Affordable Housing: Creative Solutions to a Complex Problem

Affordable housing is a complex, politically charged topic, but studies have shown that one thing is for certain: Canada is in a housing crisis. ¹

There is a shortage of housing across the country, namely in the affordable housing sector, and according to Daniel Wynnychuk, Canada ICI’s Director of Mortgage Origination in Edmonton, “It’s in society’s best interest to try to solve the housing crisis in Canada.”

Could affordable housing become a new institutional asset class?

Wynnychuk believes that it could. He sees how this shortage is contributing to the development of more creative and affordable housing programs, predicting that with the increased support of government and industry partnerships there will be continued activity in the affordable housing sector.

What’s in it for developers?

It makes sense from a social standpoint to make housing affordable, but is investing in affordable housing worth it to developers? 

With support from CMHC and from the Canadian government, developers are investing in this sector more and more because of the durability of the income stream. The Rental Construction Financing initiative (RCFi) is a national program that promotes a reliable supply of new rental units for families in expensive housing markets by encouraging sustainable rental apartment construction. 

The focus of RCFi is to offer incentives to builders that compete against development that is limited to high-end luxury units in Canadian communities that have a need for additional rental housing. The new program is going well and given the high demand, the Canadian government has expanded the program by adding an additional $12 billion over the next seven years; the program now totaling $25.75 billion in low-cost loans.

CMHC rental construction financing offers these loans to eligible developers during the riskiest phases of rental apartment construction. The RCFi provides a 10-year term with a fixed interest rate and access to CMHC mortgage loan insurance for which the borrower does not pay the premium (only the PST, if applicable). The initiative also includes the following advantages:

• up to a 50-year amortization period 
• up to 100% loan-to-cost for residential space 
• up to 75% loan-to-cost for non-residential space

Affordability and environmental responsibility

Riverview Crossings Residences is a 248-unit affordable housing complex to be constructed in the East Edmonton neighbourhood of Abbottsfield. The developers for this project, Alberta-based Ayrshire Group have a strong appetite for socially and environmentally responsible real estate projects and received $46.5M in funding through CMHC’s RCFi program.

Affordability and environmental responsibility are caveats to this low-cost loan, which was a good fit for the Ayrshire Group. Wynnychuk explains, “The economics work when constructing these more efficient building systems and features because of the flexibility offered by CMHC within its loan parameters.”

Graham Gooch, Managing Director of the Ayrshire Group tells how the vision of Riverview Residences was formed.

“When we acquired Abbottsfield Mall in 2017, it was approximately 50 per cent vacant and in need of a new community-focused vision. With help from the City of Edmonton and various community-focused organizations, we decided to rebrand the shopping centre as Riverview Crossing and subdivide a large unused portion of land to accommodate this 248-unit Riverview Residences development. This mixed-use project is a great example of how a collective effort from Municipal, Provincial, and Federal levels of government can transform a property into a hub of activity, entertainment, and community services.” ²

At least 20 per cent of the Riverview units must offer monthly rent costs below 30 per cent of the median total income in the Edmonton region. Taking the environment and a more modern, and greener design into consideration, the Riverview Residences buildings are planned to use 30 per cent less energy than similar buildings and at least half of its underground parking stalls will have access to electric charging stations.

Affordable housing redefined

What was once a half-vacant mall on an oversized lot, the Abbottsfield Mall conversion has redefined what is possible for developers now providing the opportunity to explore converting this kind of excess space into rental housing thereby enhancing the livability and affordability of urban communities. This project has received a lot of attention across the country.

Wynnychuk describes what works well about where Riverview is situated, stating, “It’s built on the excess land of what was once a half-vacant shopping mall with a community center just to the north.”

The Ayrshire Group was able to reposition the mall to offer community services such as a medical office, pharmacy, indoor play gym, and other social services, giving residents direct access to the daily amenities, transit, with a location directly across from Rundle Park.

Wynnychuk goes on to say, “I know there are other potential affordable housing sites out there that can be densified, perhaps retail properties that are past their useful life in their current form and could be reimagined.”

A socially-driven investment

Upon announcing the planned construction of Riverview Residences, Families, Children and Social Development Minister Ahmed Hussen explained why projects like this one are vital to the social fabric of Canadian cities.

“Ensuring housing affordability and stability for all Canadians is not a quick fix, especially in urban centres like Edmonton, the cost of living continues to rise,” Hussen said. “By investing in this project, our government is looking to build a new generation of rental housing for middle-class Canadians right across Canada and for those who are struggling to join the middle class right here in Edmonton. At the end of the day, it’s really about ensuring a better quality of life for Canadians.” ²

Wynnychuk refers to why some investors are choosing affordable housing as part of their portfolio, saying,

Wynnychuk sums up the importance of affordable housing, saying, “I would call affordable housing a socially-driven investment because there are great outcomes from it at both the community level and at the capital level. A strong economic return is generated, as well as positive social outcomes.” He goes on to say, “If we solved the problem of affordable housing in Canada, the solution would bring with it tremendous societal benefits including less pressure on the healthcare system, on the education system, and on social services. Put a stable roof over someone’s head and a lot of other factors fall into place. Investment in affordable housing is definitely a win-win-win.”

¹Perrault, Jean-Francois, “Estimating the Structural Housing Shortage in Canada.” scotiabank.com. May 12, 2021, https://www.scotiabank.com/ca/en/about/economics/economics-publications/post.other-publications.housing.housing-note.housing-note–may-12-2021-.html.

²Catling, Leonard, “More rental housing for nearly 250 families in Edmonton.” cmhc-schl.gc.ca. May 20, 2021, https://www.cmhc-schl.gc.ca/en/media-newsroom/news-releases/2021/more-rental-housing-families-edmonton