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Resources & Insights


The End to Section 95 Financing Means It’s Time to Start Thinking About Your Future

Affordable housing providers across Canada are quickly approaching a turning point. After several decades of low-cost mortgage financing from CMHC under Section 95 of the National Housing Act, those agreements are moving inexorably toward termination.

When this funding system was created years ago by the federal government, the idea was to provide a long-term, stable source of debt capital that would allow affordable housing stock to be created and operated while loans were paid down and equity was built up.

By all accounts, the program worked exactly as intended.  Participants now have strong equity positions, often in property assets with values that have been significantly inflated.  Unfortunately, what the program did not anticipate was the significant extra cash that housing providers would need to fund major capital upgrades that are required to successfully operate aging buildings. For most housing providers, the need for capital will not end with the completion of Section 95 Agreements. Residences must be maintained, infrastructure needs constant upkeep and there is a greater need than ever for new units. How to address this near-future funding quandary is an important strategic consideration.

In light of the fact that affordable housing organizations have been one step removed from negotiating with CMHC and have been instead presented with financing terms by administrators on a fait accompli basis, many providers find themselves with more questions than answers on the topic of property finance.  Should we wait until Section 95 Agreements expire before taking action or seek alternative financing early? What steps are involved in financing or re-financing? How much should we borrow? Should the prospect of rising interest rates concern us? What sort of CMHC options are available? How much more will those options cost? What sort of restrictions might be imposed in a new, post-Section 95 financing arrangement?  Is there ever a time that conventional, second and pari-passu mortgages make sense? How will lenders evaluate our submission?

Finding the right answers is critically important and for that reason, First National developed a series of articles to help affordable housing providers familiarize themselves with the various funding options available in the market.

A CMHC-approved lender for well over 20 years, First National is Canada’s largest non-bank mortgage provider with over $100 billion under administration and one of just a few institutions in the market specializing in the affordable housing sector. This specialization was developed because First National realized the sector was not well served by the Canadian mortgage industry – in part because many lenders had trouble gaining comfort with the cash flow sources from subsidized rental units –  and felt that with its deep knowledge of CMHC programs and track record in multi-unit residential housing, it could be of service.

Daniel Bragagnolo, Director, Commercial Mortgages leads First National’s affordable housing team and is a regular speaker at social housing forums across Canada. A passionate advocate for the sector, he has helped a number or providers successfully transition to a market-based financing regimen. In Daniel’s view, it pays to plan well ahead when thinking about future financing and to start by assessing CMHC’s product line up.

“The CMHC recently signalled its intent to provide additional assistance for the development and refinancing of affordable housing units in the form of the CMHC Flex Financing program,” said Daniel. “We’re excited about this construction program because it comes with a low cost, low equity-in threshold and provides financing of up to 95% loan-to-cost to support new construction. But this is only one CMHC program. Each has its own qualifying rules and use-of-funds’ restrictions. So while there are great options available, it takes knowledge and effort to navigate the system, understand the implications of competing choices, insured and conventional, prepare the applications and secure the funds. There are also a number of moving parts involved in exiting Section 95 Agreements, including a waiver process. So if I could offer one piece of advice, it’s to start the investigation process early and make full use of the expertise available from lenders serving the sector.”

First National is open to acting as an advisor, on a non-cost basis, to affordable housing providers contemplating new financing options. For those interested, Daniel’s direct line is 416.597.5460 and his email is

For those wishing to do more reading, future articles in this series will delve into CMHC products (Flex Financing, Energy Efficiency and Innovation Fund), the role of conventional financing, how to prepare a strong business case for borrowing, what to look for in a lender, how to protect against rising interest rates and whether it pays to seek an early exit from an existing Section 95 Agreement.

If you have suggestions for other topics, please contact Daniel directly at 416.597.5460 or by email at