By Robb M. Stewart
OTTAWA–Canada’s government is raising the annual limit for mortgage bonds by 20 billion Canadian dollars, the equivalent of about US$14.9 billion, in an effort to unlock financing for the construction of rental apartments to boost much-needed housing supply.
To ensure builders have low-cost financing to build more rental projects, the government is increasing the mortgage-bond issuance limit to C$60 billion a year and designating the increased amount for funding mortgage loans on multi-unit rental projects insured by Canada Mortgage and Housing Corp., Deputy Prime Minister and Minister of Finance Chrystia Freeland said Tuesday.
Eligible projects must have at least five rental units, and can include apartment buildings, student housing and residences for seniors.
Freeland said there is currently unmet demand from developers and builders to access low-cost financing, which is preventing them from building rental apartments.
Last week, Freeland introduced legislation to remove the goods and service tax on new rental housing construction across the country. The bill would increase the GST rental rebate to 100% from 36% and remove existing GST rental rebate phase-out thresholds for new rental housing projects.
The change to the mortgage-bond limit will support financing of new housing by providing mortgage-loan insurance and securitization. CMHC mortgage-loan insurance supports the construction, purchase, and refinancing of properties by protecting lenders against loss from mortgage default, which is aimed at helping to lower borrowing costs for builders and ease access to capital.
As well, the federal government said CMHC would launch consultations with the housing financing sector to help find potential additional solutions to boost Canada’s rental housing supply.
Write to Robb M. Stewart at [email protected]
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