Canada Mortgage and Housing Corporation (CMHC) is a vital institution in Canada’s housing landscape, striving to create a future where every Canadian has access to affordable, safe, and suitable housing.
CMHC was created after World War II, when Canada faced a significant housing crisis with a surge of returning veterans and a shortage of affordable housing. As a federal crown corporation, CMHC built homes for returning soldiers and their families. Over the years, its role has expanded to encompass various aspects of the housing market, including mortgage loan insurance and research.
Currently the biggest challenge facing CMHC, and Canada, is the country’s serious housing affordability crisis.
“Canada needs an ’all-hands-on-deck’ approach to address housing affordability,” says Romy Bowers, President. “We are bringing together governments, financial organizations and other partners including developers to incentivize and help make system-wide changes to address the housing needs of all Canadians.”
CMHC plays an important role in supporting the stability of Canada’s housing finance system, which is key to housing affordability. It does this through its commercial products, including mortgage loan insurance and multi-unit mortgage loan insurance, as well as providing lenders reliable access to mortgage funding.
The corporation also conducts impartial research and provides essential data to inform housing policy.
Moreover, CMHC helps deliver Government of Canada commitments to make housing more affordable, such as the National Housing Strategy which aims to address needs across the housing continuum.
CMHC’s role extends beyond addressing housing issues; it also contributes to Canada’s economic resilience. During the 2008 financial crisis, CMHC’s mortgage loan insurance and securitization programs ensured that Canadians could maintain their homes and access essential mortgage financing. This support played a crucial role in helping Canada navigate the global recession. In 2023, as Canadians face economic challenges, including higher interest rates and record levels of debt, CMHC stands ready to absorb potential economic shocks and maintain stability.
The Housing Crisis in Canada
Canada is currently grappling with a housing crisis of significant proportions. This crisis comprises two distinct challenges impacting vulnerable populations and middle-income Canadians.
Approximately one in ten households in the country faces core housing needs, living in unsafe, overcrowded, or unaffordable conditions. The issue of homelessness remains prevalent, with thousands of people experiencing it nightly thanks, in part, to decades of underinvestment in community housing.
Also, middle-income Canadians are increasingly struggling to pay their mortgage or rent. The rapid escalation of housing prices, combined with inflation and high-interest rates, has placed a significant burden on this demographic.
“The single biggest factor driving this housing crisis is the severe shortage of homes in most cities across the country,” says Romy. “It’s a simple equation of supply and demand. Our cities are growing, the people living in them need homes, and there simply aren’t enough to go around.”
In fact, CMHC estimates that to restore affordability by 2030, Canada must build 3.5 million more homes than it is already on track to build – and that reaching that goal would take an investment of at least $1 trillion dollars.
The Business Community’s Role
The housing crisis isn’t solely a concern for CMHC or the government; it affects the broader Canadian economy as it’s becoming a bottleneck for economic growth.
Businesses in large urban centers like Toronto, Montreal, and Vancouver are finding it challenging to attract and retain employees due to housing shortages and high costs, says Romy. In response, they may have to offer higher salaries to compensate for the elevated cost of living. The crisis also results in people migrating away from urban areas in search of more affordable housing, potentially diminishing the appeal of cities to businesses.
High housing prices, coupled with significant household debt, limit consumer spending, affecting various sectors of the economy. Further, that fact that we Canadians have the highest level of household debt in the G7, with three quarters of our debt tied up in mortgages, makes Canadians more vulnerable in the case of economic downturns and job losses. Not to mention the fact that with so much investment tied up in housing, a very low-productivity asset class, Canadians aren’t investing in more productive segments of the economy.
“At CMHC, we’ve mobilized all our resources to work towards restoring housing affordability,” says Romy. “But to fix the problem, every sector needs to get involved, including the business community. The health and prosperity of our communities and our economy depend on it.”
Business Community as a Crucial Partner
Romy says the problem needs the kind of capital that only the private sector can provide – especially here in Canada where this sector supplies about 96 per cent of housing.
“The government can incentivize this – and indeed there are already measures in place to encourage more much needed purpose-built rentals for middle-income Canadians,” says Romy. “For example, the Rental Construction Financing Initiative provides low-interest loans for developers at the early stages of a project. Additionally, the new Housing Accelerator Fund provides incentives to municipalities to do what they can to cut red tape and speed up things like permitting and zoning changes.”
Also, CMHC provides a mortgage loan insurance product, MLI Select, that offers developers reduced premiums and longer amortization periods based on their commitment to affordability, accessibility, and climate compatibility.
Recently Finance Canada has added additional incentives by making the construction of purpose-built rentals GST-exempt, and by unlocking billions in additional financing through Canada Mortgage Bonds.
While governments must continue to support community housing for vulnerable populations, the private sector’s involvement is indispensable.
CMHC seeks innovation and new perspectives from the business community to improve building techniques, enhance supply chains, introduce new financing models, and promote sustainability.
Looking to the Future
CMHC remains dedicated to helping Canadians access housing that is affordable and that meets their needs. It will continue to deliver existing federal government programs through the National Housing Strategy, making its commercial programs as effective as possible, and monitoring risks in the housing market.
CMHC also recognizes the importance of encouraging more housing supply in the long term. The organization is positioning itself to best serve Canadians in the future by gathering knowledge and building partnerships. It aims to define its long-term role in the housing system, furthering its commitment to improving housing accessibility and affordability.
As the nation faces the challenges of housing affordability and economic resilience, CMHC remains at the forefront. It is collaborating with all levels of governments and all sectors to respond to urgent needs now and build a better future…one where housing is affordable for everyone in Canada.
For more information, please visit www.cmhc-schl.gc.ca