Ottawa making financing cheaper for more builders to spur rental construction

The effort to offer cheaper mortgage rates to more builders comes as construction costs have ballooned in recent years amid expensive materials and rising interest rates.

The Liberal government’s latest plan to get more rental housing built is to expand a program that helps developers secure cheaper mortgage rates as higher interest costs affect the viability of new projects.

Finance Minister Chrystia Freeland announced Tuesday that the federal government is expanding the annual limit for the Canada Mortgage Bonds program to $60 billion from $40 billion previously.

Builders who access the Canada Mortgage Bonds program have their loans secured by the federal government. That lowers the risk for lenders, who are able to offer interest rates on financing that are typically one to two percentage points lower than market mortgage rates, according to Freeland.

Expanding the availability of cheap financing in the market would add an estimated 30,000 rental units to Canada’s housing stock annually, according to Ottawa’s projections.

Purpose-built rental projects with five or more units will qualify for the bonds. Freeland said the expansion will take effect immediately and have “no fiscal impact” on the government’s books.

“We’re just adding some juice to a program that already exists,” she told reporters on Tuesday.

“We don’t have to invent new things. We simply will have more financing available for a program which we know already works and is already playing an essential, even fundamental role in the multi-unit rental construction market.”

There are no quotas for affordable or otherwise below-market rental units to be included in the proposed projects for builders to access the bonds.