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The Canada Mortgage and Housing Corporation says it is temporarily reducing dividend payments to the federal government in order to redirect the funds toward supporting the construction of rental housing.

The CMHC revealed in second-quarter results on Aug. 30 that insured volumes for multi-unit rentals had jumped 45 per cent year-over-year to $12.3 billion from $8.5 billion in the same period last year.

To sustain this growth and foster the development of more purpose-built rental housing, CMHC is temporarily reducing its dividend payments to Ottawa. For the second quarter, the reduction amounts to $250 million, marking a significant change in policy aimed at steering capital into supporting new housing projects.

“As Canada’s only provider of mortgage loan insurance for multi-unit residential properties, our insurance facilitates access to preferred interest rates, lowering borrowing costs for the construction, purchase, and refinance of multi-unit residential properties and facilitates renewals throughout the life of the mortgage,” Michel Tremblay, chief financial officer said in the report.

“While our current capital position remains strong, decreasing our overall dividend payments allows us to continue to grow our multi-unit insurance business.”

Since it started paying dividends in 2017, CMHC has declared and paid $18.9 billion to the federal government, including $790 million so far in 2023. The corporation, a Crown entity, juggles both profit-generating activities, such as its mortgage insurance business, and a public mandate to deliver housing programs in collaboration with Ottawa.

Caroline Sanfaçon, the agency’s senior vice-president of commercial solutions, said more than 50 per cent of the current loan insurance applications are made up of new construction or what they call “take-out loans.”

“Having the change that we’re making right now will really help us ensure that we can continue to take the applications we receive and not have to curtail our approval, for example, because we don’t necessarily have the capital to support the growth,” Sanfaçon said.

Traditional financial institutions, which would still have to extend the loans to developers, are supportive of the measure.

“We’re definitely seeing lots of demand from our clients to build purpose-built rentals to deal with this shortage of housing supply,” said Andrew Moor, chief executive of Equitable Bank. “CMHC needs to retain capital on its balance sheet to support its activities in supporting the building of apartments. Holding back dividend to build capital to have more capacity to absorb any losses should they arise, makes a lot of sense.”

Moor said that more still needs to be done to fully address the housing sector’s challenges.

“CMHC is part of the puzzle,” Moor said. “However, we face challenges in both supply chain management and planning. Keeping CMHC really strong is helpful, but other elements also need to be improved.”

CMHC’s mortgage loan insurance allows approved lenders to extend financing options to borrowers for standard rental housing in multi-unit buildings. This insurance covers up to 85 per cent of the lending value or 100 per cent of the construction, purchase, or refinance costs, depending on which is lower.

The multi-unit residential business makes up 70 per cent of the CMHC’s year-to-date insured amount as of June 2023.


Story by: Financial Post