca/financinginitiative. Loan commitments are available through March 2021.
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