Ontario Construction News staff writer
The City of Ottawa’s Finance and Corporate Services Committee has approved a pilot program designed to leverage the municipality’s strong credit rating to fast-track the construction of approximately 550 affordable housing units.
At a meeting on Tuesday (Feb. 3), the committee endorsed the Affordable Housing Debt Funding Pilot, a new financial framework that will allow Ottawa Community Housing Corporation (OCHC) to bridge significant equity gaps caused by rising construction costs and interest rates.
The recommendation will be considered by City Council on Wednesday, Feb. 11.
Bridging the funding gap
According to a report submitted by Deputy City Treasurer Isabelle Jasmin, construction costs for residential projects have risen more than 50 per cent in Ottawa since 2021. Combined with higher interest rates, OCHC is facing equity shortfalls of approximately 30 to 40 per cent on planned developments, despite federal and provincial funding.
The new framework allows the city to issue debt—specifically short-term promissory notes and long-term debentures—on behalf of OCHC. By using the city’s treasury infrastructure and superior credit rating (Moody’s AAA, S&P AA+), OCHC can access capital at rates 30 to 50 basis points lower than commercial lenders.
“The proposed framework introduces an alternative, budget-neutral financing mechanism… to accelerate the delivery of affordable housing projects without compromising the city’s financial position,” the staff report states.
The pilot projects
The pilot will initially apply to three “shovel-ready” OCHC developments:
- Mosaiq Phase 2: 273 units (Completion target: 2026)
- Beausoleil: 159 units (Completion target: 2028)
- Geyser Place: 118 units (Completion target: 2028)
The total development cost for these three projects is estimated at $288.3 million. The pilot will support the issuance of approximately $25.7 million in debt to cover immediate equity requirements.
Budget-neutral approach
Under the approved framework, the city will not simply hand over cash. Instead, it will pre-allocate up to $2 million annually for up to 10 years from its existing Housing Reserve. This money will cover the debt servicing costs (principal and interest) until the buildings are completed and generate enough rental revenue to become self-sustaining.
Staff emphasized that this funding comes from existing affordable housing budget allocations and will not create new tax pressures.
Risks and federal funding
The financial modelling for the pilot assumes OCHC will secure approximately $32 million in funding from the federal Build Canada Homes program over the next three years.
The staff report notes that if this federal funding does not fully materialize, the city may need to consider “incremental upfront equity contributions” or additional debt issuance to complete the projects.
The strategy was developed in consultation with Deloitte, which recommended bond issuance as a primary vehicle to close funding gaps for the housing corporation. As the sole shareholder of OCHC, the city consolidates the corporation’s financial results, making the partnership a logical step to reduce borrowing costs.
If approved by Council next week, city staff will negotiate the necessary legal agreements to launch the pilot.
