Canada’s housing market faces numerous challenges, from affordability crises in major urban centers to shortages in available rental units. To address these issues, the Canada Mortgage and Housing Corporation (CMHC) offers a crucial solution ─ mortgage loan insurance for affordable multi-unit and market rental housing. This program not only supports developers and individual property owners but also aims to ensure a steady supply of affordable rental housing across the country.

Understanding CMHA mortgage loan insurance

The CMHA mortgage loan insurance for multi-unit properties is designed to facilitate the financing of rental housing projects. It mitigates the risk for lenders, encouraging them to provide loans to individuals and developers of both affordable and market rental housing. By insuring the mortgage, CMHC guarantees that the lender will be compensated in case of borrower default. This reduces the risk for financial institutions, making it easier for applicants to secure funding at favourable terms.

Key features and benefits

1. Facilitating access to financing

One of the primary benefits of CMHC mortgage loan insurance is the enhanced access to financing it provides. Individuals and developers often face significant challenges in obtaining loans for multi-unit housing projects due to the inherent risks associated with real estate development. With CMHC insurance, lenders are more willing to extend credit, knowing that their investment is protected.

2. Promoting affordable housing

CMHC’s mandate includes a strong focus on promoting affordable housing. Through its mortgage loan insurance programs, CMHC seeks to increase the supply of affordable rental units. This is achieved by offering insurance on loans for projects that include a certain percentage of affordable units, thereby encouraging the inclusion of affordable housing in project plans.

3. Lowering borrowing costs

CMHC mortgage loan insurance can result in lower borrowing costs for anyone creating multi-unit housing. Insured loans typically come with lower interest rates and longer amortization periods, making the financial burden more manageable. This, in turn, can lead to lower rents for tenants, addressing the affordability issue more directly.

4. Supporting market rental housing

While affordable housing is a key focus, CMHC also supports plans for market rental housing. By insuring loans for market-rate rental projects, CMHC helps ensure a balanced rental market where both affordable and market-rate units are available. This balance is crucial for maintaining a healthy and diverse housing ecosystem.

Eligibility and application process

To be eligible for CMHC mortgage loan insurance, applicants must meet specific criteria, including: 

• Property type ─ The program covers a variety of multi-unit properties, including apartments, retirement homes and student housing.
• Project size ─ The project must consist of at least five rental units.
• Affordability ─ For affordable housing projects, a portion of the units must be offered at below-market rents.

The application process involves several steps:

• Initial consultation ─ Applicants are encouraged to consult with CMHC early in the planning process to understand the program requirements and benefits.
• Application submission ─ A formal application is submitted, detailing the project scope, financial projections and other relevant information.
• Underwriting and approval ─ CMHC reviews the application, conducts underwriting and, if the project meets the criteria, issues an insurance commitment.
• Construction and loan disbursement ─ During construction, loan disbursements are made according to the terms of the insurance agreement.

Impact on the housing market

CMHC mortgage loan insurance has had a significant impact on the Canadian housing market. By reducing financial barriers for individuals and developers, it has facilitated the construction of thousands of rental units, contributing to a more robust and diverse rental market. This has been particularly beneficial in high-demand urban areas where rental housing shortages are most acute.

Finally

Innovation is key to CMHC’s ongoing success. To this end, the crown corporation is focusing on energy-efficient and accessible housing, aligning with broader national goals of sustainability and inclusivity. Additionally, CMHC is exploring new financing models and partnerships to further support affordable housing development.

Innovation is key to CMHC’s ongoing success. To this end, the crown corporation is focusing on energy-efficient and accessible housing, aligning with broader national goals of sustainability and inclusivity. Additionally, CMHC is exploring new financing models and partnerships to further support affordable housing development.