A big push from the federal government hasn't hurt the cause
Buyer beware? In B.C., it’s more like buyer despair. The province’s volatile housing market has led to a drop in prices, but affordability remains a problem. Even with low unemployment and rising wages, owning a home remains out of reach for many residents. Let’s face it: ownership in B.C. has probably peaked at the 68 percent reported by Statistics Canada. The real estate industry, including Canada Mortgage and Housing Corp., is finally paying attention.
For a decade, CMHC, whose current mandate is to make it easier for Canadians to access a variety of affordable housing options, has largely concentrated on boosting home ownership. Its policies, which include bulk insuring and securitizing of mortgages with taxpayer dollars, have helped to inflate prices to a point that has left the financial system in a vulnerable spot, while completely neglecting the rental market.
Under president and CEO Evan Siddall, though, CMHC is taking things in another direction. Crafting a narrative that renting a home can and should be a viable option for many Canadians, the Crown corporation has shifted away from insuring leveraged homebuyers to supporting purpose-built rental construction. For example, back in January 2013, 59 percent of chartered bank mortgages were insured; today that number hovers around 39 percent.
CMHC’s new focus is its Rental Construction Financing program, which provides low-cost loans encouraging construction of rental housing across the country. Rates usually range from 1.5 to 3 percent, about 100 to 300 basis points cheaper than conventional construction credit. These loans are also locked in for 10 years, with potential for a 50-year amortization.
Developers in B.C. and elsewhere are taking CMHC up on its generous offer. Demand has been so hot that the federal government plans to increase the program to almost $14 billion over the next nine years, way up from $2.5 billion when it launched in 2017.
For renters and those seeking an alternative to expensive home ownership, that’s welcome news. As of the third quarter of 2019, there were a record 15,946 rental homes under construction across B.C., according to CMHC. Rental housing starts sit at all-time highs, too, with more coming as word of the agency’s construction financing program spreads.
Despite all the grim headlines about the province’s affordability prospects, hope is on the horizon. Besides taking pressure off the home ownership market, an economy with more rental options gives those living and working in B.C. a healthier choice between owning and renting.