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Prime Minister Justin Trudeau speaks during an announcement and groundbreaking ceremony at the Squamish Nation's Senakw housing development site in Vancouver on Sept. 6, 2022.DARRYL DYCK/The Canadian Press

The giant Senakw development by the Squamish Nation could not have proceeded as an all-rental project if the federal government hadn’t provided a $1.4-billion low-cost loan, its co-developer says.

Instead, a significant number of for-sale condos would have been necessary, the number of rentals would have had to be reduced, and likely no apartments could have been rented at below-market rates.

Without the loan, “the development of the Senakw lands would have had significant challenges in providing 100 per cent of its units as rental housing, and strata leasehold condominiums would likely have had to be included,” Squamish Nation council chair Khelsilem said.

When the loan was announced on Sept. 6, some critics said it was given under old criteria that Canada Mortgage and Housing Corp. (CMHC) has had in place the past four years. Many housing experts and non-Liberal politicians said these rules require very little in the way of affordable units in return for the loans that save developers millions in financing costs.

It’s unclear what the savings will be for Senakw. CMHC said that it cannot comment on the interest rate for any specific loans under its Rental Construction Financing Initiative (RCFI), but that the rate is generally lower than in the private sector and can involve other favourable terms besides the interest rate.

The Liberals had promised in the spring to increase the affordability requirements dramatically and that, under new criteria, 40 per cent of the apartments in a project would have to rent at below-market rates, and those rents would be lower than under current rules.

But the 11-tower, 6,000-unit Senakw project, which is getting the loan to help finance the first half of the development, will still provide more affordability than anything else, Khelsilem said. The Squamish Nation is co-developing the project with builder Ian Gillespie’s Westbank Corp.

Khelsilem said the first phase will have 281 apartments that will be rented at what CMHC has defined as the average rent. (That is lower than the typical rent for new apartments, because it includes many older units for which increases are restricted under provincial rules.)

CMHC says those average rents for 2021 are $1,346 for a studio apartment, $1,520 for a one-bedroom, and $2,104 for a two-bedroom.

Ultimately, 20 per cent of the 3,000 apartments in the first two phases – 600 in total – will have lower-than-market rents, rather than the 40 per cent the new rules would require.

Trudeau and Squamish Nation councillor Khelsilem arrive for the groundbreaking at the First Nation's Senakw housing development site.DARRYL DYCK/The Canadian Press

The project will not gear its rents to local household incomes, which CMHC allows. That formula produced most of the criticism, because some rents could be set far higher than local averages.

Others in the development industry also say it seems likely Senakw would have had to reduce the number of rentals without the loan.

“It’s probably realistic to say it would have had more condos built. Many renters will benefit from being able to live there,” said Luke Harrison, the chief executive officer of non-profit Catalyst Developments. Two of his projects have had loans from the same fund as Senakw, and he said they were key to making rentals work.

Mr. Harrison and others say it’s becoming harder by the day to move ahead with rental projects in the current climate of rising interest rates, construction costs and, as of last week in B.C., another below-inflation limit on rent increases.

That means that it’s unlikely that rentals could proceed if CMHC demanded more affordability.

“With rental, it’s really a fine line and it’s been getting worse,” said Tim Grant, the president of PCI Developments. Not only do companies receiving the loan have to commit to charging 10 per cent less for rent over all than what they could get on the open market, but they also have to meet energy-efficiency criteria. “We’re trying very hard to keep going with rental, but it’s very difficult. If there are any more bumps, it will be even harder.”

Mr. Grant’s company received RCFI loans for two apartment buildings at Hastings Street near Boundary Road, now under construction, and he is hoping a future project in Vancouver will qualify.

Development consultant Michael Mortensen, the founder of Liveable City Planning Ltd., said some of his clients and others are quietly putting rental projects on hold because they can’t make the numbers work as financing costs have risen.

“We had this window of opportunity at great rates and that window has closed,” he said.

Mr. Mortensen noted that CMHC’s own recent research, done since the spring budget promise, has shown that any attempt to bump up the affordability requirements under current conditions would likely mean developers will stop applying. That will mean fewer apartments getting built at a time when Metro Vancouver has a vacancy rate of almost zero and international students and immigrants are flooding back as pandemic restrictions ease.

Rental-construction applications and the pace of construction-financing loans from CMHC have slowed as developers have found that, even with the financing, they can’t make projects break even.

CMHC has provided $912-million in loans to 16 B.C. developers in the past four years to projects with a total of 1,965 apartments – about two-thirds of the size of the Senakw loan and development.

Before last week’s announcement, the highest amount had gone to local developer Wesgroup in July last year, $349-million for 386 apartments in New Westminster and Vancouver. The only other Indigenous development to get a loan before Senakw was the Musqueam project Lelem being built at the University of B.C.

But no other loans had been announced in the past year after Lelem was provided with $88-million for its 175-unit project.

An earlier version of this article referred to $912-billion in loans, when it should have said $912-million. This version has been corrected.