The federal government has pledged a low-interest loan of $1.4-billion to help a Vancouver-area First Nation build affordable rental apartments in a massive development on the shores of the city’s inner harbour.
It is the largest loan the Canada Mortgage and Housing Corp. has ever given for a development.
The government said the 50-year loan – funded through a special program in its National Housing Strategy – will create affordable housing, but is being offered under rules that housing experts say would allow rents that are too high to be called affordable.
Earlier this year, the federal government promised to overhaul the criteria for defining what is affordable in such projects, but those new rules have not yet been applied.
The April 7 budget said the reform of the Rental Construction Financing Initiative would “ensure that rental units built through it are more affordable.” It included a goal to have “at least 40 per cent of the units it supports provide rent equal to or lower than 80 per cent of the average market rent in their local community.”
The old criteria require developers to designate only 20 per cent of the apartments as affordable and the rents permitted will be geared to household incomes, not local rents.
Giving the loan to the Squamish Nation under the old rules means fewer apartments will be defined as affordable in the 6,000-unit project, and the rents for those units will be higher than they would be under the new rules, housing analyst Steve Pomeroy said.
“It’s disappointing to see that they’ve made such a major announcement without utilizing the new directions that were announced in the budget,” Mr. Pomeroy said.
Many housing groups and the NDP and Conservative parties have panned the loan program in its four years of existence because of how much money it has provided to private developers with very minimal requirements for affordability.
In some cases, the “affordable” apartments have been rented for more than the average rent in an area.
Mr. Pomeroy said that, if the loan had been given under the new criteria promised, 40 per cent of the apartments would have to be at or below 80 per cent of local market rents.
In Vancouver, he calculated, that would mean $1,460 for those affordable two-bedroom apartments, compared to the average $1,824 in Vancouver for that size.
Instead, using the old criteria, those apartments can be rented at around $2,200 using the household income criteria.
“Not sure in whose world $2,200 is affordable,” Mr. Pomeroy said.
The current plans are that all 6,000 units in the project, which broke ground on the first of what will be 11 buildings last month, will be rentals, with 250 reserved for Squamish Nation members.
The loan is aimed at financing 3,000 apartments. It will also save the developers tens of millions of dollars at a time when private-finance interest rates are rising sharply.
A spokesperson for the local development-industry advocacy group said the low-interest loans from the federal government have become key for many local developers trying to build rental projects, as interest rates, material costs and labour have skyrocketed.
“Interest rates and overall inflation is making rentals harder and harder,” said Anne McMullin, chief executive officer of the Urban Development Institute.
At a news conference on Tuesday, Prime Minister Justin Trudeau said the federal support addresses three government priorities at once: housing, Indigenous reconciliation and climate change through net zero emission building practices.
“All these things come together and it’s something that the federal government is very pleased to be able to be a partner in,” he said.
Mr. Trudeau said the ambitious project is “reconciliation in action” and will benefit both Indigenous and non-Indigenous people in Vancouver and targets the need for “middle-income” rental housing. He also said it will include some low-income rental units and will add supply to the city’s housing market.
“That will be a big step forward for Vancouver in terms of taking off some of the pressures that are around on housing and I know that this is a good thing for the city and the province and for the country,” he said.
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