The Canadian government has announced another program to support affordable homeownership, in addition to the First-Time Home Buyer’s Incentive.
The Shared Equity Mortgage Providers Fund launched at the end of July 2019. It’s a $100 million, five-year program managed by the Canada Mortgage and Housing Corporation that will support existing SEMPs.
This sounds the same as the FTHBI, but it’s actually a completely separate Fund. The FTHBI is a $1.25 billion program that starts on September 2, 2019. The funding will be put towards shared equity mortgages between qualifying first-time buyers and the CMHC.
The SEMP Fund will have two separate streams for funding. Stream 1 will be loans for preconstruction housing projects that provide shared equity mortgage options via SEMPs. The government will prioritize applications that have a percentage of units reserved for first-time buyers.
"Affordable homeownership is a pressing concern for many young Canadians,” says Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister Responsible for CMHC. “Access to funding for SEMPs will encourage the new construction needed to address some of the housing supply shortages in Canada while making housing more affordable for Canadians.”
Stream 2 will be for loans to SEMPs who will provide shared equity mortgage opportunities to first-time buyers. Most SEMPs operate the same way where there is no monthly payment and the loan is repaid with appreciation or depreciation when the property sells. For example, if you enter into an agreement where an SEMP loans you 10% of the purchase price for a down payment, then you would pay back 10% of the selling price when the time comes.
CMHC predicts the SEMP Fund will assist with the creation of 1,500 new housing units and benefit at least 1,500 first-time buyers in Canada. When considering the entire country, 1,500 first-time buyers receiving assistance doesn’t seem like a lot, but it’s better than nothing.
"As our Government continues to make big investments in building new affordable homes across this country, we also need to find new ways to help more people buy homes today,” says Bill Morneau, Minister of Finance. “That's what this fund is all about - an innovative approach that can take some of the mortgage burden off homeowners, and help more hard-working families find and afford a good place to call home."
The SEMP Fund is now underway. We’re curious to see if has a significant impact on the country’s housing market as a whole.