Condo Developers Push for Federal Financing Parity With Rental Builders
As the Toronto-region condo crash drags on, a new report from the real estate industry and big banks is calling on the federal government to help get new projects off the ground.
The report is recommending, among other priorities, providing financing tools for condos similar to the ones that exist for rental buildings, such as the Apartment Construction Loan Program by the Canada Mortgage and Housing Corp. (CMHC).
That program offers low-interest loans to developers to encourage them to build badly needed rentals.
“The apartment construction loan program is functioning very well and has stimulated levels of purpose-built rental that we haven’t seen in decades, which is amazing,” said Mattamy Homes Canada CEO Brad Carr, who is co-chair of the National Housing and Investment Initiative, the coalition behind the report, which includes leading developers and representatives from the big five banks.
“The challenge is we believe that Canadians still want choice and they still want ownership as an option.”
Condo construction has become “sell the building, and then we’ll lend you money to build,” Carr added. And that has created an overreliance on investors as buyers.
Typically condo developers need around 70 per cent of units pre-sold to get the financing to move forward. This has been a challenge in the Toronto area where demand has dried up since a peak in prices during the pandemic.
Carr believes there are buyers who want to live in condos in good locations in major Canadian cities, “and if we could create financing vehicles that made it more attractive to build them and then sell them, those buyers would be there.”
The report, titled ”Recommendations for a Sustainable Canadian Housing Market,” has 29 big ideas, such as making Ontario’s HST rebate for new housing permanent.
It was facilitated by the Building Industry and Land Development Association (BILD) and research and advocacy organization the Missing Middle Initiative.
“The government likes to challenge folks. Don’t bring me problems, bring me solutions,” said Dave Wilkes, president and CEO of BILD.
“So this group of companies and banks took that challenge to heart, and really wants to use this paper as a discussion tool, as a road map, if you will.”
The report pitches an “Owner-Occupied Construction Loan Program.” But Wilkes said it’s still to be determined how exactly condo financing would work, and what kinds of projects or units it could cover.
“It could be guarantees to equity investors, private sector investors that provide insurance, it could be working through CMHC potentially to change the presale requirements,” Wilkes said.
Representatives from CMHC did not respond to a request for feedback on the idea by deadline.
Beau Jarvis, president and CEO of developer WesGroup Properties, and the other co-chair of the coalition, said they are recommending the federal government find a way to “mirror” the rental program but for ownership.
He’s based in Vancouver where condo buildings have faced similar struggles to the Toronto region.
Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives who was not involved with the report, said the recommendation seems “strange” as the rental program was responding to a clear need for rental housing and has requirements around affordability attached.
Instead, Lee believes the government should invest more in housing outside of the private market.
“If you want to finance new condo construction, we have institutions that do that. They’re called banks,” he said.
“That’s the whole point of capitalism: people putting up capital take the risks. If there are gains, they make big gains. And if there are losses, then they take losses,” he added.
This article was first reported by The Star
