The Canada Mortgage and Housing Corporation’s (CMHC) MLI Select program allows owners and developers of multi-unit buildings to benefit from more favorable mortgage insurance terms in exchange for commitments related to affordability, energy efficiency, and accessibility. The program is based on a points system: the more substantial the commitments, the more attractive the incentives can be.
But who is the MLI Select program intended for? What benefits does it offer, and what requirements must be met? Here are the key points to know before considering this program for a real estate project.
Which buildings are eligible for the MLI Select program?
MLI Select is intended for various types of multi-unit residential properties, whether new or existing. The program may apply to, among others:
- standard rental buildings;
- buildings offering private rooms;
- housing with support services;
- seniors’ residences.
Generally, the property must have at least 5 units. For a seniors’ residence, the threshold is set at 50 units or beds. Non-residential spaces generally cannot represent more than 30% of the total gross floor area or the total loan value.
MLI Select may therefore be of interest to both an owner seeking to preserve an existing rental building and a developer planning the construction of a new residential development.
What benefits does MLI Select offer?
One of the program’s key benefits lies in the financing flexibilities it offers. These flexibilities vary depending on the number of points earned.
For an existing property, a minimum of 50 points may allow for a loan-to-value ratio of up to 85% and an amortization period of up to 40 years. With 70 points or more, the loan-to-value ratio can reach 95%, and the amortization period can extend to 45 years. With 100 points, the amortization period can extend to 50 years.
For new construction, the loan-to-cost ratio can reach 95% with a minimum of 50 points. The repayment period can also be up to 50 years when 100 points are earned. The program also provides reductions in insurance premiums based on the level of commitment.
These parameters can have a tangible effect on a project’s financial structure, particularly by reducing the need for initial financing or by allowing the loan repayment to be extended over a longer period.
How does the MLI Select points system work?
The borrower can earn points in three categories: affordability, energy efficiency, and accessibility. It is not necessary to earn points in every category. Instead, the borrower can choose the combination that best suits its project.
However, a minimum of 50 points is required to qualify for the program.
How do you earn points for affordability?
For a new construction, the affordability commitment may earn the project:
- 50 points, if at least 10% of the units are offered at a rent corresponding to no more than 30% of the tenants’ median income;
- 70 points, if this proportion reaches 15%;
- 100 points, if it reaches 25%.
For an existing property, the proportions are higher, namely 40%, 60%, or 80% of the units, depending on the targeted point level.
The affordability commitment must be maintained for at least 10 years from the first date of occupancy of the complex. Commitments extending for 20 yearsor more may be eligible for an additional 30 points.
How do you earn points for energy efficiency?
The criteria vary depending on whether the building is new or existing.
For a new construction, points are awarded based on the improvement in energy performance relative to the applicable requirements of the National Energy Code for Buildings or the National Building Code. The first level awards 20 points, while the higher levels can earn 35 and 50 points, respectively.
For an existing property, points are primarily linked to reductions in energy consumption and greenhouse gas emissions compared to the building’s current performance. The levels require minimum improvements of 15%, 25%, or 40%.
These commitments must be supported by an assessment conducted by a qualified professional and, when necessary, by appropriate energy modeling.
How do you earn points for accessibility?
MLI Select also takes into account the accessible and adaptable design of housing units.
Depending on the target level, commitments may include, among other things, the proportion of housing units that are accessible in accordance with the CSA/ASC B651-18 standard—Accessible Design for the Built Environment, the use of universal design principles, or obtaining certification from the Rick Hansen Foundation.
The program also includes general requirements for the building’s “visibility” and accessibility. The goal is to ensure that people who use mobility aids, seniors, or individuals with temporary limitations can safely access housing units and common areas.
What criteria must the borrower meet?
The benefits of MLI Select are not based solely on the property’s characteristics. The borrower must also meet certain requirements.
In particular, the borrower’s net worth must be at least 25% of the requested loan amount, subject to a minimum of $100,000. It must also demonstrate that it has the necessary skills and experience to operate and manage a property of the specified size and type.
CMHC generally requires at least 5 years of experience managing similar multi-unit properties, although certain arrangements may allow this requirement to be met otherwise, such as through a team or manager with the required experience.
Is MLI Select a good fit for your real estate project?
MLI Select can be an attractive financing option for property owners and developers who are able to incorporate affordability, energy efficiency, or accessibility goals into their projects.
However, the financial benefits must be assessed based on the long-term commitments they entail. For example, an affordability commitment can affect rent management for several years.
Before choosing this option, it is therefore important to evaluate both the savings and flexibility offered by MLI Select, as well as the resulting obligations. Since the program’s parameters may vary depending on the type of building and the target rating, a project-specific analysis remains essential.
Questions about the MLI Select program?
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