Rental Construction Financing
The Rental Construction Financing initiative provides low-cost loans to encourage the construction of rental housing across Canada. It supports sustainable apartment projects in areas where there is a need for additional rental supply. The initiative has a total of $2.5 billion in available loans, and is open from 2017 to 2021.
Loans are available for:
Eligible housing types
The initiative focuses on standard apartment projects in Canada with general occupants. It does not support construction of niche housing types such as retirement homes, single room occupancy, student housing and equity co-ops, nor construction of supportive housing or housing with tenancy restrictions.
First Nations eligibility
Projects situated on a reserve may be eligible for financing if the borrower can demonstrate that enforceable security over the lands can be granted to CMHC.
Each loan offers:
All projects must:
Financial viability requirements
You must have the financial and operational ability to carry the project without ongoing operating subsidies. This includes the capacity to deal with development risks such as cost overruns, delays in construction and lease-up.
Projects must meet the minimum debt coverage ratio (DCR) requirements using an interest rate stress test of 100 bps over the indicative rate provided by your regional CMHC representative.
Social outcome requirements
At a minimum, your project must meet the following social outcomes.
To meet the affordability requirements, you must meet one of the following criteria:
Projects must decrease energy use and greenhouse gas (GHG) emissions to at least 15% below the 2015 National Energy Code for Buildings or the 2015 National Building Code.
If we advance your application to the underwriting stage, we will require a confirmation of the energy efficiency and GHG emissions reduction by a qualified energy professional. See Appendix B of the Required Documentation fact sheet.
At least 10% of the project’s units must meet or exceed accessibility standards as regulated by local codes. In addition, access to the project and all common areas must be barrier-free as regulated by the local codes or the 2015 National Building Code. See Appendix A of the Required Documentation fact sheet.
We accept applications on a continuous basis. Once we review your application, we will notify you of the end-date of the current 60-day prioritization window. We will inform you within 5 business days of the end of this window whether your application was selected for underwriting, retained for the next prioritization window or declined.
Selected applications are subject to approval based on an underwriting assessment of the borrower, the property and the market. CMLS Financial has been contracted to complete the underwriting assessment on CMHC’s behalf.
Prioritization of applications
Factors used to prioritize and select applications for underwriting include social outcomes, readiness for construction, local need for rental supply, financial viability and CMHC’s borrower exposure. Your project’s assessment from the social outcome grid will also assist in determining your projects’ loan to cost.
The Required Documentation provides the minimum information and documentation required when an application is selected for underwriting and before final credit approval.
If your application is selected for an underwriting assessment, the following fees will be required for your application to proceed to underwriting:
If your application is approved and funded, the application fees will be credited back to you through a reduction in the loan’s interest rate.
If your application is declined or withdrawn, we will retain a portion of the fees (minimum 10%) for the underwriting work rendered. Once CMHC has issued a commitment Letter of Intent, we will not refund any portion of the fees, even if the loan is not advanced.
Rental Construction Financing Social Outcome Grid
This tool will help you look at various scenarios by providing some information regarding the proposed project such as costs, financing and sources of equity. The tool will also help you determine if your project meets the mandatory minimum requirements for financial viability, affordability, energy efficiency, and accessibility. In addition to these mandatory requirements, applications will be scored on additional criteria linked to social outcomes. Although a more detailed underwriting will be required when an application is formally submitted, this will give you sufficient information to explore different options.
You must demonstrate how your project will achieve a minimum 15% decrease in energy intensity and Greenhouse Gas (GHG) emissions relative to similar projects constructed to the 2015 National Energy Code for Buildings or the 2015 National Building Code.
At least 10% of units within the project must meet or exceed the local accessibility standards of the municipality, Province or Territory, and the accessibility requirements of the 2015 National Building Code.
What does the financing initiative provide housing developers?
It will provide lower-cost construction loans that will be approved for 10 year terms providing cost predictability during the earliest stage of rental development. In addition, loans through the financing initiative include CMHC mortgage loan insurance. This will simplify the loan renewal throughout the life of the mortgage.
What is the maximum loan amount that an applicant can request?
The financing initiative will prioritize projects that demonstrate greater social outcomes and will potentially offer a loan for up to 100% of the cost of these projects.
Why does the Rental Construction Financing initiative have social outcome eligibility criteria?
The eligibility criteria of project viability, affordability, accessibility, and energy efficiency are to ensure that the subject residential rental property is self-sustaining without government subsidy and that it positively contributes to a vibrant, socially inclusive, neighborhood.
Is there a fee for applying to the Rental Construction Financing initiative?
Yes. Once we have reviewed the initial application, the following fees will be required for the Rental Construction Financing application to proceed to the underwriting assessment:
* In addition to the $55,000 maximum per loan.
If the Rental Construction Financing loan is approved and funded, the application fee is credited back to the borrower through a reduction in the loan interest rate.
What happens to the application fee if my application is declined or withdrawn?
If your application is declined by CMHC or is withdrawn (after the underwriting assessment has begun) CMHC will retain a portion of the application fee for work rendered thus far. A minimum of 10 percent of the application fee will be retained. Once a commitment letter is issued, the fee is deemed to have been fully earned by CMHC and will not be refunded even if the loan is not advanced.
Could a project receive additional funding assistance?
Proponents may apply for other CMHC products, programs or services and if approved this additional assistance can form part of the loan application to the Rental Construction Financing. Projects can also leverage other government housing programs or initiatives to improve project feasibility and affordability however it is a requirement that the project must be financially viable without ongoing operating subsidies to the borrower.
Are provinces and territories eligible for financing?
The financing initiative was not specifically designed to target provinces and territories as borrowers or delivery partners for new construction as these entities benefit directly from the Federal Government’s Investment in Affordable Housing (IAH) funding.
Are on-reserve groups eligible for financing?
Projects situated on a reserve could be eligible for financing provided that the borrower is able to demonstrate that enforceable security over the lands can be granted to CMHC. New rental housing projects off-reserve would be eligible.
For more information or help with your application, contact your regional CMHC representative or email the Rental Construction Financing team.
Phone: 1-800-668-2642 (8 a.m. to 7 p.m. ET)
CMHC representatives by region
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