Passive House, net-zero and net zero-ready affordable-rental buildings may qualify for the Affordable Rental Innovation Fund through Canada Mortgage and Housing Corporation (CMHC).
The initiative focuses on affordable-rental projects (with five or more units). Single-family houses would not be a fit unless at least five single-family houses were constructed and operated as affordable rentals by the same operator. Townhouses and apartments are eligible. The main criteria with the Affordable Rental Innovation Fund is an innovation the lowers costs or risk associated with developing the project.
The intent of the fund is to foster innovations in the finance and design of affordable rental housing that lower the costs associated with the project. Along with some initial criteria around accessibility, resource efficiency, and affordability, projects will need to incorporate a potential game-changing innovation that can be replicated elsewhere in the country.
The innovation can be either completely new to Canada, or a more incremental innovation; for example, a replicable way to do an existing approach at significantly less cost.
The main questions CMHC asks when initially assessing the innovation are:
- What is the proposed innovation? – the Innovation Fund defines innovation as “a design/building or finance model that lowers the costs associated with the project”
- Is this new to the Canadian rental housing sector?
- How does the innovation achieve cost savings, such as reducing construction time or costs, reducing operating expenses, and so on, so the project can offer lower rents (or less risk to the developer), and what are the anticipated savings relative to the project costs and rents?
- How much is the project seeking as an investment from CMHC, and how will CMHC funds assist the project?
The criteria outlined on the CMHC website is minimum eligibility criteria, so innovations may see a project exceed these minimums in one or more areas and proposals are evaluated based on the degree to which address the criteria.
- In terms of affordability, the rent levels must align with the affordability definitions of the local municipality. If there are no such definitions, then the rents should be below the local average rents.
- In terms of resource efficiency, the energy use/GHG emissions need to be 10 per cent below a comparable project constructed under the current local building code expectations.
- In terms of accessibility, 10 per cent of the units need to be accessible, with specific details available through CMHC’s Accessible by Design series, CSA, ADA, or other resources.
Other criteria include projects need to involve 5 or more units, the rental affordability needs to be guaranteed for 10 years, the project must be financially viable without ongoing government subsidies, and proximity to transit if there is transit available in the community, alongside a central requirement for a true innovation. This is harder to define, but it can be a design or financing model that is new to Canada and that can be scalable to future projects, so the impact of the innovation extends beyond the one project.
The application form on-line is intentionally high-level to encourage a wide-range of ideas. Projects that meet the eligibility criteria (with the quality of the innovation as a key determinant) will then require more comprehensive details—business plan, construction costs, projected operating expenses / revenues, etc.—for CMHC to fully evaluate the application.
The Innovation Fund is not meant to replace conventional financing or completely cover the costs of a project, but rather to serve as an investment to help advance innovative approaches.
The innovation can be in design or financing, so a project with an eligible innovative design doesn’t necessarily need to incorporate financing innovation. However, CMHC also seeks innovative proposals for how the funding can be applied, beyond a “dollar amount contribution per unit”—ideally CMHC’s investment in the project would be creative (beyond a conventional grant), to include any combination of grant, loan (with flexible options such as low interest, an interest-free period, or a period of paying interest only), or an equity stake in the project.
Details about the Innovation Fund criteria and objectives are included in the CMHC Innovation Fund brochure.
Other CMHC funding programs and financing initiatives for affordable housing may also apply; specifically, the Rental Construction Financing initiative and multi-unit mortgage loan insurance flexibilities, along with Seed Funding to assist with pre-construction soft costs associated with affordable projects.