On June 11th, 2016, the Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister responsible for Canada Mortgage and Housing Corporation (CMHC), announced that the Government is providing $150 million over four years to allow co-operatives and non-profit social housing providers to prepay long-term, non-renewable mortgages held by CMHC without penalty.
It is anticipated that with this enhanced flexibility to pay out their CMHC loans early without incurring a prepayment penalty, housing providers will be able to access financing from the private market at current interest rates, which will lower mortgage expenses and help to keep rents affordable. Lower interest costs will place housing providers in a stronger financial position with the flexibility to strengthen their capacity to deliver affordable housing through lower mortgage expenses, provide the opportunity to finance repairs with private capital, and offer flexibility to transition to more self-sustaining operating models.
The funding will be allocated over four years, with $50 million set aside for 2016-17, $50 million for 2017-18, and $25 million in each of 2018-19 and 2019-20. As such, CMHC will waive penalties on qualifying loans up to these limits each fiscal year.
For all housing projects wishing to pay out their CMHC loan early without a prepayment penalty, an application will be required and assessed on outcome-based criteria such as:
- completing repairs to promote housing sustainability;
- creating new affordable housing units; and
- maintaining/increasing their level of rent-geared-to income units
CMHC will review all applications, regardless of the government jurisdiction charged with the administration (federal, provincial, territorial) and prioritize those projects that demonstrate the best results prior to approving the waiving of prepayment.
Eligibility to Apply
Co-operative and non-profit social housing providers who hold long-term, non-renewable mortgages with Canada Mortgage and Housing Corporation can submit an application to be considered for the early payout of its CMHC loan without penalty.
We are inviting you to apply to this new initiative by following the instructions below. The deadline for the first round of applications is August 2, 2016. If the annual budget of $50 million is not fully spent by this round of applicants, CMHC will be issuing a second call for applications later in the year. Updates will be provided on our website at www.cmhc.ca/prepayment.
A call for applications will be completed for each of the subsequent years of the initiative on the following dates:
- Budget year: 2017-18 -- Application Deadline: February 1, 2017
- Budget year: 2018-19 -- Application Deadline: February 1, 2018
- Budget year: 2019-20 -- Application Deadline: February 1, 2019
*Please note that if the annual budget is not fully spent in these rounds of applications, a second call for applications will be made and announced on our website.
For applications that are approved for prepayment without penalty, and where the project received an upfront capital contribution to be earned over the life of the loan, the unearned portion of the contribution will also be forgiven at the time of payout.
If your organization is approved under this initiative to prepay your CMHC mortgage, federally administered operating agreements will be terminated upon the prepayment of the loan.
If your organization has a rent supplement agreement directly with CMHC, rent supplements will continue for a maximum of five years from the date of prepayment or the natural expiry of the agreement, whichever comes first. This approach will give you time to transition toward strong financial footing through improved access to private funding. An amending rent supplement agreement will need to be signed.
The prepayment of your CMHC loan and the termination of the operating agreement also causes your organization to give up its right to other federal funding (current and future) for existing federally administered social housing, such as funding for renovation and retrofit. However, you may now be eligible for funding under the Investment in Affordable Housing (IAH). You may inquire to the province or territory in which you reside about other possible funding under the IAH.
Next Steps
Please complete the entire application form and return it to CMHC by August 2, 2016, along with all the required supporting documentation listed in the application. For additional information or to download the application form, please visit www.cmhc.ca/prepayment. The web site will also be used to provide additional guidance on how to submit your application in the event of a mail strike.