Crown corporation doubles down on rental housing
Canada Mortgage and Housing Corporation (CMHC) has halted dividend payments to shareholders amid a sharp increase in demand for its multi-unit mortgage loan insurance.
In the first half of 2024, Canada's sole provider of mortgage loan insurance for multi-unit residential properties saw insured volumes reach $31,175 million in the first half of 2024, a 61% increase from $19,406 million during the same period last year.
CMHC's insurance plays a vital role in facilitating access to preferred interest rates, making it easier for developers to finance the construction, purchase, and refinancing of multi-unit residential properties.
The increased demand for rental housing, particularly purpose-built rentals, is driving this growth in multi-unit insurance. CMHC anticipates that this trend will continue as the need for affordable rental housing intensifies across the country.
"It is encouraging to see continued increase in demand for our multi-unit insurance products, which leads to increased rental housing supply," said Michel Tremblay, CMHC’s chief financial officer and senior vice president of corporate services. "We remain committed to our important role of furthering and supporting the growth and sustainability of purpose-built rental supply in Canada."
In light of this increased demand and upcoming regulatory changes, the crown corporation has decided to temporarily suspend its quarterly dividend to the federal government. CMHC said in its news release that it will preserve $145 million in capital in the second quarter of 2024 alone.
The decision comes in response to the Office of the Superintendent of Financial Institutions (OSFI) announcing new capital requirements for multi-unit residential exposures, set to be published in Q4 2024.
Read more: OSFI postpones stricter bank capital rules
CMHC's financial results for the three-month period ending June 30, also showed resilience in other areas. Despite the high-interest environment, which boosted investment and interest income, mortgage arrears remained low at 0.28%, slightly below the rate from the same period last year. This low arrear rate has kept claims payments minimal, further supporting CMHC's strong financial position.
Additionally, CMHC saw a 7% increase in transactional homeowner unit volumes and guaranteed $52 billion in new securities. These were driven by an increase in annual issuance limits for its National Housing Act Mortgage-Backed Securities (NHA MBS) and Canada Mortgage Bonds (CMB) products.
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