National housing agency could address associated risks through insurance program, suggests executive
Boosting the number of affordable housing units in Canada remains a top priority of the federal government – and a prominent mortgage industry executive believes developing so-called “brownfield” sites could help significantly accelerate that pace in the coming years.
Kevin Fettig (pictured), president at CMI Financial Group, has called on the national housing agency, Canada Mortgage and Housing Corporation (CMHC), to ease concerns about the challenges of developing those sites and address risk by rolling out new insurance and financial programs.
Brownfield sites, defined as abandoned or underutilized commercial or industrial properties where environmental contamination has previously been caused but which retain potential for redevelopment or economic opportunities, currently number around 30,000 across Canada.
Fettig told Canadian Mortgage Professional that CMHC, whose mortgage default insurance program is aimed at mitigating mortgage lending risks, could help boost confidence in the potential for redeveloping brownfield sites.
“Those are some of the more affordable pieces of land that are available. The challenge is that developers really are cautious about developing because of the liability risks associated with those lands,” he said.
“And so if CMHC would act as an insurer, there’s an opportunity here to make those lands available for development, and hopefully [that would mean] much more land available for affordable housing.”
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How could CMHC become involved in insuring brownfield site development?
The agency would be a good fit to help push ahead with redevelopment of those sites, according to Fettig, given its expertise on both the housing and insurance fronts.
“In the past, they used to have land development entities. They used to have property managers. CMHC in the past has worked closely on development,” he said.
“They’ve just never taken it up as an opportunity to say, ‘If we acted as an insurer, [knowing] about housing, finance and property, what could we do to encourage these lands to be developed?’ It’s really about finding an insurance solution.”
A prime example of an area that would benefit from enhanced development of brownfield sites is Hamilton, Ontario, Fettig said. The city has taken huge strides to transform those sites in recent times, cutting its total by half in the decade between 2008 and 2018 – but has plenty of polluted land remaining.
“They’ve done a lot of work as a city to remediate, to encourage the development of brownfields. But still there’s a lot of land available in Hamilton that can be developed as brownfields,” he argued.
“A lot of those properties are also going to be on or close to major transportation corridors, so it fits within most of the city’s desire to see densification. It fits – it’s just the challenge is that there really isn’t anyone providing the solution here to make it a type of land that could be easily, readily developed.”
Move would prove a worthy endeavour for agency, suggests executive
Some might point to the potential cost on CMHC’s part of implementing such an insurance measure targeted at brownfield sites, although Fettig said it could be put in place with relative ease.
“I think that certainly there’d be a learning curve, but CMHC does have the expertise,” he said. “They’d probably have to hire some people to get up to speed specifically for that type of insurance, but they have expertise as an insurer, they understand how to underwrite, they understand what’s involved in creating policies, and they understand how to do claims management.”
Ultimately, he said, the proposal was one that would help further incentivize the use of the land – where development is already notably cheaper than elsewhere because of the risks – to ease the affordable housing crisis.
“You’re potentially developing cheaper land and you’re creating intensification, and it fits well within the broader scope of what CMHC’s trying to do and what the federal government’s trying to do,” he said, “and it ties nicely with financing facilities associated with development.
“So you could create an end-to-end solution here quite easily for a brownfield development in terms of providing insurance and providing the finance – a very solid turnkey solution.”
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