Apartment Construction Loan Program

Overview of the Apartment Construction Loan Program program:

The Apartment Construction Loan Program, delivered by Canada Mortgage and Housing Corporation (CMHC), is designed to stimulate the construction of purpose-built rental housing in Canada. It targets the growing demand for affordable rental options in urban and rural communities by providing access to long-term, low-cost, insured loans during the construction phase. This initiative is part of the broader National Housing Strategy, helping developers overcome key barriers in rental housing development, such as high up-front capital costs and difficulty accessing financing. CMHC’s program focuses on encouraging projects that contribute to a more inclusive housing market, with specific attention to affordability, energy efficiency, and accessibility. Loan support is tailored to developers and organizations that demonstrate strong housing outcomes, such as offering units below market rent, prioritizing vulnerable populations, incorporating universal design standards, and meeting high energy efficiency targets. The program finances up to 100% of eligible residential construction costs with repayment periods of up to 10 years (conventional) or 50 years (for MLI Select-eligible projects). Projects can be privately owned, co-operative, or non-profit. CMHC conducts a two-stage approval process involving initial eligibility and full underwriting assessment. The application window is currently open with high demand, and intake is being managed regionally.

Benefits of the Apartment Construction Loan Program program:

• The loan offers:
• Favorable Terms
• A 10-year term (closed to pre-payment) and a fixed interest rate locked in at first advance for certainty during the riskiest periods of development
• Up to a 50-year amortization period
• Up to 100% loan to cost for residential space and up to 75% loan to cost for non-residential space (depending on the strength of the application)
• Low costs
• Interest-only payments financed by the loan during construction through to occupancy permit
• Principal and interest payments are due after 12 months of stabilized effective gross income
• Access to CMHC Mortgage Loan Insurance
• CMHC mortgage loan insurance that is effective from the first draw and for the duration of the amortization period to simplify loan renewal. The borrower does not pay the premium, only the PST if applicable

Eligibility criteria of the Apartment Construction Loan Program program:

• Eligible borrowers include for-profit developers, non-profit developers, and municipalities.
• All projects must
• Have at least 5 rental units
• Have a loan size of at least $1 million
• Respond to a need for rental supply
• Have zoning in place, a site plan in process with the municipality, and a building permit available. The first construction draw must be within 6 months of the date of the executed loan agreement
• Meet minimum financial viability and social outcome requirements described below
• Meet minimum requirements (Key highlights) :
• Financial Viability: You must have the financial and operational ability to carry out the project without ongoing subsidies and the ability to meet debt coverage ratio requirements.
• Affordability: You must meet one of the following affordability requirements and it should be maintained for at least 10 years.
• A: At least 20% of units must have rents below 30% of the median total income of all families for the area, and the total residential rental income must be at least 10% below its gross achievable residential income.
• B: The proposal has been approved under another affordable housing program or initiative from any government level, such as capital grants, municipal concessions, or expedited planning processing.
• Energy efficiency: Projects must be a minimum of 15% more efficient in energy consumption and GHG emissions than the applicable reference model building code:
• Low-rise multi-unit buildings under Part 9 of the National Building code must demonstrate a minimum 15% improvement over the 2015 NBC.
• All buildings under Part 3 on the National Building code must demonstrate a minimum 15% improvement over the 2017 NECB.
• Accessibility requirements: At least 10% of the projects units must meet or exceed accessibility standards as regulated by local codes.