Canada Increases Mortgage Bond Limit to Boost Rental Apartment Construction
Canada’s government is taking steps to address the housing supply issue by raising the annual limit for mortgage bonds. In an effort to unlock financing for the construction of rental apartments, the government is increasing the mortgage-bond issuance limit to C$60 billion a year. This translates to about US$14.9 billion.
Deputy Prime Minister and Minister of Finance, Chrystia Freeland, announced that the increased amount will be specifically designated for funding mortgage loans on multi-unit rental projects insured by Canada Mortgage and Housing Corp. Eligible projects must consist of at least five rental units, which can include apartment buildings, student housing, and residences for seniors.
Freeland acknowledged the unmet demand from developers and builders for low-cost financing, which has been hindering the construction of rental apartments. To address this issue, the government introduced legislation last week to remove the goods and service tax on new rental housing construction across the country. The proposed bill includes increasing the GST rental rebate to 100% from 36% and eliminating existing GST rental rebate phase-out thresholds for new rental housing projects.
By increasing the mortgage-bond limit, the government aims to support financing for new housing by providing mortgage-loan insurance and securitization. The mortgage-loan insurance offered by CMHC protects lenders against loss from mortgage default, thereby reducing borrowing costs for builders and improving access to capital.
In addition to these measures, CMHC will initiate consultations with the housing financing sector to explore potential additional solutions for boosting Canada’s rental housing supply.
