Housing Crunch

Housing construction in Medicine Hat slowed sharply in 2024, with only modest recovery in early 2025. Despite low vacancy rates and rents climbing nearly 30% in three years, new multi-family projects remain rare, and most permits are for small, low-density builds. High interest rates, lower achievable rents compared to big cities, and limited local developer capacity have made larger projects financially difficult. While the City has introduced grants, tax incentives, and outreach to attract builders, progress so far has been incremental. The result is a rental market under pressure, with rising demand for affordable housing that current construction levels can’t meet.

Establish and Fund the Program

Capitalize the fund: The program starts with seed money from municipal reserves, supplemented by co-lending from local financial institutions. The fund operates on a revolving basis, meaning that repaid loans are used to finance new projects, with a specific focus on those that involve the rehabilitation of existing buildings.

Define project criteria: The fund targets specific types of rental projects, including small-scale infill developments and the adaptive reuse of existing buildings. To be eligible, projects must include a long-term affordability covenant (20 years) and meet other criteria, with additional incentives for projects that rehabilitate old buildings or include a higher percentage of attainable units.

Streamline the Application and Approval Process

Expedite the pre-approval phase: A fast-tracked, pre-screen process requires applicants to submit essential documents like site control and project financials. A "deal navigator" is assigned to help with zoning and other municipal alignments.

Provide favorable financing terms: The fund offers subordinate loans of up to 25-30% of the project cost with a 0% interest rate and an 18-48 month term. It also allows for early draws to cover initial soft costs on the rehabilitation/demolition of existing buildings, easing the financial burden on developers.

Manage Risks and Ensure Accountability

Mitigate financial risks: The program includes risk controls such as portfolio limits to prevent over-concentration with a single developer. It also requires construction insurance and performance bonds for larger projects, along with personal or corporate guarantees from sponsors.

Track and adjust performance: The fund's performance is measured and published quarterly, tracking metrics like the number of units created and the cost per unit of municipal support. This data is used to make continuous adjustments to the program's terms and caps to ensure it meets its target goals.

Housing Crunch

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