Affordable and not-for-profit housing initiatives in Canada’s Housing Action Plan: A comprehensive overview

December 13, 2023 | David Tang, Noah D. Gordon, Safa Warsi

On November 21, 2023, the Deputy Prime Minister and Minister of Finance tabled the 2023 Fall Economic Statement (“Statement”) which outlined “Canada’s Housing Action Plan” (the “Action Plan”). The Action Plan is the Canadian government’s current roadmap for supporting and building a strong economy in areas ranging from housing supply and cost of living, to tax reforms. One key focus of the Statement and the Action Plan is tackling Canada’s housing crisis by making housing more affordable and accessible.

The Statement sets out the various measures the federal government is taking in the Action Plan to “build more homes, faster, while protecting renters, buyers, and homeowners”.  This article addresses each of the primary measures so affordable, rental, co-operative, not-for-profit or charitable housing proponents can better understand what they are, how they work, and whether they can be accessed.

1. Increasing housing supply

Fast-tracking the building process

What it is: The Statement provides an update on the Housing Accelerator Fund (“HAF“), a $4 billion fund that launched in March 2023 aimed at fast-tracking the building of at least 100,000 new homes across the country through incentive funding to local governments. Incentive funding can be used for prescribed uses falling under four categories: (1) investments in affordable housing; (2) investments in housing-related infrastructure; (3) investments in community-related infrastructure that supports housing; and (4) investments in HAF Action Plans.

How it works: Local governments with delegated authority over land use planning and development approvals were eligible to apply for the HAF between March 2023 and August 18, 2023. Government applicants with populations over 10,000 applied via the large/urban stream while those with populations under 10,000 applied via the small/rural/north/indigenous streams.

What it means: Nine cities already have HAF Agreements in place: London, Vaughan, Hamilton, Brampton, Kitchener, Halifax, Kelowna, Calgary, and Moncton. The HAF supported the building of over 21,000 homes in growing cities over the next three years. With more HAF agreements with governments expected to come, including a recent agreement reached with the Province of Quebec worth $1.8 billion, the federal government anticipates it will exceed its goal of building 100,000 homes.

The application process for housing providers is established by each of the municipalities that receives HAF funding. Each municipality will have its own action plan for how the funding will be allocated, including specific initiatives.  The federal government may or may not approve the full amount requested.

The City of Hamilton’s plan provides an example of what those action plans can look like.  It applied for $123 million in funding, but was approved for $93.5 million. In its Action Plan, Hamilton proposed that the funds would be allocated as follows: 15% to support HAF initiatives; 45% to the City’s Affordable Housing Funding Program to support investment in the development of new affordable housing led by not-for-profit organizations; and 40% to eligible infrastructure and planning projects to support new housing.

Funds are essentially earmarked for certain initiatives through the municipalities’ action plan, with specific allocation to be left to the discretion of the municipalities later. Providers of new projects will need to enquire with and likely monitor the relevant municipality to see when it will release details of when and how to apply, including details for any required Request for Proposal (“RFP“) processes.

Investments in the Canada Mortgage and Housing Corporation (CMHC)

What it is: The CMHC is Canada’s national housing agency whose goal is to make mortgage loans affordable for Canadians through its various initiatives. The Action Plan includes increasing CMHC’s annual limit of support for low-cost financing by providing a $20 billion per year increase to the Canada Mortgage Bond (“CMB“) issuance limit, up from $40 billion. The CMB allows approved financial institutions to more easily make loans, by insuring mortgage loans on multi-unit rental projects.

How it works: CMB bonds are issued through Canada Housing Trust No.1 (“CHT“), which is a special purpose trust. The bonds are then sold to investors around the world, and the proceeds are then used to purchase insured eligible residential loans, through the National Housing Act Mortgage-Backed Securities Program.

Eligible rental projects must have at least five rental units and can include apartment buildings, student housing, and senior residences. The CMHC has a number of funding options depending on the type of project being built. Details about those projects and the application portal can be found CMHC website.

What it means: The increase in the annual limit will allow the CMHC to provide more low-cost financing for rental housing providers. The new increase is intended to facilitate up to 30,000 more rental apartments each year.

Increasing financing for apartment construction

What it is: The Statement announced $15 billion in new loan funding, starting in 2025-2026, for the Apartment Construction Loan Program (“Loan Program“), which is the proposed revamping of the current Rental Construction Financing Initiative (“Financing Initiative“). The details of the Loan Program are to be announced in 2024. Details of when it will be renamed and what the new program will look like will likely be released in the middle of 2024. In the meantime, under the current regime, the Rental Construction Financing Initiative, continues to apply.

The $15 billion augments the $25 billion previously allocated to the program, bringing the total funding to $40 billion. The interest rates for loans advanced by the Loan Program will likely be announced in 2024. Given the recent rising interest rates, these measures are intended to make it more economically feasible to build.

How it works: The current Financing Initiative provides low cost funding to borrowers with a minimum loan size of $1 million for a project which responds to the rental supply needs. To receive funding, certain affordability criteria must be maintained for at least 10 years, the project must meet energy efficiency and consumption standards and accessibility requirements. Eligible borrowers include for-profit and not-for-profit developers and municipalities.  Projects made in collaboration with non-profit Urban Aboriginal Groups or municipalities will be prioritized for these loans. Loans under the Financing Initiative are provided for a 10-year term at a fixed interest rate, with the rate locked in at first advance. Loans are available for up to 100% loan-to-cost for residential construction and up to 75% loan-to-cost for non-residential construction. Interest only payments would be paid by the borrower from the obtaining of occupancy permits until the project achieves 12 consecutive months of stabilized effective gross income. The loan will be administered by Canada Mortgage Loan Services Limited (CMLS), an external service provider.

The Financing Initiative, as it is currently known, is still available for applications through the CMHC website.

What it means: Housing providers will follow the procedure below to access a loan:

  1. Before applicants apply to the Financing Initiative, they will work with a CMHC specialist to gather the relevant information (i.e., project budget, project summary, etc.) for the application. After receiving confirmation from the specialist, the application can be submitted online.
  2. The application will be reviewed for eligibility by the CMHC and strong applications will be prioritized based on scoring criteria. Strong projects will:
    1. meet or exceed the minimum financial viability, affordability, energy efficiency, and accessibility requirements;
    2. demonstrate greater social outcomes that contribute to vibrant, socially inclusive neighborhoods; and
    3. address a need for supply in the market.
  3. Applications will either be rejected, kept on hold, or selected for underwriting. If selected for underwriting, applicants will receive a conditional commitment letter within 60 days of their application.
  4. Applications will then go through the underwriting process by CMLS, after which the application fee will need to be paid. The application fee can be anywhere from $200 to $55,000 on the residential portion of a project, depending on the project size.
  5. Within 265 days of providing the required documentation to CMLS, the CMHC will review the application once again, and consider the underwriting assessment and the market among other factors. If successful, the applicant will receive a Letter of Intent.
  6. Once the applicant signs the Letter of Intent, within approximately 40 days, the loan agreement will be issued. Once the agreement is executed by the borrower, the funding process will begin.
  7. On the expiry of the 10-year term of the loan, the borrower must transfer the mortgage to a National Housing Act Approved Lender.

Investments in building affordable housing

What it is: The Statement announced a commitment of $1 billion over three years, starting in 2025-26, for the Affordable Housing Fund, which is the proposed revamping of the current National Housing Co-Investment Fund. The details of the new Affordable Housing Fund are to be announced in 2024. Details of when the program will be renamed and what the new program will look like will likely be released in the new year. In the meantime, the current regime (the National Housing Co-Investment Fund) continues. This new investment is designed to allow non-profit, co-op, and public housing providers to build more than 7,000 homes by 2028.

How it works: The National Housing Co-Investment Fund provides capital, in the form of loans and top-up contributions, to organizations that have partnered with another level of government and have secured some funding. Capital is to be used for the building of new affordable housing or the renovation and repair of existing affordable and community housing. Funds are provided as low-interest and/or forgivable loans and contributions. Repayable loans can have a term of up to 20 years, with an initial term of 10 years fixed at a below-market interest rate locked in at the beginning of the term. The National Housing Co-Investment Fund has not indicated exactly what the interest rate will be.

If such a loan is renewed, the interest rate will be reset at the end of the initial term and fixed for another 10-year term. According to the Statement, in the first six years, the National Housing Co-Investment Fund committed funding to repair or renew nearly 129,000 homes and support the construction of more than 31,500 new homes.

This investment is available to community housing providers, municipalities, provinces/territories, indigenous governments and organizations, and the private sector. The following types of projects are considered for funding: community and affordable housing, urban indigenous community housing, mixed-use market/affordable rental, new constructions and/or conversion from a non-residential use to affordable multi-residential, shelters and transitional and supportive housing.

Applications for repayable loans will be considered before those seeking forgivable loansThe projects must meet financial viability, energy efficiency and accessibility requirements. The minimum affordability requirements mandate that rents for at least 30% of the units must be less than 80% of the Median Market Rent and maintained for a minimum of 20 years.

The National Housing Co-Investment Fund, as it is still known, is still available for applications through the CMHC website.

What it means: Projects that aim to provide a greater depth of affordability in a greater number of units, greater energy efficiency, a greater level of accessibility in a greater number of units, and provide close proximity to public transit will be given priority. Projects will also be evaluated preferentially if they focus on providing community resources, collaborate with other groups (including Indigenous groups) and developers, provide supports and services for tenants on site, and support priority populations (women and children escaping domestic violence, seniors, Indigenous peoples, those with disabilities and addiction issues, houseless, etc.).

Housing providers will follow the procedure outlined below to access a loan:

  1. Before applicants apply for the National Housing Co-Investment Fund, they will work with a CMHC specialist to gather the relevant information and complete the required forms. After receiving confirmation from the specialist, the application can be submitted online through the CMHC portal.
  2. After submitting the application, CMHC will contact the applicant within 14 days if any additional information or clarification is needed.
  3. Within 30-120 days from submitting the application, a credit risk assessment will be completed. Applications will be assessed on the basis of their financial viability, whether they meet the minimum requirements for the program, what socio-economic outcomes they will achieve, the needs of the local community, and funding availability. Relevant provinces and territories will also be consulted.
  4. If successful, applicants will receive a Letter of Intent, which is a conditional funding requirement. If the letter sets out conditions that need to be satisfied, the applicant must fulfill them within 60 days. After the conditions, if any, are satisfied, within approximately 30 days, the application will go through the final approval process.
  5. CMHC will then prepare the loan documents within approximately 40 days. The applicant must accept and return the executed loan documents within 30 days of receipt.
  6. Assuming all conditions are satisfied, the applicant will be able to submit a draw request to CMHC. The draw request must be submitted 10 days before the drawdown date specified in the loan documents, and must be accompanied by:
    1. a current project status report prepared by the applicant’s own Quantity Surveyor/Cost Consultant;
    2. the drawdown notice;
    3. the project status certificate;
    4. the project consultant’s certificate;
    5. a notarized CCDC statutory declaration (declaration of payment distributions by a contractor); and
    6. any other documents that were provided for in the loan documents.

Removing GST from new rental and co-op housing

What it is: The Statement provides that the federal government is creating financial incentives to build more homes, faster, by removing the Goods and Services Tax (GST) from new purpose-built rental housing projects, such as apartment buildings, student housing, and seniors’ residences.

How it works: This incentive would only apply to projects that begin construction between September 14, 2023, and the end of 2030, and that complete construction before 2036. The intent of this incentive is to encourage rapid construction.

Co-operative housing corporations that provide long-term rental accommodation would also be eligible for the removal of the GST on new rental housing, provided the other conditions have been met. The incentive does not apply to co-operative housing corporations where occupants have an ownership or equity interest.

The incentive will not apply to substantial renovations of existing residential complexes (this is to avoid ‘reno-victions’). The intent behind this exclusion is that doing so would defeat the intent of creating new supply of housing.

This action is being implemented through new legislation to amend the Excise Tax Act, Bill C-56  (known as the Affordable Housing and Groceries Act), that was introduced on September 21, 2023. Bill C-56 had its second reading on November 23rd and has been referred to the standing committee.

What it means: Proponents of new rental or co-op housing should update their financial projections and perhaps consider the implications to their existing financing or other arrangements.  Consideration should also be given by proponents who may have been considering a different structure for financial reasons, as the elimination of the federal GST can result in a completely different (better) financial picture for the rental option.

Proponents may wish to keep in mind further potential tax incentives. The federal government has called on provinces to remove their sales tax on new rental housing, or goods and services used in their construction. To date, the governments of Ontario, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador have all announced plans to do so. Ontario has not released its legislation yet.  Manitoba and British Columbia have exempted some rental construction costs from provincial sales taxes already.

Advancement of the co-operative housing development program

What it is: The Statement provides for an investment of $309.3 million in new funding for the Co-operative Housing Development Program, launched by the CMHC and other co-op housing partners. The Co-operative Housing Development Program was announced in Budget 2022. $500 million of funding on a cash basis was reallocated from the National Housing Co-Investment Fund to launch the program.

How it works: The program is expected to launch in early 2024.

What it means: The parameters of the program are not known yet. It is expected that more information will be released in 2024.

Utilizing federal lands for housing

What it is: The Statement reiterates the announcement by the Canada Lands Company of a new minimum affordable housing target of 20 percent across projects that they are developing. This target would apply in communities where a municipal minimum requirement of affordable housing is lower or does not already exist. The Canada Lands Company is a Crown corporation which supports development of federal lands.

On November 7, 2023, the federal government announced that six surplus federal properties will be developed into more than 2,800 new homes in Edmonton, Calgary, St. John’s, and Ottawa. Through programs like the Federal Lands Initiative, the federal government has been helping to increase the supply of housing, through heavily discounting the cost of its land in the sale to builders who want to create affordable housing.

Support from the Canada Infrastructure Bank

What it is: The Canada Infrastructure Bank will be announcing details of work they are doing to further support the needs of communities seeking to develop the infrastructure required to build more homes. Further details of what this support will entail will be announced by Budget 2024.

How it works: Budget 2024 will likely receive royal assent in June of 2024, according to trends in previous years.

Further development of Indigenous housing strategies

What it is: Budget 2023 announced the $4 billion Urban, Rural, and Northern Indigenous Housing Strategy.

How it works: The strategy will be developed with Indigenous partners and launched in 2024. The strategy will complement the 3 existing distinction-based housing strategies: First Nations Housing and Related Infrastructure Strategy, the Inuit Nunangat Housing Strategy and the Métis Nation Housing Sub Accord.

Creation of the Department of Housing, Infrastructure and Communities

What it is: The Statement provides that the federal government proposes to introduce legislation to establish the Department of Housing, Infrastructure and Communities (currently known as Infrastructure Canada). The purpose of this change is to recognize the link between housing and infrastructure and acknowledge the way that infrastructure is used to support the creation of more homes.

How it works: At the time of this article, this legislation has not yet been introduced.

2. Helping Canadian Residents to Rent, Buy, and Own Homes

Recognizing and strengthening local prohibitions of short-term rentals

What it is: The Statement announces that the federal government will be denying income tax deductions for expenses incurred to earn short-term rental income, including interest expenses, for short-term rental businesses in municipalities that have prohibited short-term rentals. Deductions will also be denied in cities where short term rentals are permitted if the taxpayer has not complied with provincial or municipal licensing, permitting, or registration requirements.

Furthermore, $50 million over three years starting 2024-25, has been proposed to support municipal enforcement of restrictions on short-term rentals.

How it works: The income tax measures would apply to all expenses incurred on or after January 1, 2024.

What it means: The intent of this measure is to support municipalities with enforcement of regimes that incentivize operators to return units being operated as short-term rentals back to long-term housing.

The new Canadian Mortgage Charter

What it means: The Statement announces the new Canadian Mortgage Charter (the “Charter”). The Charter is aimed at financial institutions and provides guidance for how they are to provide relief and ensure that mortgage payments are reasonable. In particular, those who have a mortgage on their personal residences will receive fair, reasonable, and timely mortgage relief measures from federally-regulated financial institutions. For example, financial institutions are to proactively reach out to vulnerable borrowers and support them through difficult times. Most of these rules are based on the Guideline on Existing Consumer Mortgage Loans in Exceptional Circumstances, published by the Financial Consumer Agency of Canada in July.

How it works: The rules of the Charter are published in the Statement. Through the Charter, Canadians can expect that financial institutions will:

  • Allow temporary extensions of the amortization period for mortgage holders at risk;
  • Waive fees and costs that would have otherwise been charged for relief measures;
  • Not require insured mortgage holders to re-qualify under the insured minimum qualifying rate when switching lenders at mortgage renewal;
  • Contact homeowners four to six months in advance of their mortgage renewal to inform them of their renewal options;
  • Give homeowners at risk the ability to make lump sum payments to avoid negative amortization or sell their principal residence without any prepayment penalties; and
  • Not charge interest on interest in the event that mortgage relief measures result in a temporary period of negative amortization.

3. Increasing Labour to Build Homes

More international labour mobility

What it is: The Statement announces that the federal government will be working to remove barriers to international labour mobility. Construction is one of the areas of focus identified as a sector where more workers are needed.

How it works: Steps to remove barriers include initiatives such as expanding on programs that improve the mobility of tradespeople and eliminate barriers caused by red tape such as duplicative credential recognition. The federal government will also work on ensuring that there is interprovincial mobility for workers.

Prioritizing construction workers for permanent residency

What it is: In May 2023, a new selection process under the Express Entry immigration system prioritized permanent residency applicants with specific skills and work experience in the construction sector. The Statement affirms that since May, 2023, 1,500 workers with trade experience have been invited to participate in the permanent residency process. Applicants with experience in the following trades were prioritized: carpentry, electrical, welding, plumbing, contracting and more.

Should you have any questions regarding this article or related matters, please feel free to reach out to a member of Miller Thomson’s Municipal, Planning & Land Development or Social Impact Groups for more information.


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