ECO N O M I CS
FINANCING PRODUCTS FOR MODULAR HOMES INNOVATIVE OFFERINGS FOR BUILDERS AND BUYERS THAT HELP UNLOCK MODULAR DELIVERY
BY EVAN ANDRADE, CHBA ECONOMIST
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ack of access to proper construction financing products for factory-built construction is one of the major factors preventing greater industry growth in Canada. The challenge was one of several flagged by CHBA and its Modular Construction Council in CHBA’s Sector Transition Strategy. There are legal differences between real property and chattels as well as lending practices that developed over time to support traditional site construction – which has become status quo. As a result, modules under construction in the factory or in transport to the installation site have been unable to
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secure traditional lending methods, since they aren’t considered real property until affixed to a permanent foundation. This means that funds can only disbursed to the builder when the modules are attached to the foundation and become real property. The issue with this is that the capital that a modular builder needs during production must come internally before being compensated upon project completion. This is one cashflow risk that reduces the attraction of investing more into modular construction. However, there are new financial products arriving that can help smooth the cash flow
issues, allowing modular builders access to a steady stream of payments prior to and during the production of the modules. Two of CHBA’s Alliance Network Members, Canada Mortgage and Housing Corp. (CMHC) and RBC Royal Bank, have relatively new products geared specifically to financing residential modular construction.
PERFORMANCE BONDING ALLOWS FOR FINANCING Still in its pilot stage, the CMHC is attempting to fill an industry gap with a new insurance program for construction loans specific to modular multi-unit rental buildings of five units
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